Transports, monthly, rainbow
Transports, weekly
Summary
The rainbow chart gives a good overview of what is a very weak transportation index. So far this month, we do indeed have a confirmation red candle to help confirm the weakness seen in August.
First downside target is the June low of 4800, that seems viable as early as the end of September.
My primary target for Autumn remains the 4500/4400 zone. That probably equates to around sp'1300, although it might be sp'1200, if the main dow/sp indexes play 'catch-down' to where the tranny already is.
Near term up...mid-term..down
To be clear, my best guess for tomorrow is the start of a new up move, that might last all the way into the FOMC of next Thursday. Yet, the transports are an important issue as I've been noting for months. I will be very inclined to re-short later next week, especially if we're somewhere in the sp'1420/30 range. Whether we make a new index high or not, I really don't think it matters too much.
What does matter is how the transports close September. As has been the case since the Spring, bears need a monthly close under 5k. That would be a very strong warning of broader market weakness this Autumn. I'm certainly not expecting a collapse this Autumn- as some still are, but it remains possible we could briefly hit the low sp'1200s, before the Bernanke initiates QE3.
Goodnight from London