Those doomer bears who are still looking for Autumnal red flags need only look to the transportation index. The transports has had a rough week so far, declining 2.5% to 5083. Yet, - as has been the case since February, only with a monthly close <5000, will there be a genuine real warning of possible underlying weakness for the wider market, and indeed, the economy.
Trans' monthly, rainbow
We are seeing a pretty strong reversal in the weekly chart, even if we decline no further this week, and close at present levels, it would make for an preliminary warning.
The monthly chart has been mixed so far this month. We opened September with a red candle, but that has flicked to blue..and even green with the announcement of QE3.
Yet with two days of strong declines, the tranny is now sporting a blue candle on the rainbow chart, and we're just 1.5% away from breaking the 5000 level.
If we can close September under 5000, I think that will most definitely count as the first red flag, and indeed, it would be confirmation of the red candle we saw in August.
I remain short, seeking an exit somewhere around sp'1440/30 within the next 2-4 trading days. I don't think we can take out the previous cycle low of 1397 in this cycle, but it will be paramount for the bears to seek a lower high <1474 in the next multi-day up cycle.
Goodnight from London