Why Do Transports Matter In The 21st Century?

There is a lot of talk in the news right now about a potential market crash.  This fear is fueled for many reasons, one of which is that the Dow Jones Industrial Index remains relatively strong while the Dow Jones Transportation Index has fallen.  This is known as “Divergence.”  While it is troubling, make sure you have a clear understanding and strategy before you buy into the hype and sell out of the market.

One of the core tenets of the Dow Theory is the need for confirmation.  If the stocks compromising the Industrial Index move significantly upward, the Dow Theory is loath to call a “bull market” until the stocks compromising the Transportation Index move upwards as well.  Originally the Transportation Index was comprised of railroad stocks which primarily moved the consumer goods that the Industrial companies made.

Even though the Transportation Index is no longer solely comprised of railroads, companies such as UPS and FedEx as well as airlines, truckers, etc.still transport goods from the Industrial companies to consumers.  The Transportation Index has been falling of late and this can be an indicator that the Industrial Index may fall as well.  However, as we have said in our book and our newest newsletter, “the primary trend is assumed to continue until definitely proven otherwise.”

Don’t be caught off guard!  Know the strategy, follow our newsletter, and invest wisely!



Latest News

Steve Reitmeister of Zacks Investment Research in his Trading Alert Commentary identified our August 1st 2016 Newsletter as one of "3 fairly bearish articles that made me want to pause just a bit and realize that the bears are not done".   Read the emailed article HERE

Mark Hulbert of MarketWatch:  Despite equity indices near record highs, the Dow Theory remains bearish, and quotes  Jack Schannep as to how that could turnaround.  Read the article HERE

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