Somebody a lot smarter than me figured out that if you can leverage one key chart, you might just be able to discern future market direction, explains Jeff Greenblatt of Lucas Wave International.

That guy was Charles Dow. His legacy is alive and well on this one chart. Looking at the Transports, it’s a mess. It's also one of those sectors that is not near new highs along with the banks. Midweek, the KBW Nasdaq Bank Index (BKX) was putting in a high wave candle, which means wicks on each end of the candle. It could be sending a signal the banks are losing conviction and could consolidate for a while.

Not so with the Transports, which are suddenly in fresh trouble. Several days ago, it found a low at a decent reading of 42 days down and a 43% retracement. In a good market it’s a setup designed to manifest a fresh bull leg up. I thought it could be a decent low but there was one caveat. Never overlook the fine print, even on a price chart.

There was a gap down to the low and the sunny disposition of the market could return if they took out that gap. Simple enough, right? It was so close yet so far. It stalled right as it tested the gap. Now let’s look at the intraday to see those finer details. My job isn’t to predict what will happen, but to give you the right information so you can track it and make your decision.

transport hourly

On the hourly chart we see how the gap was filled. But what we also see is a smaller high at 14884.96. The calculation that could be driving the entire market in the days and weeks to come could be that pivot at 14852.34. Why? It's an 85% retracement of the 14884-prior high. You are reading about this because it reacted and left the upper tail. Here’s a couple of potential scenarios.

Gaps act as magnets, and I think in terms of chaos theory they act as strange attractors. Strange attractors are nothing more then magnet points, which first attract, then repel. So, let’s say we get a drop to fill that gap. It's still holding support. The problem is if they do fill the gap, they will take out that big green wide range candle. The low of the candle, which is now support could turn into resistance. The ideal situation would be a drop just to the low of that wide range candle, which is 14617.17. The ideal rarely happens. The Transports are weak and could be one real distribution day away from going over the ledge. If that happens, the recovery rally could be over.

daily transport

Another important chart, which I’ve covered the past couple of weeks is gold where Kairos suggested we could get a reaction going in a northerly direction. It is now right in the middle of that weird zone test, which was a strange place to put in a big lower tail. But it held and is still on the move. The greenback stalled but strange Bitcoin hasn’t moved in sympathy. The greenback stalled and is only weeks away from its 161-month window. If the dollar bear is going to live up to popular anticipation of trouble, it needs to start going soon.

gold

Here’s how the intraday clock helped identify the important turn back up. Many people would like to trade intraday but are confused at what to look at and intimidated by the speed of the market. The intraday clock slows the action down. Your edge comes from what you are looking at. There was a big drop of 236 points on the open in the Dow futures. It found the low at 236 points down, 137 minutes and the intraday clock was 133dg from the low in the overnight action, which was 233 points down.

vibration

Replication of numbers is the key. If you will only look at important highs and lows, the “new bits of information” as Bill Williams likes to say act as important “tells” to the rest of the pattern. Most people don’t realize it, just like most people don’t realize how important the numbers to the right of the decimal point in stocks are. To most it's just the cents holder. But for those who are initiated, the cents holder turns into the time holder. I can show you literally hundreds of examples of how the cents holder helps us recognize key turning points in the market.

They used to call baseball’s All-Star Game the midsummer classic. For us that means we are getting close to September, which is the traditional graveyard for stocks. The nagging divergence is still active and how the Transports test manifests can go a long way in determining whether September will live down to its hype.

For more information about Jeff Greenblatt, visit Lucaswaveinternational.com.