The Dow Transports hit a new all time high last year. The DJIA did not. Some people claimed we had a Dow Theory Bull Market confirmation when the DJIA managed to hit a new 52 week high a while back.
Would you agree?
Or would you think as I do that without the DJIA hitting a new all time high there is a problem with that thinking.
Ultimately confirmation is very important. Right now we will have to wait a while to see if the Transports continue to roll over and set a series of lower highs on the way down. Confirmation of a change in the trend would be given if the DJIA does the same setting and begins setting a series of lower highs on the way down.
Here are some charts I did on the Dow Transports. I don't have all the answers. I just want people to ask the hard questions. Market don't go up, or down, forever. Technical analysis, market breadth analysis, and sentiment analysis along with actual charts we can follow is something I could not trade without.
Lets look at the Transports and this write up to see how accurate it is shall we? First we see that Bank One accurately states that the transports outperform early in an economic recovery.
BPTRAN has been at 100 we know that the index simply cannot get any stronger even if the stocks associated with it continue to rise:
The next assertion that Bank One Makes is that the DOW Transports soften before a recession. They certainly did in advance of the market top in 2000 and the eventual recession that followed:
More than likely when we see the Dow Transports begin to struggle it will be an early sign of an impending market top and an upcoming recession.
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