Skip to main content

Stock market wrap up

Are US stock markets set to go higher?

While the current financial environment is dominated by a wave of bad news related to the credit crisis and weaker corporate profits in the tech and financial sectors, recent action in the leading Dow Jones averages may be painting a different picture for US shares: one of strength.

Dow Theory Letters writer Richard Russell has recently made repeated references to the surprising strength in both the Dow Jones Industrial Average and the Dow Transports since the time of their January lows.

While the DJIA has been something of a laggard between the two, the Industrials have remained stubbornly above their January lows (Edit: this is true only in terms of intraday lows reached on January 22, and not in terms of closing prices. My apologies.).


Meanwhile, the Dow Transports continue to move higher, having recently broken through the 200-day moving average on the daily chart, and above their old February highs.

Are we witnessing a brief bear market rally in the leading Dow averages, or is this the start of something more?

As I noted in our January post, "Yeah, it's a bear market", Russell's reading of Dow Theory suggests that a primary trend bear market confirmation has been in place since November 21, 2007. So barring further notice (and a joint move by the Industrials and Transports to new highs), we remain, by Dow Theory standards, in bear market territory.

But the recent strength in the Transports and the Industrials has Russell wondering if stocks have seen their worst and are now discounting the gloomy news that continues to pour forth. As Russell noted in a recent letter to subscribers, "We have a bullish non-confirmation by the Transports and a rally on the part of both averages".

Since recording their January lows, the two averages have worked higher in the face of bad news. This curious strength in the face of overwhelming bad news leads Russell to wonder if maybe the stock market is signaling a light at the end of the tunnel?

It's an intriguing question, and one I will try and keep up with. You can subscribe to Russell's newsletter and do the same, or check out some periodic samplings of his work at 321gold.

For now, looking at that other well-known barometer of US stock market performance, the S&P 500 index (SPX), the overall picture remains bearish.

Since most professional money managers and investors use the S&P 500 to gauge US stock market performance, we'll continue to keep a close eye here as well and see whether it will follow the Dow Jones averages higher, or continue its move to the downside.

Stay tuned.

Popular posts from this blog

New! Finance Trends now at FinanceTrendsLetter.com

Update for our readers: Finance Trends has a new URL!  Please bookmark our new web address at Financetrendsletter.com Readers sticking with RSS updates should point your feed readers to our new Finance Trends feedburner .   Thank you to all of our loyal readers who have been with us since the early days. Exciting stuff to come in the weeks ahead! As a quick reminder, you can subscribe to our free email list to receive the Finance Trends Newsletter . You'll receive email updates about once every 4-8 weeks (about 2-3 times per quarter).  Stay up to date with our real-time insights and updates on Twitter .

Moneyball: How the Red Sox Win Championships

Welcome, readers . T o get the first look at brand new posts (like the following piece) and to receive our exclusive email list updates, please subscribe to the Finance Trends Newsletter .   The Boston Red Sox won their fourth World Series title of t he 21st century this we ek. Having won their first Se ries in 86 years back in 200 4, the last decade-plus has marked a very strong return to form for one of baseball's oldest big league clubs. So how did they do it? Quick background: in late 2002, team own er and hedge fund manager, John W. Henry (with his partners ) bought the Boston Red Sox and its historic Fenway Park for a reported sum of $ 695 million. Henry and Co. quickly set out to find their ideal General Manager (GM) to help turn around their newly acquired, ailing ship. This brings us to one of my fav orite scenes from the 2011 film , Moneyball , in which John W. Henry (played by Ar liss Howard) attempts to woo Oakland A's GM Billy Beane (Brad Pi

William O'Neil Interview: How to Buy Winning Stocks

Investor's B usiness Daily founder and veteran stock trader, William O'Neil share d his trading methods and insights on buying winning stocks in an in-depth IBD radio interview. Here are some highlights from William O'Neil's interview with IBD: William O'Neil's interest in the stock market began when he started working as a young adult.  "I say many times that I didn't get that much out of college. I didn't have much interest in the stock market until I graduated from college. When I got married, I had to look out into the future and get more serious. The investment world had some appeal and that's when I started studying it. I became a stock broker after I got out of the Air Force."    He moved to Los Angeles and started work in a stock broker's office with twenty other guys. When their phone leads from ads didn't pan out, O'Neil would take the leads and drive down to visit the prospective customers in person.