Monday, May 20, 2013

US stocks - relevant correction in the making ?

Old rules are still valid - dow theory works.

Whether you like it or not, US stock market is still in a bull stage. Although volume is thin, market breadth is deteriorating and investors bullishness is at its historical highs - dow theory still validates current bull stage.

But looking at the main two averages, Dow Jones Industrial and Dow Jones Transportation, apart from dow theory confirmation we can spot quite interesting thing: transportation average is lagging behind industrial average.
Let's look at the chart:


As one can easily spot, each time we have seen such a situation, the relevant correction took place.

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