JBLU
DOW Transports To Retest Recent Lows(Note: DOWT is no longer in a bear market after rallying the last two weeks)
2015 was suppose to be just another year of the epic bull market created by reckless central banking policies. Some Wall Street estimates for the S&P 500 were as high as 2,300. Me? I projected a contraction to 1,810 in mid-January.
Whether or not the SPX will reach my target within the next 10 weeks, or so, is uncertain; but what has been quite clear is the scaffolding holding with risk assets around the global has been crumbling for sometime.
In " Is A Storm Brewing? How History is Repeating Itself ," I was clear and concise in what 2015 had in store (posted Jan. 13, 2015):
I support the idea that we are on the precipitous of something disastrous.
Those who constantly look at underlying factors and notice the shifts in the FX, commodity and economic data are witnessing that the latest boom cycle is on its last leg.
In essence, the post was a summery of the marco trends few wrote about because everybody indulged in the feel-good of rising stock prices.
The post ended quite ominously: "2015 is going to be mercurial…"
On March 26, I indicated that the DOW transports looked technically weak. Price action had been consolidating early in the year, much like the SPX. The index made several lower highs, higher lows and finally broke support at 8600.
Nobody was even looking at the transports as a potential catalyst to drag the broader markets lower, even though that is historically the case.
For instance, Cowen Group's Head of Sales, David Seaburg, said, as late as June 25 (after the the transports already began weakening underneath consolidation), "Everyone is up in arms about the transports, but the underperformance has very little to do with a weak economy and has more to do with the structural issues within the sector."
Seaburg also said that "I DEFINITELY don't see any downside (broader markets) necessarily." Almost a month-to-the-day, not only did the DOW and SPX hit their first 10 percent correction in four years, the DOW transports fell into bear market territory. Awkward.
Those that live by subjectivity, die by subjectivity.
The broader markets did receive a massive bounce following the largest NYSE short-interest since the Lehman Brothers collapse, but the transports has been rejected twice from 8,250, or the 23.6% Fib. retracement from the 2012-lows.
It's important to note that central bank credibility is fading fast, and traders will become more wary as the year winds down. Structurally, the index looks weak as earnings have been lackluster to not good at all.
EMAs are showing bullishness on the daily, as they are sloping upward. However, a close above 8,250 will be needed to garner any significant technical buying in my opinion.
Price action is within a large symmetrical triangle with price support of 7,970 cutting through the middle. This key, near-term support level could determine whether the index will test triangle support, which is supported by price support of 7,790.
A confirmed close below the triangle support will cause transports to retest the 2012 ascending trend line. I expect fundamentals to continue to deteriorate into 4Q, and the transports to challege 2011's trend (between 7,200 and 7,300).
Conversely, a close above triangle resistance could cause a rally to 8,500.
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JBLU & USDCAD - Long to 26JBLU has shown a strong correlation with USDCAD, as both financial instruments are inversely correlated with oil (shown below). It should also be noted that USDCAD has recently broken out of a cup and handle pattern on the monthly chart and a continued rise could be an early indication of similar price action in the aerospace sector. The wave count for USDCAD suggests that an extended fifth may be in progress, which if true would provide a confluent fifth wave target. JBLU targets may be placed at 26 and 30, extensions of wave ((3)). These extensions proved to be important in sub-degree 5th wave targets and the fractal characteristic of EW suggests that these levels may also play an important role on the larger degree. A SL may be placed below wave (1) high at around 21.40.
Correlation with USDCAD:
USDCAD Monthly Cup and Handle:
USDCAD Wave Count:
