We have described the divergence between the Dow Jones Industrial (DJI) and the Dow Jones Transportation (DJT) indices before. The DJT peaked already back in May while the DJI continued to make new all-time highs. The divergence between the the two indices is a warning, that a larger corrective decline could be nearby.
As it can be seen on the chart above, we have seen divergence between the two many times before and it normally call for major corrections as we saw it back in 2000, 2007, 2015 and 2020. Therefore we should be aware of the red light flashing for a possible major top and a larger corrective decline in the weeks/months ahead.
