Transports: Reverse Head and Shoulders

We've been watching the Transport Index chart for the last few months and early on saw the reverse head and shoulders forming. Although it wasn't logical that the Transport Index could complete the bullish pattern to 5530 with $4.00/gal gas, the market proved again that it can do anything it wants.

Okay, so now we've hit the target, what next?

Answer: No one knows, but we do know this. The VIX has been at SUPER LOW numbers that are likely unsustainable and the general market is in an overbought condition.

The topping tail on the Transport Index is very prominent and after such a ballistic move up it seems likely that a moderate pull back is in order even if it decides later to resume it's uber-bullish trend.

We talked about this reverse H&S target on last Thursday's call so those of you that were on the call this comes as no surprise.

Summary, market is certainly bullish, but we are at some key resistance levels so we are prepared to take advantage of a mild to severe pull back should one occur.

DOW Transports Index: