BREAKING DOWN THE TRANSPORTS
I've been watching the transports closely since FedEx (FDX) and Norfolk Southern (NSC) both lowered earnings expectations last week. The transports chart ($TRAN) looked weak, but today's action including the big rollover into the close caused me to want to put a chart up for your examination.
5% MORE AT LEAST?
Based on a couple of key things, I think we will see another 5% drop in the transports to bring us at least to the 4700 level where we'll hit the lower portion of the descending channel and also the previous upper resistance line that should now serve as support (look at April of 2010).
WATCH YOUR ALTITUDE FEDEX
FedEx had a big failure and now must hold this $84 level or $75 could be a realistic target on the shortside.
The weekly chart of FDX pictured above also shows that the 14 day EMA has crossed over and below the 40 day EMA which is a longer term swing trade indicator suggesting a bigger decline.
Although not pictured here, a break of $62.75 on NSC should usher in a drop to at least $57.00
WHERE IS THE GOOD NEWS?
A global slowdown seems undeniable at this point and the turn in the transports signals at least a 5% move lower. With all the positive news like the Fed announcement, this round of ECB lies, and the APPLE 5 release, where will the positive news come from to reverse this move?
I have had more "bullish" conversations with friends over the last two weeks than I have had in four years. It would seem that the Apple 5 release has brought the bulls out of the woodwork and they literally have no fear and certainly no desire to lock in gains. I would suggest we are really ripe for a rip lower to rob Mom and Pop of 10% to 20% just to remind them who runs the show. Queue another Flashcrash Wall Street!
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