As previously highlighted that the DOW Jones Transport index has indicate a possible bearish trend developing
Yesterday’s DOW Jones closing low and just above a very thin Ichimoku support suggests that the support level may not hold.
On top of that, the leading Ichimoku kumo support is thin as well.
The chances of the index turning bearish is getting higher.
Just a couple of days ago, Dow Jones index hits new high.
Yet, underlying this bullish trend, a disturbing divergent can be found in the Dow Jones Transport.
On the Down Jones index chart above, we can see that the kumo support is so thin, that suggests that support is very weak. And the slightest news will most likely see it goes below 17700.
We can see from the Ichimoku chart that Down Jones Transport has instead turns bearish, trading below the kumo.
Dow Jones Transport has failed to breakout above 13794 for 4 times since November 2014. With the latest high in March, it has since turns bearish and support level does not seems to hold.
It is likely that the Dow Jones index will follow through and turn soon. After all, if demand for transport is not growing, are manufactured goods being move across the supply chains? Where is the demands for finished goods?
If there’s one trade that is worth looking at, it will be Crude Oil.
As 2014 closes, crude fell from $115 to around $40 since June.
News outlet begin reporting about possible reasons:
- Price war from OPEC
- Too much supply in the form of shale oil from US
- Weak demand
A common theme I heard from fellow traders is “it is now low enough to buy”. They said it at $80, and they said it again at $60. And again at $50 and the beginning of the year when the price is at $40s.
However, if we were to look at the chart and see how crude oil break down in June, what justification do we have that this is a good time to go LONG?
From the Ichimoku Daily Chart for /CL, we can see the following:
- Since last June, when it breaks support, crude has started on a bearish trend
- Towards end December, we saw some consolidation of price. However, is this a bear flag formation ‘in-progress’ ?
- From the Ichimoku chart, we can also see that it has hit the Chikou Span resistance twice
- The leading kumo continues to shows a huge resistance with no change in trend.
Based on the observation above, there is a high chance that we may see a downward movement towards the $40 next week.