Chart of the Day - Tuesday, January 23, 2024

January 23, 2024

So it's a little early for this but anytime the market makes a new ATH, Dow Theory' gets a look.

Transports correlation nearing the lower bound (still some room) meaning at some pt the two indices need to get back in 'gear' (note this process can go both ways).$ES_F $IYT pic.twitter.com/NLKj8xYQYY
— Arun S. Chopra CFA CMT🧐 (@FusionptCapital) January 23, 2024

🏆 Today’s Chart of the Day was shared by Arun Chopra (@FusionptCapital).

It’s hard to deny that a new bull market is underway. However, Charlie Dow might disagree, considering we haven’t had a Dow Theory Buy Signal in over two years.

One tenet of Dow Theory states that the market averages must confirm one another. Dow thought the companies that make the goods (Industrials) should trend with the companies that move the goods (Transports).

Industrials have been printing all-time highs since mid-December, while Transports haven’t made new highs since Nov. 2021. Arun points out that one will likely catch up to the other soon as the 160-day correlation is stretching.

The takeaway: The lack of confirmation between the Dow Industrials and the Dow Transports tests the bull case. This divergence will likely resolve soon; however, Industrials don’t always ‘catch down.’

Filed Under:

Dow Theory,

Arun Chopra,

TCR Chart of the Day,

Transports

Chart of the Day - Tuesday, January 23, 2024

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