Stock market outlook: 100-year-old Dow Theory buy signal just flashed

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A more than 100-year-old buy signal just flashed in the stock market

A classic stock market buy signal called the Dow Theory just flashed, according to LPL Research, suggesting that there is more upside to be had in the current rally.that expanding participation in different areas of the stock market helped catapult the Dow Jones Transportation Average to new 52-week highs last week, confirming the broader rally in the Dow Jones Industrial Average.

The thinking behind Dow Theory is that if the economy is doing well and consumers are buying goods, transportation firms should also be doing well as long as they are tasked with moving those goods.and is based on hundreds of his editorials published in The Wall Street Journal more than 120 years ago.

He ran the numbers and found that when the industrial and transportation averages had overlapping breakouts to new 52-week highs, as they did last week, the forward returns for the broader market were above average.

 

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