Something quite interesting is developing in the U.S. stock markets. S&P 500 has broken above the all times high of 3,000 levels and a lot of people are thinking it as a sign of another bullish move towards much higher levels.
In his recent analysis of U.S. stock markets, Alessio Rastani has pointed out some major negative signals that S&P 500, NASDAQ and even European stocks are showing. He analyzed these negative signals in relation with the DOW transportation index and concluded that a move above 11,000 levels of the transportation index would indicate a bullish move of stocks and a move down to below 10,000 levels would be an indication of coming bear market for U.S. stocks.
Alessio discussed a chart of S&P 500 that shows negative divergences that are often a sign of weakness in the market trend. He also discussed NASDAQ & European stock charts that too show some negative divergence.
The last time European stocks showed such negative divergence was in 2017 and it dropped quite massively from there.
He further discussed the DOW transportation index and the reason to keep an eye over the transportation index is that it shows an overall strength on the market. All the products that are manufactured, have to be shipped and if they are not getting shipped, it’s a weakness in manufacturing industry.
The weekly chart of Dow transportation index shows a triangle formation and up trend of this transportation index would be the indicator of another bull run for stocks. A move above 11,000 levels would be a leading indicator of bullish trend for stocks and a move below 10,000 levels would be a sign of weakness in the stock market.