Today we will look at the Transportation Index, and what happened in China last night.
A potential market problem we pointed out last Friday, was the Transportation index.
The Transports broke a 5 year support and it has been struggling to make it back into its rising channel as seen in the chart below.
For weeks, the Transports have been in a consolidation pattern as seen between the thick red resistance and support lines we drew. But ... this week, the Transports broke through the bottom support of that consolidation.
It will be very important for the Transports to resist dropping further, otherwise it will bring the Dow Theory analysts closer to calling for a bear market condition.
If you recall, we said that, "The July to October Shanghai rally is now coming under duress" on last Friday's update.
This is this morning's chart of the Shanghai Index. The Shanghai Composite went down only -0.27% this morning ... but wee had plenty of deterioration on the Shanghai since last Friday.
At the close this morning, the Shanghai was continuing to trend down after breaking its second support line. At the same time, the Shanghai Composite's Relative Strength went slightly below 50 which is a negative Strength level.