U.S. Stock Market - Red Flag !

The Dow Jones Industrial Average posted another record high today, as did the Russell 2000 Index. However, the Dow Jones Transportation Average fell 0.48% to 6,081 (red flag), which is more than 100 points below yesterday’s intra-day record high at 6,187. My strong view here is that the top in the Dow Jones Transportation Average was made yesterday and that the top in the Dow Jones Industrial Average was made today or will be made early tomorrow depending upon the results of the monthly U.S. Employment Report which is scheduled to be released at 8:30 AM ET.   

Here are today’s closing marks, with changes from Wednesday’s close:

                                                                                    Thursday’s Changes                

Dow Jones Industrial Average                      14,329.49        +33.25             +0.23%           

S&P 500 Index                                                1,544.25        +  2.80             +0.18%

NASDAQ Composite Index                             3,232.09        +  9.72             +0.25%

Russell 2000 Index                                             934.57        +  4.61             +0.50%                       

After surging between 4% and 10% yesterday, most Gold/Silver mining shares consolidated these extraordinary single-day gains by tracing out sideways patterns today, mostly around the unchanged level. I sense a very strong underlying bid to this sector now, and I remain convinced that a major advance is now underway in this oversold and undervalued group.

For your review, I have included today’s daily bar charts for the Dow Jones Transportation Average and also the Silver ETF (symbol SLV) below. All my computer-generated buy and sell signals are included in these charts.

Bottom Line: I was surprised today by the dearth of profit-taking ahead of tomorrow’s key U.S. employment report. However, upside action was less than convincing and cracks in the bullish case were evident (i.e. Transports). If I am right in my forecast that most major stock market averages are poised to reverse sharply to the downside, then tomorrow’s February employment results shouldn’t really matter. There will probably be more than the usual volatility in very early dealings, but the downturn that I am expecting should be well underway by early afternoon at the latest. Today’s slide in the Dow Transports, which had been a market leader, is probably a significant cautionary sign for the overall market. The fact that gold/silver stocks maintained almost all their lofty single-day gains from yesterday is also a warning sign for the overall market. Long Treasury Bond rates have now backed up about 20 basis points to 3.20% over the last week, and the 10-year T-Note rate has risen about 15 basis points to 1.99% over the same period. Bullish stock market analysts might actually see this exit from Treasury securities as a “plus” for stocks (part of the “great rotation”), but I don’t share this view.

Silver ETF (symbol SLV) Daily Bar Chart

Dow Jones Transportation Average Daily Bar Chart