The Dow Theory Has Spoken

From my last week post about the possibility of the US economy experiencing a double dip, I have suggested to keep an alert on the Dow Theory and keep a watch on some transportation stocks for clues to determine if recent slowdown of the US economy is a double dip or simply a temporary slowdown.

I put up some charts for some transportation stocks that might provide some signs on the future direction of the US economy. As seen from the updated charts below for these transportation stocks, some of them have already broke above the upper channel (red line).






Furthermore, the chart for the DJ Transportation index also shows it has closed at an all time high on Friday, July, 1, 2011, and the Dow Theory has spoken.




Although the DJ Industrial index did not close at a new high above its April 29, 2011 close, but this non-confirmation signaled by the Dow Theory indicates a new high for the DJ Industrial is yet to come.




The significance of the new closing high from the DJT is it is an indication the recent slowdown in the US economy could turn out to be only temporary; ‘slow patch’. When the DJ Industrial index confirms with the DJ Transportation index, then a strong case can be made that the US economy is on a road to recovery. Until then, I will keep watching for the next Dow Theory signal with a bullish bias for the intermediate term.