Transports are a train that's still chugging toward new highs

Ready for a Dow Theory bullish (buy) signal? Got IYT (ETF for the Dow Transports or $TRAN)?! There isn't enough buzz about the Nasdaq having exceeded its 2007 high, but it'll probably be different when the Transports index manages that feat, as it's poised now to do. That's because, unlike the Nasdaq, the $TRAN's 2007 high was higher than its 1999/2000 era peak. The Dow Transports reaching to all-time highs is a bullish Dow Theory signal that will be confirmed if - and when - the better-known Dow Industrials (DJIA or $INDU) do the same. On a simple wave basis (similar to a huge reverse (bullish) head-and-shoulders pattern), the $TRAN should gain an additional 10% to hit at least 6000. Notice that the point and figure (P&F) chart at bottom, below, indicates a bullish target about 6350.

As long as the Transports index doesn't violate recent swing lows (thus erasing the P&F chart warning), its apparent wave count and technicals look supportive for it to continue flying high. There are some who especially like the airline sector, by the way. Interestingly, Dow Theory is a very old theory (precursor to R.N. Elliott's Elliott Wave Theory) saying that when BOTH the Dow Industrials and the Dow Transports make new swing highs (or swing lows), it's bullish (or bearish) overall. When it's only one, then it's tentatively bullish (or bearish, if new lows), until it's "confirmed" by the other index doing likewise. So this won't be confirmed until the Industrials make new all-time highs. You can see from the Transports' higher highs and higher lows on the daily chart, the volume-price bars (showing good support that's being moved up from now), and technicals in the daily and monthly charts below, this index is going strong. Certainly the Transports' strength bodes well for the rest of the economy and markets. It shows that "something's moving"!

In that sense, this bullish indication is similar to that provided by the Baltic Dry Index ($BDI); something I addressed in a post last week. So for my readers who went long on Wednesday or Thursday last week on that (perhaps along with other things we've pointed out here) - how's that working out for you? Pretty well ... and with a stop just under last week's lows, it should be a good long-side swing for a while!