Dow Theory

[winston]

This Week's Major Test

by Charles Payne

Last week, the S&P 500 rallied 2.8% for its best week of 2016. There is a general sense this is a pause and not a turn, so this week will be a major test. If momentum is to be maintained, there are certain areas that must participate, including transportation.

I have long been a fan of the Dow Theory, where one tenant is that transportation stocks must be higher to give market rallies legitimacy.

The Dow Jones Transportation Index turned in early January and has picked up even more momentum. Still, the index has its challenges, including truckers and railroads.

Airlines in the index took off as crude broke under $30 a barrel again. In fact, most of the stocks traded the way one would expect with the exception of Kansas City Southern (KSU), which got upgraded at Credit Suisse.

When Trinity Industries (TRN) crashed, I was sure rails would all collapse in unison. I loved Kansas City Southern for years, and it may be a stock to own again before the new Panama Canal opens. For now, the Dow Transportation Index has to find a way to close above 7,500.

It's going to be an interesting week marked by an avalanche of Federal Reserve speakers that could either: a) corroborate no rate hike in March, or b) make things more confusing.

We also just got some disappointing data on housing: supply of new homes, especially on the lower end, continues to be tight. There has been a move from luxury homes buyers to more first time buyers, which was reflected in the median home price falling 4.5% to $278,800. Despite the decline, economists say the housing recovery does remain intact.

Once again, the Dow faces a challenge to close above 16,500. The oil/stocks relationship is fading a bit, but oil is up just slightly today and oil stocks could help in a rally attempt. Watch for the Energy Select Sector Fund (XLE) to climb above 58, then breakout on a closing basis above 60.

Source: Making Money

[winston]

The divergence that’s worrying the stock market’s bulls

Dow Transports is falling while DJIA is rising

Source: Market Watch

http://www.marketwatch.com/story/the-di ... eid=yhoof2

[winston]

A GOOD SIGN FOR THE BULL MARKET

Transportation stocks hit a new 10-month high last week... And that's good for the bull market in stocks.

The "transports" are a widely followed sector, thanks to Charles Dow, the legendary founder of the Dow Jones Industrial Average. He also developed a famous method of stock-market analysis called "Dow Theory."

One of Dow Theory's main ideas is to monitor both industrial shares (the manufacturers of goods) and transportation shares (the transporters of goods). This gives us a "big picture" view of the economy and the overall stock market.

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

As you can see in the following chart of the Dow Jones Transportation Average – which tracks America's largest railroad, trucking, and freight companies – the index is in an uptrend and just broke out to a new 10-month high. It's still a "Dow Theory confirmed" bull market.

Source: Daily Wealth

[winston]

One more sign you should have money in stocks today

Source: Daily Crux

http://thecrux.com/one-more-sign-you-sh ... cks-today/

[winston]

Here’s what the oldest market-timing system in stocks is saying now

By Mark Hulbert

With stocks near a record high, is a change of fortune just around the corner?

All three of the Dow Theorists who I monitor on a regular basis believe the major trend remains up.

What would it take for a Dow Theory “sell” signal to be generated? Though each of these market timers may quibble on how to put the Dow Theory into practice in each situation, there is broad agreement on what it would take:

1. Both the Dow Jones Industrial Average DJIA, -0.67% and the Dow Jones Transportation Average DJT, -1.08% must undergo a significant decline after hitting new highs — significant in terms of time and magnitude.

2. In their subsequent significant rally following the decline referred to in step No. 1, either one or both of those Dow averages must fall to surpass their highs.

3. Both averages must then fall below their lows registered at the bottom of the decline referred to in step No. 1.

Richard Moroney, editor of Dow Theory Forecasts, summarizes what this means for the current stock market: “A rebound above the March 1 closing all-time highs … would reconfirm the bullish primary trend under the Dow Theory. If one or both averages fail to rebound to fresh highs … the stage would be set for a bear-market signal.”

Jack Schannep, editor of TheDowTheory.com, reminds us, the “current trend is assumed to continue intact until it is proven otherwise.”

And for the moment, that means the judgment of the Dow Theory is that the bull market remains intact.

Source: Market Watch

http://www.marketwatch.com/story/heres- ... yptr=yahoo

[iam802]

2017Apr-Dow Jones Averages Industrial Average-800x600.png

[winston]

The oldest stock market indicator known to man is flashing a big buy sign

by Joe Ciolli

Reports on the imminent demise of the eight-year equity bull market have been greatly exaggerated, at least according to a century-old indicator.

The godfather of technical analysis, known as Dow Theory, says[b] transportation and industrial stocks must advance together for market gains to last. [/b]The most bullish possible signal is when the two groups hit record highs simultaneously.

That happened in October, and the subsequent uptrend has yielded 17% in returns for the Dow Jones industrial average.

So it's smooth sailing for stocks, right? Not quite. The situation is not that simple for stock bears.

Recent strength in the Dow propelled the index to a new record on June 19, but the associated transportation index did not reach one, and that lack of confirmation has troubled some market pessimists.

Fear not, says Raymond James chief investment strategist Jeffrey Saut, who points out that transportation and industrial indexes in the S&P 500 achieved highs on the same day. While not adherent to the exact parameters of Dow Theory, this is a bullish signal nonetheless, he said.

While Saut admits the situation with the Dow is a so-called "bearish divergence," he notes that the Dow transportation index is still within 2% of confirming the bullish trend.

Over time, Dow Theory has developed a reputation as a reliable indicator. It flashed a sell signal in November 2007, prior to major losses for US indexes. It also returned a bullish reading in October 2008, about six months before the start of the ongoing bull market.

While it's far from perfect — after all, no stock indicator is — Saut is banking on the continued bullishness Dow Theory is currently foreshadowing. He's particularly intrigued by what he perceives to be a lack of overly confident sentiment, and sees the undercurrent of pessimism is healthy for the market.

"We remain in the camp that this upside breakout is a solid breakout to new all-time highs," Saut wrote. "We think that when the negative nabobs turn positive, that will be the time to raise cash. Until then we remain bullish."

Source: Business Insider

[winston]

This is how you’ll know when to get out of stocks

by Nick Rokke

Source: Palm Beach Daily

http://thecrux.com/analyst-this-120-yea ... -says-buy/

[winston]

If You Are a Crazy Bullish Investor Right Now This Chart Should Be Terrifying

So far in August only the Dow Jones Industrial Average by setting new highs. Transports have peaked, which warns that stocks may decline soon.

by Richard Suttmeier

Source: The Street

https://www.thestreet.com/story/1425689 ... yptr=yahoo

[winston]

The Dow Theory is telling us to chill about the health of the bull market

One reason so many investors are concerned about the stock market: The Dow Jones Transportation Average has nose-dived

The stock market must jump over three successive hurdles to generate a bear-market signal, and it hasn’t even cleared the first.

Those three steps are:

1. Both the Dow Jones Industrial Average and the Dow Jones Transportation Average must undergo a “significant” decline after hitting new highs — “significant” both in terms of time and magnitude.

2. In their subsequent “significant” rally following the decline referred to in step No. 1, either one or both of these Dow averages must fall to surpass their highs.

3. Both averages must then fall below their lows registered at the bottom of the decline referred to in step No. 1.

Source: Market Watch

http://www.marketwatch.com/story/the-do ... yptr=yahoo