Is the Dow Jones Transportation index presenting a rare buying opportunity? The broad market most likely hopes so.
Transports have spent the majority of the past decade creating a series of higher lows. This pattern has created rising channel (1), which started back in 2009.
Transports have spawned a bearish divergence to the S&P 500 over the past 20 months, as they have created lower highs while the S&P has done the exact opposite.
The softness in Transports has it testing its May lows and the 10-year rising channel to start out the week at (2). While testing this support last week the index created a bullish reversal pattern.
An extremely important support test is in play this week at (2). If Transports happen to rally off support and break above falling resistance at (3), odds increase that the S&P 500 succeeds in breaking out to new all-time highs.
Keep a close eye on Transports over the next couple of weeks as they to send the broad market a very important message.