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U.S. Trans Index Suggests Bottom May Be Forming

By Chris VermeulenStock MarketsOct 11, 2018 02:04PM ET
www.investing.com/analysis/us-trans-index-suggests-bottom-may-be-forming-200348070
U.S. Trans Index Suggests Bottom May Be Forming
By Chris Vermeulen   |  Oct 11, 2018 02:04PM ET
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Our research team at TheTechnicalTraders.com is alerting our members that the Transportation Index has reached its first level of support near 10,500, which may be the start of an extended bottoming formation. If you have been following our research posts, you already know that we predicted this recent downside price swing over 3 weeks ago with our Adaptive Learning Predictive Modeling systems. You will also understand that our modeling systems suggest this move may not end till early November (somewhere between November 8-12). Keeping this in mind, we are now alerting you to be prepared for the following:

Stock Support

This Weekly US Transportation Index chart highlights what we believe will become support for the US stock markets. The 10,500 level, highlighted by the GREEN horizontal line, is a key support level that goes all the way back to late 2017 and early 2018. This will likely present strong support for the Transportation Index and, thus, for the US stock markets in general. We do expect the continued downside pricing pressures to test this level over the next few weeks, but we are beginning to think we could be setting up for an extended bottom formation that may include many weeks of volatility and sideways price rotation.

Weekly Nasdaq Transportation Index
Weekly Nasdaq Transportation Index

If the 10,500 level is breached, secondary support exists at the 10,000 level (only 500 pts. below). As dramatic as that move will be, if it happens, this suggests that any attempt to move near this level could be considered a “wash-out low” price rotation – a typical bottom formation. At this point, we believe the 10,500 level is holding as we are not seeing extended downside price action in the current market. If the US stock market was severely threatened by internal or external factors, we believe we would have seen much deeper follow-through the day after the massive price collapse.

Price Rotation

What does an extended bottoming formation look like and what should we expect over the next few weeks? This daily chart shows an earlier example of extended bottoming and some bottom price rotation before a recent upside price move. This example clearly shows how the initial bottom setup (highlighted in YELLOW) forms prior to an extended period of “basing” or bottoming price rotation. We don’t expect many months of this type of bottoming price rotation. Rather we expect this bottom to setup and form over a period of about 2~3 weeks before a new uptrend begins to form. Overall, this is a good example of how an extended bottom is formed before an upside price move initiates.

Daily Nasdaq Transportation Index
Daily Nasdaq Transportation Index

U.S. Trans Index Suggests Bottom May Be Forming
 

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U.S. Trans Index Suggests Bottom May Be Forming

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Dante Valerian
Dante Valerian Oct 11, 2018 5:43PM ET
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QQQ is coming off a key reversal week (last week). We often see 4 to 12 weeks of rangebound action after those weekly candlestick patterns, with the key reversal candle's high as the top of the range.
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