Dow Theory

[winston]

Should We Be Worried About The Truckers? by JC Parets

The Dow Theorists are flipping out.

What this group wants to see is the Dow Jones Transportation Average make new highs whenever the Dow Jones Industrial Average takes out a previous peak.

Dow Theory states that they need to confirm each other. In an uptrend both should be making new highs, and when one doesn’t, there’s a problem.

Same thing in a down trend – when one average makes a new low, the other should follow. If there is a divergence, it’s considered a positive.

So this Spring, when the Dow Industrials took out their 2011 highs, we were waiting for the Transports to confirm. They never did.

Today I wanted to look at a chart of just the Truckers vs the Dow Jones Industrials Average to show just how weak this space looks right now:

So should we be worried about what the truckers are telling us?

I think so.

http://allstarcharts.com/should-we-be-w ... -truckers/

[winston]

The Transports are Flashing Yellow Lights By MICHAEL KAHN

The recent underperformance of transportation stocks is a warning sign for the broad market, but not yet a sell signal.

Technical analysis is not as deterministic as it is perceived. As new information appears, sometimes even the best-supported forecasts must change.

That is what seems to have happened to the Dow Jones Transportation Average after an early September upside breakout failed and turned into breaking to the downside late in the month.

That is not good news for equity investors although not an immediate sell signal for the stock market as a whole.

The Transports already had been heading in a different direction from the broad market for more than three months.


Source: Barrons

[winston]

BIG NEWS FROM THE TRANSPORTATION SECTOR by Brian Hunt

This week, we've shown you several charts we've called "good for America." Shares of airline and financial stocks are exhibiting strong price action. Today, we add one more group of stocks to the "good for America" list: transportation stocks.

The "transports" are a widely followed sector, thanks to Charles Dow. Dow is the legendary founder of both the Wall Street Journal and the Dow Industrials Average. He also developed a famous stock analysis method called "Dow Theory."

There are several ideas contained in Dow Theory. But one of the main ideas is to monitor both industrial shares (the manufacturers of goods) and transportation shares (the transporters of goods). This gives the investor a "big picture" view of the economy and stock market.

Dow reckoned if both manufacturers and transporters were enjoying higher stock prices, they were "confirming" a bull trend.

Below is a two-year chart of Dow's modern-day transportation index, the Dow Transports. The index tracks America's largest railroad, trucking, and freight companies. As you can see, the index spent most of this year in a downtrend.

But in just the past few weeks, the index "broke out" to a fresh 52-week high. It's a "Dow Theory confirmed" bull market.


Source: www.dailywealth.com

[winston]

Should Investors Still Trust the Dow Theory as a "Buy" Signal? By Ben Gersten

Richard Russell - godfather of financial newsletters, author, Dow Theory expert and longtime bear - just turned bullish.

One reason for his conversion: the Dow Theory, which is said to have formed the basis for all modern technical analysis through its definition of a trend and its reliance on studying price action.

The Dow Theory says the market is in a bullish trend if one of its averages - either the Dow Jones Industrial Average or the Dow Jones Transportation Average - advances above a previous important high and is followed by a similar advance in the other average.

The Transportation Average broke through its record high in January, and the Industrial Average hit an all-time high on March 5.

http://moneymorning.com/2013/03/19/shou ... uy-signal/

[winston]

The Levels to Watch in Transports

One index that has my interest today is the Dow Jones Transportation Average. Transports have helped lead equities higher off the Nov. ’12 lows and have been outperforming the S&P since September.

Transports have put in a nice rising trend line once it broke out from its channel. We discussed the trading range created between June and December a few times last year (here and here), which gave us a nice level to watch for a breakout. This trend line is what many traders will be watching if we see any continued weakness and a break of 6,100.

Like I’ve mentioned with the S&P 500, The DJ Transport Avg. is seeing its momentum set lower highs while price has rocketed higher, putting in a negative divergence. I’ll be watching the 50 level on the Relative Strength Index as a sign of momentum breaking down, as that’s the level tested back in Feb.

