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Divergences Everywhere

By Matthew Kerkhoff


It’s not a death sentence for the market, but the action in the Transports is becoming more and more ominous. In the chart below we can see two recent developments, both of them bearish. This leading index has now fallen below the lower trendline of its downward sloping channel, and at the same time triggered the dreaded death cross.


In the green circle below you can see the 50-day moving average crossing below the longer-term 200-day moving average, confirming what has already been very evident: the Transports are getting weaker and bucking the bullish trend elsewhere in the markets.



While the death cross has a rather vicious name, it’s not always a signal of a dying market. Last year we saw a similar divergence by the Russell 2000 small-cap index, which experienced its own death cross in mid-September. The index continued lower for a month after that event, but subsequently rallied ... Log in or subscribe to continue reading.

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