The Dow Jones Transportation Average has underperformed recently, while the Dow Jones Industrial Average has broken to new highs. This has prompted Dow Theorists to send out worry signals, as an article in today's WSJ points out. Below we provide a chart of the two indexes since the bull market began in October 2002. One noteworthy point on the chart is the late summer of last year. In a similar setup to today, the Transports were struggling as the Industrials were testing new highs. A search on Google's news archives found an article titled "Dow Theory Signals Trouble Ahead as Transportation Extends Declines" that was published on August 15th, 2006. However, as the chart shows, the Transports didn't hold back the Industrials at all. The Dow 30 rose 11% from 8/15 through the end of the year.
lt's also important to note how much the Transports have already outperformed the Industrials since the bull market began. As shown below, the Transports are up 143% while the Industrials are up 92%.
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