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Now that the bears have regained short-term control technicians turn to secondary indicators to seek further validation. First and foremost, we’ll look at the BKX followed by the Transports. The BKX took quite a wild swing yesterday as the bank sector rallied off the open, due to JPM’s earnings, and faded into the close. This index has been faltering throughout the entire bull run, never having the ability to keep pace with the broader indices. As depicted below, it has succumb to a retest of its 50-DMA and began heading south 5 trading days ago. If the $51 Floors & Ceilings neckline gives way technicians will be looking for the proverbial door.
The next index was, in true fashion, the perfect ‘Dow Theory’ leader since the ’08 lows. Consequently, it will provide great technical significance and the earnings season progresses. The Transports, while holding up as leaders, are now pushing against major Long-term resistance going back to the 2007 highs. This secondary index will most likely be the key to advancement of the 4 Sisters.
I hope this helps increase clarity and your probability measures.