Mark Hulbert of Marketwatch: The Transports have been the stronger of the two benchmarks, and it is widely considered to be a leading economic indicator. Read the article HERE.
In 1877 a young farmer from Sterling, Connecticut wrote a piece for the Providence
Sunday Dispatch regarding the transportation systems between New York and
Providence, CT. This piece proved to be the seed for many more writings and articles
by this young farmer turned business reporter, blossoming into a successful career that
would establish the Wall Street Journal and the Dow Jones Industrial and Transports
Averages. Charles Dow’s fascination with the railroads, the primary transportation mode
of the day, led to his obsession with American business.
Today, when most people speak colloquially of the Market, they are more times than
not referring to the Dow Jones Industrial Average. While he believed that this was an
important indicator of the health of the stock market, he always relied upon his original
interest in Transports to confirm what the DJIA was telling him. He never went into
why this was so, but observed that they did confirm each other when their signals proved
correct. Again though, with the Internet, Direct mailing, soft-products as opposed to
hard-goods, does the study of the Transports matter anymore?
It would be wise to remember that the Transportation Average represent 6 different
industries: airlines, air freight, railroads, rail equipment, marine transport and trucking.
Most companies, even in the age of the iPad, still require these mediums to deliver
those iPads to those of us who eagerly await their arrival. Business still relies upon
transportation and monitors the fortunes of transportation companies; we would be wise
to do the same.
There has been renewed interest in the Dow Theory since Jack Schannep presented his research to the Market Technicians Association that showed Dow Theory produced an excess return of 1.5% per year (from 1953 thru 2011) versus a buy and hold strategy. His presentation attracted a whole new generation of Dow Theory enthusiasts. Read the article HERE.