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06 febrero 2007

Dow Transports Confirm the Bull Market

Importante refuerzo técnico para la tendencia alcista:

The first week of February was a memorable one for the stock market in many ways. From the all-time high in the Dow Industrial index, to the breakouts in the small cap and mid cap sectors. But most memorable from a technical standpoint was the new all-time high in the Dow Jones Transportation Average (DJTA).

A bullish confirmation signal was generated in the Dow Jones Transportation Average on Friday. The DJTA finally closed above the 5,000 resistance level, which makes for an all-time high in this economically sensitive proxy. From a Dow Theory standpoint, the Transportation index closing above 5,000 will cause a number of market technicians and investors to re-evaluate their previously bearish or non-committal stance on the future direction of stock prices. Those analysts that have stubbornly held to their bearish outlook, if they're intellectually honest, will at the very least question their reasons for remaining bearish. Once they openly admit that the new high in the DJTA is bullish from a Dow Theory perspective, the followers of these analysts will become more comfortable with the long side of stocks and this should translate into greater inflows into the market. A surge in trading volume followed by higher stock prices will then ensue.

One reason why this bull market isn't likely to end anytime in the immediate future is because of the clear lack of public participation, or of anything approaching euphoria. Major bull markets always end with a final flourish where the public is heavily invested (usually leveraged to the hilt) and everyone and their hair stylist is excited about the "inevitability" of higher prices to come.