Back in May of this year, I noted that the Dow transports were failing to confirm the new highs seen on the Dow Industrials click here to read the blog.
This tenant of Dow theory states that the INDU and TRAN averages must confirm. The tenant is probably the – or one of the- first breadth indicators created. To this day, it’s a still a good leading indicator, so long as it’s used in conjunction with other methodologies. You’ll note on the chart below that we got a follow-up divergence signal from the TRAN/INDU lines in June. It was becoming quite clear that something was amiss for the markets.
So what are the averages telling us now? Well, from a Dow confirmation point of view, the outlook is bullish. Note how both indices have been following each other’s movements closely through the entire double-bottom formation. This gives us one more bit of evidence to suggest that the markets are likely going to remain bullish (interim corrections along the way to be expected) for the coming months.
Keith speaking at the MoneyShow Saturday October 31, 2015 at 3:30pm
Please come out and join me – I really enjoy meeting readers of this blog at my speaking engagements. Here is the link for the details.
New video: Have your cake and eat it too – Better returns with lower risk
[su_youtube_advanced url=”https://youtu.be/R9mJvbHApmk” rel=”no”]On April 21, 2011, I sent the following commentary to our clients at ValueTrend regarding the state of the markets:[/su_youtube_advanced]