If you have been following our research posts, you already know that we predicted this recent downside price swing over 3 weeks ago with our Adaptive Learning Predictive Modeling systems. You will also understand that our modeling systems suggest this move may not end till early November (somewhere between November 8~12). Keeping this in mind, we are now alerting you to be prepared for the following.
This Weekly US Transportation Index chart highlights what we believe will become support for the US stock markets. The 10,500 level, highlighted by the GREEN horizontal line, is a key support level that goes all the way back to late 2017 and early 2018. This level will likely present strong support for the Transportation Index and, thus, for the US stock markets in general. We do expect the continued downside pricing pressures to test this level over the next few weeks, but we are beginning to think we may be setting up for an extended bottom formation that may include many weeks of volatility and sideways price rotation.
If the 10,500 level is breached, secondary support exists at the 10,000 level (only 500 pts below). As dramatic as that move will be, if it happens, this suggests that any attempt to move to near this level could be considered a “wash-out low” price rotation – a typical bottom formation. At this point, we believe the 10,500 level is holding as we are not seeing extended downside price action in the current market. If the US stock market was severely threatened by internal or external factors, we believe we would have seen much deeper follow-through the day after the massive price collapse.
What does an extended bottoming formation look like and what should we expect over the next few weeks? Please take a look at this Daily Transportation Index chart that shows an earlier example of extended bottoming and bottom price rotation before a recent upside price move. This example clearly shows how the initial bottom setup (highlighted in YELLOW) forms prior to an extended period or “basing” or bottoming price rotation. We don’t expect many months of this type of bottoming price rotation. We expect this bottom to setup and form over a period of about 2~3 weeks before a new uptrend begins to form. Overall, this is a good example of how an extended bottom is formed before an upside price move initiates.
We urge you to pay attention to our posts and to visit www.TheTechnicalTraders.com to learn more about how we can help you navigate these markets. Please take a minute to visit our website and learn how we continue to work to assist our members with clear and effective analysis, research and trading signals every day. It really makes a world of difference when you have a dedicated team of researchers using specialized proprietary price modeling systems to help you stay ahead of these market moves.
The iShares Transportation Average ETF (IYT) closed at $188.68 on Friday, up $1.67 (+0.89%). Year-to-date, IYT has declined -1.20%, versus a 3.82% rise in the benchmark S&P 500 index during the same period.
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