This Week in Money - Sell in May, and Go Away?
From Ross Clark, Chartworks, February 14, 2015
The Dow Industrial Index is progressing well this month as the ‘risk on’ environment in the credit markets exerts its influence.
However, the Transports are lagging. Both peaked at all-time
highs over six weeks ago on December 29th.
If the Transports fail to push to a new high with the Industrials we will end up with an important signal. Non-confirmations over a period of less than six weeks tend to bring about minor
corrections as seen following the December 5th, July 22nd and January 22nd highs of last year.
However, the eight non-confirmations in the last three decades stretching over more than six weeks resulted in measurable downside breaks in the Industrials. Five were around 15%, two around 8% and one was 50%.
Any new high close in the Industrials unconfirmed by the Transports, then followed by a downside reversal will be considered the catalyst for a slide in the order of 15%. This fits with Friday’s Chartworks S&P report (Feb 13th) outlining the importance of the S&P holding above this week’s low of 2041.