I believe that the week ahead, beginning tomorrow, may play out to be a very interesting one for stocks, here's why...
With the Dow Jones industrial average hitting eight records in a row, it seems that very few people are paying attention to the Dow transports which have sold off fast and hard since the middle of July.
Are the Dow transports sending a signal that the stock market is about to drop?
Well one of two things has to happen.
Either 1., we get a rebound in the Dow transports which would, in theory, drive stocks higher or
2., we get a correction in the market.
Technically speaking the Dow Jones industrial average, the S&P 500, and the NASDAQ are way over owned.
Each of the major indices right now are riding well above their 50 day moving average, and if you have a copy of my new "Rip System" for trading, you know how important the 50 day moving average is. Click here: http://www.lulu.com/shop/gregory-mannarino/the-rip-the-markets-face-off-system-for-technical-trading/ebook/product-23285099.html
The other place we all need to be looking, is at the bond market.
The yield curve continues to flatten out with the 10 year yield now hovering about 2.26
The continuing dollar plunge is also a supporting factor of this market however, as I spoke about last week on my blogs, the US dollar may indeed be poised for a rebound.
In summary:
-The Dow transports may be signaling an imminent downturn in the stock market unless they rebound.
-The US dollar. If we do get a rebound, which I believe is likely at this time, this could put pressure on the stock market as well.
-Moreover, with all 3 of the major indices well above the 50 day moving averages, a market correction may be imminent.
*Ok, now I'm off to the pool! ; )
Gregory Mannarino @marketreport
