Transports; Could be repeating 1999 & 2007 pattern
Below looks at the Dow Jones Transportation Index over the past 20-years. Before we discuss the chart below, let me be clear about this, the trend at this time remains up.
The focus of this chart is what the highs in 1999 and 2007 looked like. As you can see, in 1999 and 2007, the transports made attempts to breakout above old highs and each time it did make a “moderate new high” each time at (1). Then weakness came in, breaking support and selling picked up speed.
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As mentioned earlier, the trend remains up in the transports and they are attempting to breakout to new highs. Would take very little gains to create a breakout.
As Transports are attempting to breakout, the current pattern looks a little like prior highs in 1999 and 2007 at (2).
Breakout above resistance at (2) = Positive move for this key sector.
Breakdown of short-term rising support at (2), could cause selling pressure to increase and could make the current pattern start looking all the more like 1999 and 2007.
Transports are in a tight stop, caught between overhead resistance and short-term rising support at (2). Which one is taken out (breakout/breakdown) should send an important message to the broad markets.