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Transports Have Not Yet Confirmed Dow’s Breakout

Transports must break to a new high in order to confirm a Dow Theory buy signal


The Dow industrials ended Thursday with another record closing high — its 46th of the year. But it was a day of tedious back-and-forth trading that left both the S&P 500 and Nasdaq slightly in the red.

Unemployment benefits rose 10,000 to a seasonally adjusted 379,000, the highest level since March.

The yield on the 10-year Treasury note rose to 2.92%, up from 2.88% on Thursday. And gold fell sharply with futures down 3.3% to settle at $1,195 an ounce, a three-year low. The U.S. dollar rose against a basket of currencies.

At the close, the Dow Jones Industrial Average gained 11 points to 16,179, the S&P 500 fell 1 point to 1,810, and the Nasdaq closed off 12 points at 4,058. Total NYSE volume was 3.5 billion shares, and the Nasdaq traded 1.8 billion. On the Big Board, decliners outpaced advancers by 1.4-to-1, and decliners on the Nasdaq were ahead by 1.6-to-1.

Dow Chart
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Chart Key

Wednesday’s big Dow industrials breakout was followed with a new closing high Thursday. This is a confirming move accompanied by a new buy signal from the MACD indicator.

DJT Chart
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However bullish the industrial average, the Dow Jones Transportation Average must also break its old high made on Dec. 2 at 7324.15 in order to confirm a new Dow Theory buy signal. Without a new high the breakout of the industrial average is in a “non-confirmed” status. 

But MACD is hooking up and should shortly trigger a new buy signal. Support at the 50-day moving average at 7,051 is also arching up at a sharp angle. A new confirmation should come shortly.

Conclusion:  As a result of Wednesday’s breakout, the intermediate targets are Dow 16,645 and S&P 500 1,858. The Nasdaq must break its 13-year high at 4,081.78 before an intermediate target can be calculated. Net week, I’ll take a stab at the 2014 targets for each index.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

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