Technical Talk: Fatigue sets in on stock markets

By Prieur du Plessis, on October 28th, 2009 posted in: Investment, Markets, Money

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The comments regarding the Dow Jones Transportation Average were provided by Kevin Lane of Fusion IQ.

“As seen below, the Dow Jones Transportation Average (TRAN) has stalled and turned down from resistance at the 4,075 level (red lines) twice in the past few months. This inability of the transports to get above this level suggests at the very minimum the economy’s recovery path is being called into question.

“Technically the index is currently testing the lower end of its upward sloping channel (green line). While in the short run the index may find a shallow bounce from this level, the failure twice now at a key resistance level is the greater trump card.

“The burden of proof now rests on the transport bulls and the index is an underweight sector that we expect to continue to underperform until it can work above resistance.”

Regarding the S&P 500 Index, Adam Hewison (INO.com) sounded a cautious note as explained in one of his popular technical analysis presentations. Click here to access the presentation.

Source: Kevin Lane, Fusion IQ, October 27, 2009.

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Frank W

October 29, 2009 at 4:47 am

Another index that is behaving badly is the Russell 2000, one almost no one bothers to look at. Unlike the DJIA and S&P 500, it has not been able to surpass its previous peak. The reason for this is apparently that there is growing fear that the market is weakening. Consequently, there is a flight to quality, meaning the large front-line stocks. This week it appears that the DJIA and S&P 500 are finally retreating. This may well be the top. On the other hand, the know-nothings and do-anythings that are driving this market couldn’t care less about anything, especially the fundamentals, such as a P/E ratio well in excess of 140, so I wouldn’t discount another shot at the top by the do-anythings. After all, we have heard one call after another, as this rally rose, that we are now at the top.