In the bottom panel of the chart we can see the relative performance between the iShares Transports ETF ($IYT) and the SPDR S&P 500 ETF ($SPY). The ratio has done a pretty good job at finding support at its 50-day moving average. When we get a break with follow through of the 50-MA then we can get a clue of a possible trend change between these two indices and a sign that the equity leader is having some trouble.

On Friday I discussed the charts that could end the rally. Alongside the setups I mentioned, it’s important to keep an eye on sectors and names that have led the market rally.

Transports are definitely one of those names and can act as the canary if things were to weaken.

http://www.athrasher.com/the-levels-to- ... ransports/

[winston]

Dow Theory Affirms the Bull Market by Arthur Hill

According to Dow Theory, a bull signal is in force when both the Dow Industrials and Dow Transports move to new highs.

Well, this happened today as both the Dow Industrials and Dow Transports forged fresh 52-week highs.

The April lows become the first levels to watch for signs of a bearish signal.


http://blogs.stockcharts.com/dont_ignor ... arket.html

[winston]

Dow Theorists Wait For Transports to Confirm by JC Paretson

In bull markets, you want to see both the Dow Jones Industrial Average and the Dow Jones Transportation Average making new highs together.

Dow Theory suggests that when one of these gets left behind and doesn’t confirm the other, something is wrong and there should be cause for concern.

Last week the Dow Industrials closed at new all-time highs, and now sit above their May closing highs.

Meanwhile, the Transports are still almost 2% from their May highs. So if you believe in Dow Theory, you want to see these transporation stocks get going quickly.

Bottom Line: It is hard to ignore the strength that was seen last week. Much like “The Running in Pamplona”, Bulls pretty much did everything they wanted, with an unrelenting climb.

With most momentum indicators running in overbought territory, the NDX coming off 13 consecutive up days, and a potential “Dow Theory Non-Confirmation”, however, we are still hesitant to chase stocks without at least a few days of consolidation.

That does not mean that stocks are huge short-sales, however. There is very little evidence of a broad based decline, at least yet. Our point is that sometimes holding-off on aggressively buying, and waiting for better opportunities is the correct strategy.”

http://allstarcharts.com/dow-theorists- ... o-confirm/

[winston]

Transports Worry Me Up Here by JC Parets

I think now is probably a good time to bring up the Dow Jones Transportation Average running up into its May highs. These fresh closing highs in trannies got all the Dow Theorists pumped up last week as they finally confirmed the new highs that the Industrials had already been making.

But what you don’t hear much these days is the big underperformance for Transports lately. The relative strength the group had been showing this year peaked all the way back in March, believe it or not.

But why am I really worried up here? Well, it just bothers me when new highs are made that can’t hold for more than a day or two, especially when they’re all-time highs, as was the case in Transports. Here is the daily bar chart showing what just happened:

Notice the bearish divergence that has been developing throughout the year as prices have rallied; the relative strength index has not confirmed. But more problamatic might be the weekly chart. Look at the same higher highs, but more bearish divergences in RSI:

Failed breakouts scare the heck out of me as it is. But when they come along with bearish divergences on multiple timeframes, forget it. We’ll need to see new highs in price very soon to invalidate any of these bearish developments


http://allstarcharts.com/transports-worry-me-up-here/

[winston]

THIS IS A 'TRANSPORTATION CONFIRMED' BULL MARKET

If you want proof the bull market is alive and well, check out the Dow Jones Transportation Average...

More than 100 years ago, Wall Street Journal founder Charles Dow set the foundation of modern technical analysis – the "art" of watching stock price trends.

When both the manufacturers and transporters of goods were doing brisk business and enjoying rising stock prices, Dow considered it "confirmation" of a bull market.

Transporters are a good market gauge because they "touch" many parts of the economy. They do well when producers are producing and consumers are consuming. The top two holdings in the index are Union Pacific (railroads) and FedEx (shipping).

Today's chart shows the transportation business is booming. The Dow Jones Transportation Average is up over 50% from its November lows... and just struck an all-time high. This is a clear, "transportation confirmed" bull market.

Source: www.dailywealth.com

[winston]

A bullish sign for the stock market… transportation sector fund IYT soars to a new all-time high