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Battling for Bullish Runs
By Ian Cooper
Dow Theory is a simple indicator that says when the Dow Industrial average hits a significant high or low -- and that index is confirmed by the Dow Transportation Average -- then it is a clear gauge (92.8% effective) in telling you if you are in a bull or bear market.
Says Christian DeHaemer, “As you can see in a10-year chart, the Industrials and the Transports each hit a new high in March of last year. At that time I shouted from the rooftops that we were in a new bull market. Since then the industrials have been making a series of new highs, including a new one yesterday at 1,685. The Dow was up 19% last year. Not too shabby for a major blue-chip index. What you may not hear bandied about at Bed, Bath and Beyond is that the transports are less than 122 points from reconfirming the bull market by hitting a new high at 5,038.58 -- a number that could be hit in the next few days...”
And if January lives up to its reputation as the prognosticator of future market performance, 2007 could be quite a profitable year. In fact, according to the Stock Trader’s Almanac, “as January goes, so goes the market for the rest of the year.” That theory has only been wrong five times over a 56-year period with a 91% accuracy rate, according to USAToday.com. January closed positively thanks to alleviated inflation fears and Fed reassurances that the economy was on the up and up.
Better still, according to Banc of American analysis referred to by USAToday.com, a positive return in the first month of the year increases the odds that the S&P 500 will post gains for the remainder of the year. Its accuracy – 80% since 1926.
Take care,
Ian L. Cooper, Editor, Early Alert Trader