Dow Jones Transportation Index Showing Signs Of Life

The Dow Jones Transportation Average was one of the first “tells” that all was not well with the stock market. The Dow Jones Transports are an important part of the economy and have been a gauge on my radar for some time.

As well, Andy Nyquist (the founder of See It Market) highlighted this concern early last year.

In short, Dow Jones Transportation stocks have taken the brunt of the damage with this stock market decline.

To give you an idea, the Dow Jones Transports is down over 20 percent in the last 12 months, having fallen over 30 percent from the late 2014 highs to January 2016 lows.

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Below is a chart looking at the Dow Jones Transportation Average/S&P 500 ratio over the past 10 years. The ratio shows that the Dow Jones Transports has been much weaker than other stock market averages over the last year.

dow jones transportation average relative strength ratio chart 10 years

After hitting channel resistance at point (1) a year ago, the Dow Jones Transports declined nearly declined as hard as it did during the 2009 collapse. This decline took the Transports relative strength down to channel support at point (2), where a small rally has now taken place off the January lows. This could simply be a bounce, but it is reflecting some relative strength against the broader markets… for the first time in a year.

Below looks at the Dow Jones Transports Index  As you can plainly see, it has been a painful decline.

The decline over the past year has taken the Dow Jones Transports from channel resistance back down to its rising trend support at point (1). This major support level also happens to be the 38 percent Fibonacci retracement level as well (of the 2009 lows/2015 highs). As the Dow Transports Average was hitting this confluence of support a few weeks ago, it also created a reversal candlestick at point (1).

dow jones transports 10 year chart fibonacci price support levels

This is one of the most important sectors in the world, so it’s important that the Dow Jones Transports find a bottom here. This price action coincides with the S&P 500 testing a critical support level around 1800 as well.  Stay tuned and thanks for reading.

Read more from Chris:  “A Euro Breakout Would Have Major Implications For The World


Twitter:  @KimbleCharting

The author does not have a position in the mentioned security at the time of publication.  Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.