A Century-Old Stock Signal Is Flashing Buy as U.S. Transports Surgeby
Dow industrial and transportation gauges peaking at same time
Blue-chip index has rallied 9.7 percent since last instance
Equity investors wondering whether the post-election rally in the U.S. stock market has gone too far too quickly can take solace in a technical indicator suggesting more gains lie ahead.
The Dow Jones Industrial Average and the Dow Transportation Average both closed Wednesday at all-time highs for the for the first time in more than two years. According to Dow Theory, simultaneous records in the groups trigger a buy signal for U.S. stocks.
- The 30-member industrial gauge has rallied 9.7 percent since the last time both Dow indexes reached a high on the same day.
- The blue-chip average has rallied 12 percent in 2016, led by Caterpillar Inc., UnitedHealth Group Inc. and Goldman Sachs Group Inc., each of which have surged more than 30 percent.
- The Dow transportation measure has jumped 25 percent year-to-date, led by Landstar System Inc., Ryder System Inc. and CSX Corp., with gains at least 43 percent.
- Dow Theory says that for a rally to new highs in the industrial index to hold it must be accompanied by a new high in the transportation index as well.