$DJT leads $DJIAClassic theory. Had to stretch $DJT (red line). Let's see if $DJIA (blue line) follows it. Suggests ranging for months.
Djt
Dow Transports - Monthly TrendPrior to 2014 there have been 3 instances of the monthly RSI closing above 80 going back to 1988, Each of the three instances have lead to a return to the trend line noted below. In November of 2014, the DOW transports recorded the 4th instance of a monthly RSI close above 80 coming in at 86.
Recently the DOWT found support at previous resistance measured from the 1999 and 2008 tops. Should the DOWT go back below this support, I believe there is a high probability of retesting the long term trend line below. Depending on the timing, this would imply a long term target of 5500-6300 on DOWT.
DJIA vs. DJTA Divergence Supporting Diverging DJIA Price and RSIAs pointed out in a separate comment, the current price/indicator setup increasingly resembles that of 2000 and 2007, immediately before indices' pronounced price declines.
A look at the Dow Jones Industrial Average and the Dow Jones Transportation Average confirms that pessimistic view. Beginning in mid-2007, the DJTA started to trend downwards, while the DJIA remained caught in a relatively narrow trading range over the course of 2007 until early 2008. This pattern is currently being repeated, as the DJTA finds itself in a downward trend which started in late 2014, while the DJIA has been flat over the same time period.
Even more significant, in my view, is the divergence between the recent DJIA' price movement and the Relative Strength Index. It should be pointed out that the longer a divergence persists, the stronger its explanatory power - and eventually the correction it calls for. Having lasted for more than two years, the current discrepancy has persisted significantly longer than the divergence in 2007, which remained for about half a year, before indices fell by about 50%.
DJIA vs. DJTA Divergence Supporting Diverging DJIA Price and RSIAs pointed out in a separate comment, the current price/indicator setup increasingly resembles that of 2000 and 2007, immediately before indices' pronounced price declines. See the following chart for the parallels between 2000, 2007 and now, as previously posted:
A look at the Dow Jones Industrial Average and the Dow Jones Transportation Average confirms that pessimistic view. Beginning in mid-2007, the DJTA started to trend downwards, while the DJIA remained caught in a relatively narrow trading range over the course of 2007 until early 2008. This pattern is currently being repeated, as the DJTA finds itself in a downward trend which started in late 2014, while the DJIA has been flat over the same time period.
Even more signficant, in my view, is the divergence between DJIA's price movement and the RSI, which is apparent since early 2013. It is worthwhile to point out that the longer such a divergence lasts, the stronger is its explanatory power - and eventually the correction it calls for. With the current divergence between price and RSI having started more than two years ago, this is substantially longer than the roughly half year discrepancy we experienced in 2007, before prices corrected about 50%.
