Weak Markets retrace Dow Jones Transports testing support

The Dow Jones Transports, normally considered a leader, for trading the indices is either lagging the S&P500 or is showing weakness.  The test to 7150 could retrace today which means that we have one of two credible patterns emerging.

The support from Jan 21, of 7150 and the test down to 7020 with a continuing move back to 7300 is now revealing an Inverse Head and Shoulders with this move back to 7150.  The key will be the formation of an engulfing candlestick pattern where we close above the 7240 mark. Then tomorrow, I would expect to see weakness in the AM with a move up to 7300 in to the close. The extension of this move if it were to break through resistance is the double top at 7580 then and extension to 7900.   NOTE – this could be the double top everyone fears.

ON the other hand, if sellers keep control and the move continues down, I am watching for a re test to 7020.  If support gives way then a move to 6900 and then free fall to 6650 and a breaker event to 6400.  Doesn’t look like a probable move, but you never know.   Just be prepared to take advantage if the pattern emerges.