Trade Set Up: Transports

Transports have been strong lately, some say because of lower oil prices, however I've seen transports too many times used to prop the market up.

I mentioned in the Daily Wrap last night that Transports are starting to show cracks and are going to end up being a nice short.

Lets take a look, I suspect the general tone of transports is probably not too far off from general market (Dow Theory as antiquated as it is with Industrials and Transports).

 This is the DJ-20 (transports) daily chart, there's been a strong trend, earlier we had a much more bearish looking candle, but the volume just wasn't there, I suspected it wasn't going to stick.

The back of this trend looks to be clearly broken, this 60 min chart shows the distribution, as far as confirmation...

The same in the 30 min chart

The intermediate 10 min chart and here's where it starts to get interesting...

The 5 min shows a good timing turn, however I suspect this will go positive to make 1 more run, perhaps a new high or just a larger rounding top. Here's why I suspect that...

New divergences will always start on the fastest charts, here the 1 min chart today is leading positive off the lows after having gone negative and dragging down price.

Here we have the same on a 3 min chart, it may move to the 5 min, but overall the longer charts are what matters.

Strategically Transports are set up for a decline, from here we just need to look for a tactical entry. We should see a move higher in transports based on these intraday charts, it should be a short term move and because we already have such large negative divergences, we should see these intraday charts go negative on a move higher, that's where we want to enter.

That could be a bull trap above recent highs or it may be in a larger rounding top, but I suspect a higher high and that's where I'm setting my alerts. IYT would be my choice for a short, I'd keep this on the watchlist because it's close and it looks great.