Present and Probable Market Trend
27 Dec 2024
The Dow Transportation Average broke support (went below its previous low) on 9 Dec followed by the Dow Industrials breaking support on 18 Dec. This indicates the market may be forecasting a downtrend from here. Confirmation of new support in either average has not occurred yet. