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Dow Watch: Transports on the Move

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But a short-term pullback for the broader Dow.

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Editor's Note: The following was posted in real time on our premium Buzz & Banter. It's being shared here for the benefit of the Minyanville community.

The markets now seem breathless. Two of my many indicators are advising short-term rest for the market.

  • Percentage of stocks above 10 day moving average = 94

  • S&P Short Range Oscillator = 7.6

The Oscillator has congregated in negative territory for long periods during this bear market; it's symptomatic of just how brutal it's been, especially when contrasted with bull markets, where a day or 2 of oversold readings leads to a snapback rally.

However, it hasn't been able to stay in the extended positive territory for too long (again, unlike bull markets, where such action is only indicative of strength).

Now that we're in wildly extended readings, I would expect a pullback. (option expiration today complicates that picture). As I have shared many times before, I think it's going to be a garden-variety pullback and nothing virulent, since this market has shown exceptional strength. More can be known only if and when the pullback occurs.

And for those who are keeping a track with me, Dow Transports had its eighth day in the green yesterday. Of course, there's no law that says indexes can't behave in a certain way (here's hoping I didn't give our lawmakers any ideas), but this is the first time since the average broke down in September 2008 that it's been up for 8 straight days.

Again, short-term exhaustion is possible - but there is proof of underlying strength.


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