We’ve been noting a Dow Theory non-confirmation in NFTRH over the last few months as the Transports have declined while the Dow has gone on to tick new highs. The ratio (2nd panel below) obviously tanked and represents that divergence.
However, nominal TRAN has the technical look of something one might want to buy as it has pulled back within an uptrend and broken its downtrend line lately. If I take away what I think I know about the market (suspect economic fundamentals, poor valuation and over-bullish sentiment), I’d think about buying IYT.
I am not a big believer in Dow Theory in a modern market as you may be able to tell by the jokes – including Clark and the mature ascot crowd – I make about it. If I look at it as a straight up TA, which is really all I am in this context, I see buying opportunity and a non-negative signal for the stock market.