Last week I suggested that due to the downturn in the Utility and Transportation Averages, we would begin to see the Industrial Average follow suit. I argue that this week a rising support level was breached, and we should see the Dow begin its correction, I’m reposting potential targets below, with Target 3 being my favorite. My assumption that this is a correction, and not a bearish trend shift, is based mainly on the divergence shown in the chart, hinting at a break in trend, not a change. Should I be wrong, patterns will appear that will signal short entry, and I don’t know about you, but I’m always hoping for another 2007-2008 correction, and the opportunities that ensue for the prepared.
Dow Jones Industrial Average
close 17,946.68 5 Day Change – 0.38%
Today’s Volume 158,115,783
3 month Average Volume 94,518,665 down 1.25% since last week
Average P/E 17.3
1 year Change +6.53%
Dow Jones Transportation Average
close 8,242.47 5 Day Change – 2.01%
Today’s Volume 29,547,797
3 Month Average Volume 15,588,934 down 0.01% (unchanged) since last week
,Average P/E 21.3
1 Year Change +1.13%
Dow Jones Utilities Average
close 555.12 5 Day Change – 2.56%
Today’s Volume 15,898,669
3 Month Average Volume – 12,905,608 (did not keep numbers from last week)
,Average P/E 18.4
1 Year Change – 2.61%
Transports took a huge jump in volume today, almost double it’s 3 month average, although price stayed relatively constant. This means fistfight. Volume increases in the direction of the trend, with more people piling into the bandwagon. If you’re like me, you’re arguing the trend in the Transports is down, so I would argue we will see continued dropping prices for the months to come in both the Transports (already down roughly 11% since Jan 1) and the Utilities (down almost 16% since the Jan 28 highs).
The Industrials, which carry the leverage and trader speculation that the other indexes do not, have managed to hold their own, down less than 1% since Jan 1, and 2.5% since the highs put in in May. All in all, expecting some tested nerves for many later this summer and fall, especially if the “50-50 rate hike” comment earlier this week leans more towards a yes, than a no.
On a social note, as of this morning, the Supreme Court of the United States voted to uphold the right of LGBT individuals to marry in all 50 states. I’ll save the comments, as there’s already enough applause and outcry in the country. However, I’m always one to wonder whenever there’s a “social-oriented” news story filling every inch of media coverage, what else occurred today that wasn’t talked about? And why did the transportation stocks skyrocket in volume today? Perhaps some expectation or tie to the recent Trans Pacific Partnership passing that we all missed because of Confederate Flag arguments? I’m sure we’ll find out next week.
Coming Next Week
A handful of pertinent news next week, with manufacturing data out of China and Great Britain and the US, Canadian GDP as well as the US closing the week out with non-farm payroll and unemployment, which will probably have the largest impact on price changes leading into our Independence Day celebrations. With a pretty quiet news week, I’ll be spending most of my trading week in the forex markets, probably in the non-US pairs. Will track progress in my trading journal or Twitter, both can be accessed from the menu above.