Transports Diverging, But…

I can’t get the image out of my head of a Dow Theorist as a mature gentlemen wearing a silk ascot and smoking jacket in a well appointed library featuring dark woods and many important books and reference materials on the shelf.  Of course the desk is large and sturdy and the chair at which he (it’s a very male thing, after all) sits while analyzing the market is solid wood (with ample leather covered padding), comfortable and set on rollers.  Oh, and there is a little stand with a tray on top holding fine cigars and a crystal decanter of the finest Sherry.

I am sure there is also a faithful wife in the kitchen preparing a nice Beef Wellington, even as we speak.  Dow Theory is an old fashioned tradition after all, and it has not worked well for a few decades I think.  But these are the financial markets and everything goes!  Just throw it out there and someone’s gonna consume it.

Anyway, the Tranny is not looking so hot right now.  I’d discount it as an archaic market signal but one of the prime leaders of the post-election ‘Trump Trades’, the Small Caps, is in a very similar un-bullish stance, short-term at least.

iyt iwm

Speaking of ‘Trump Trades’, back on the very day of the election NFTRH+ noted the buy setup in the Transports using a daily chart of IYT, and a target using this weekly chart.

iyt weekly chart

So if IYT chooses to decline and act as another leg falling out from under the market, there is no upside measurement holding it back from doing so.

As as side note, we used this chart for much of 2016 to quiet down any noise of a Dow Theory bear signal that started taking shape.  A major non-confirmation preceded a big bullish phase for the market in 2012, after all.  Hence, my view of our distinguished, Sherry sipping friends in ascots as a novelty from another era.  So for what it’s worth, the Tranny is diverging the Dow a bit and it’s got the Small Caps in tow. Now let’s move on…

dow and tran

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