The breakout of the stock market to record highs is being affirmed by one of the oldest indicators on Wall Street
- The trend higher in the
stock marketis likely set to continue as one of the oldest indicators on Wall Street confirms the move higher. Dow Theoryis based on the relative price action of the Dow Jones Industrial Average and the Dow Jones Transportation Average.
- Since mid-February, the Transportation Average has minted 14 new all-time highs, signaling more gains ahead for the broader market.
- Sign up here for our daily newsletter, 10 Things Before the Opening Bell.
One of the oldest indicators on Wall Street is signalling that the record highs made in the stock market over the past week are set to continue.
"Dow theory" is based on the writings of The Wall Street Journal co-founder Charles Dow and represents study of the intermarket relationship between the Dow Jones Industrial Average and the Dow Jones Rail Average, now called the transportation average.The general idea is that both averages, over time, should move in tandem, given that the transportation average represents companies responsible for the movement of goods across the country. For that reason, it should serve as a leading indicator.
Technical analysts look to Dow theory to confirm broad movements in the stock market. Specifically, traders look for confirmations and divergences between the two indexes.A confirmation is when the transportation and industrial averages reach new highs (or lows), signaling that the trend in the broader market is up (or down). A divergence is when one of the two averages isn't moving in tandem with the other.
- Chris Gayle appears four times in the top 10 list of most sixes hit in an IPL match
- Up-close and not so personal with Munnar’s pit vipers, gliding frogs and more
- Haryana government extends lockdown in the state till May 24
- UK's Cairn Energy identifies $70 billion Indian assets for seizing to recover amount due from government
- States to receive nearly 51 lakh COVID-19 vaccine doses in next three days, says Union Health Ministry