Yesterday the Dow Jones Industrial Average (DJIA) broke below its early July low. At the same time the Dow Jones Transportation Average (DJTA) held above its early July low. Since the top in the transports last December they have led the industrials lower. Yesterday broke that trend. It now appears that DJIA is catching down to DJTA.

Another thing to watch with the industrials is that they’re starting to paint a rounded top with the downtrend from the last peak now two and a half months long. There hasn’t been a lot of price damage in DJIA, but the time damage is starting to be significant. The longer the market drips lower the more it drains confidence from bullish investors. Rounded tops are made by one set of market participants buying small dips while another set sells into the rallies over a long period of time. So DJIA has time damage with the formation of a rounded top, but price hasn’t broke yet. Keep a careful watch on DJIA if it breaks below the December/January lows the odds will favor a trip to the 16400 area that is my first target for a new secondary low.