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Sol Palha
TacticalInvestor.com
Sol has been studying the markets for over 15 years and trading professionally for clients and his own account for over nine. He specializes
in mass psychology, technical analysis and two new fields of study that he has pioneered, Esoteric Cycle Analysis and Phase shift
analysis. In addition, he combines multiple time frame analysis with standard deviation analysis in a unique way to help determine
market tops and bottoms.
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April 15, 2008
It's truly amazing how well the transports are holding up given the fact that oil continues to put in new highs almost on a weekly basis.
The normal course of action would be for the transports to plunge given the fact that oil is now trading at a record high of 113 dollars. The transports bottomed when oil was trading at roughly 87 dollars and now that oil is trading up a whopping 30% higher one would think the transports would correct even harder; instead they are putting in a series of very bullish higher lows. The Transports are only 11.6% away from putting a new high; given the fact that they have rallied over 20% from their lows it would be reasonably fair to assume that they are going to surpass this target in the near future.
Oil has put in yet another new high and instead of closing lower the transports after initially pulling back have ended the day up roughly 50 points. As a result the Transports have generated a very strong intra market positive divergence signal. As the markets are forward looking one has to conclude that the transports must be seeing something positive in the near future. Imagine if they are able to hold up so well with record high prices how they will react if oil should mount a minor correction.
The pattern we spotted several years ago suggests that the Utilities lead the way up (they have already done so by putting in back to back new highs in Dec 07 and Jan 08), the next to follow suit is the transports (so far they appear to be on track) and finally the Dow industrials play catch up. Thus based on this and many of our technical and psychological indicators one could go as far as saying that its almost a given that the Dow will go on to put in new highs if the transports take out their old highs.
