Dow Jones Transportation Index: Early Warning System

The stock market is gripped in a mini-mania.  Asset prices are rising, fueled in part by a recovering economy, in part by an under-invested/pessimistic public and in part by POMO, the threat of more POMO, QE2, and the threat of QE3.

This chart shows that there are some cracks starting to form in the rally.  The Dow Transports are not following the latest new high in the S&P.  In fact, there is some serious divergence in the chart.

I don’t feel that we will stop on a dime here, we could easily see another 10-30 points of upside.

If you doubt the significance of the Dow Transport Index, go find a crusty old millionaire who started out at E.F. Hutton and ask him what he thinks about it.  The old-timers pay close attention to this one.

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