However, if the Transports violate their November lows, without a similar breakdown by the DJIA of its November closing low of 7552.28; it would be a downside non-confirmation that should be interrupted bullishly. In the interim, we are cautious.
For more information regarding the Dow Theory, check out the Brown, Goetzmann and Kumar paper.
Diamonds Trust (ETF) (DIA)
Daily Chart with 50- and 200-day Moving Average
The question is this: Will the Dow Industrials follow the Transports? How will market participants react if the November the lows are breached?
On January 13, we note weakness in railroad companies:
- Railroads Derailed?
"We can see from the above Transportation Index that its November lows have not been tested. The bears have the upper hand right now as investors wait to see what earnings look like for other railroad companies. The $TRAN index has a major influence on the Dow Jones Industrials ($INDU) because Dow Theory followers are watching very closely."
Let's take a look at the most popular constituents of the Dow Transportation Index ($TRAN):
Burlington Northern Santa Fe Corporation (NYSE:BNI)
Relative Momentum vs. Dow Jones Transportation Index, Daily Chart
C.H. Robinson Worldwide, Inc. (NASD:CHRW)
Relative Momentum vs. Dow Jones Transportation Index, Daily Chart
FedEx Corporation (NYSE:FDX)
Relative Momentum vs. Dow Jones Transportation Index, Daily Chart
Norfolk Southern Corp. (NYSE:NSC)
Relative Momentum vs. Dow Jones Transportation Index, Daily Chart
Union Pacific Corporation (NYSE:UNP)
Relative Momentum vs. Dow Jones Transportation Index, Daily Chart