DJ Transportation Avg. breaks yearly support

Key Takeaways

  • Wednesday’s about-face looks serious and likely leads prices down to 3800 initially
  • Treasury yields look to be rolling over and should continue down into June
  • DJ Transportation Avg has broken down to new yearly lows

Wednesday’s decline was severe enough to suggest that a move back to lows to test and undercut is now underway.  While daily charts showed 4100 as being quite strong resistance, and other Gann-related measures suggested a bit lower, i.e. 4084 for SPX cash, Wednesday’s pullback strongly suggests our three-day bounce has come to conclusion.  Looking back, we’ve seen three separate rally attempts since late March, each spanning three days in duration.  Each has failed, taking indices back to new lows, and this time should be no exception.  Momentum indicators like RSI lifted on the early week bounce, making RSI not really oversold on any timeframe, and prices likely should breach May lows on their way to near 3800-3815 which would be a 38.2% Fibonacci retracement of the entire 3/20-11/21 rally.  

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