Will Historic Bearish Reversals Spell Doom for Dow Jones Transportation Average?

 

I think everyone will agree that the transportation sector is an integral part of the U.S. economy.

When it is trending higher, the economy is in good shape…and when it heads lower, the economy is typically slowing. Well, today we have a very concerning case of the latter.

Today’s chart is a long-term monthly chart of the Dow Jones Transportation Average that highlights a 3-decade rising price channel at each (1).

Dow Jones Transportation Average Monthly Chart

Also notice that the channel is pretty wide and there’s a lot of room from top to bottom.

Along the way, we have seen bullish reversals at each (2) that have been followed by big rallies. And over the past year, we saw the price hit the top of the trading channel (resistance) and reverse lower. But this wasn’t any old bearish reversal. It was the largest “monthly bearish reversal” in the past 30 years for the transports.

Clearly, this reversal is concerning in and of itself (note the ensuing selloff). Well, those concerns just became a whole lot more concerning. Last month, the Dow Transportation Average put in its second-largest bearish reversal. That’s right, two historic bearish reversals.

Might this bearish reversal be followed by another selloff? Stay tuned. 

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