• 11 hours France Pledges Moves To Prevent $1B Economic Catastrophe
  • 14 hours Bitcoin Miners Reel As IPO Dreams Crumble
  • 16 hours Gold Moves Sideways On Weak Jobs Report
  • 1 day Is This The End Of The Cannabis Bloodbath?
  • 1 day Markets Hit By Economic Fears, Political Turmoil in U.S. And Europe
  • 2 days The Next Wave Of Solar Tech Is Here
  • 2 days The “Everything Bubble” Has Popped
  • 2 days This 7-Year Old Is Earning 8 Digits
  • 4 days Can Crypto Outperform Equities In The Long-Term?
  • 4 days UK Suspends Top-Tier Investor Visas In Money Laundering Crackdown
  • 5 days Asia’s Wealthiest Double Down On Blockchain Tech
  • 5 days The Midwest’s Top Talent Is Looking For Greener Pastures
  • 5 days Huawei Plummets As CFO Faces Extradition To The U.S.
  • 6 days Market Uncertainty Creates A Buying Opportunity For Gold
  • 6 days This Indicator Suggests A Recession May Be Looming
  • 6 days 6 Key ETFs For The Industrial Revolution’s ‘New Economy’
  • 6 days Cautious Optimism As South Africa Snaps Out Of Recession
  • 7 days The Mystery Behind Tesla's Chinese Sales Hiccup
  • 7 days Russia Will "Respond Appropriately" If U.S. Ditches Nuclear Deal
  • 7 days This Week’s Major Pot Sector Shake-Ups
EU Weighs New Payment System With Iran To Skirt U.S. Sanctions

EU Weighs New Payment System With Iran To Skirt U.S. Sanctions

Demonstrating its eagerness to continue…

Saudi Stocks Plummet As Foreign Investors Bail

Saudi Stocks Plummet As Foreign Investors Bail

The death of journalist Jamal…

Chris Vermeulen

Chris Vermeulen

Chris Vermeulen, founder of AlgoTrades Systems., is an internationally recognized market technical analyst and trader. Involved in the markets since 1997.

Contact Author

  1. Home
  2. Markets
  3. Other

How to Know If This Rally Will Continue for Two More Months

We have focused our current effort on the Transportation Index, the US Majors, and the Metals Markets.  The Transportation Index has seen an extensive rally (+19.85%) originating near November 2017.  This incredible upside move correlates with renewed US Tax policies and Economic increases that are sure to drive the US Equity market higher throughout 2018.

In theory, the Transportation Index is a measure of economic activity as related to the transportation of goods from port to distribution centers and from distribution centers to retail centers.  The recent jump in the Transportation Index foretells of strong economic activity within the US for at least the next 3 months.

One could, and likely should watch the Transportation Index for any signs of weakness or contraction which would indicate an economic slowdown about to unfold.  In order to better understand how the Transportation Index precedes the US Equity markets by 2~5 months, let’s compare the current price activity to that of 2007~08.

This first chart is the current Transportation Index and shows how strong the US economic recovery is in relation to the previous year (2017).  As the US economy has continued to strengthen and open up new opportunities, the Transportation Index has related this strength by increasing by near +20% in only a few short months.  This shows us that we should continue to expect a moderate to strong bullish bias for at least the first quarter of 2018 – unless something dramatic changes in relation to economic opportunities.

Current Transportation Index Chart

In comparison, this chart (below) is the Transportation Index in 2007~08 which reacted quite differently.  The economic environment was vastly different at this time.  The US Fed had raised rates consecutively over a two year period leading up to a massive debt/credit crisis.  At the same time, the US had a Presidential Election cycle that saw massive uncertainty with regards to regulation, policies and economic opportunities.  Delinquencies as related to debt had already started to climb and the markets reacted to the economic alarms ringing from all corners of the globe.  The Transportation Index formed a classic “rollover top” formation in late 2007 and early 2008 well before the global markets really began to tank.

2007~08 Transportation Index Chart

Our analysis points to a very strong first quarter of 2018 within the US and for US Equities.  We believe the economic indicators will continue to perform well and, at least for the next 3 months, will continue to drive strong equity growth.  We do expect some volatility near the end of the first Quarter as well as continued 2~5% price volatility/rotation at times.  There will be levels of contraction in the markets that are natural and healthy for this rally.  So, be prepared for some rotation that could be deeper than what we have seen over the last 6 months.

In conclusion, equities are this point are overpriced, and overbought based on the short-term analysis. We should be entering slightly weaker time for large-cap stocks over the next couple weeks before it goes much higher. Because we are still in a full out bull market, Dips Should Be Bought and we will notify members of a new trade once we get another one of these setups.

By Chris Vermeulan 

 

Back to homepage

Leave a comment

Leave a comment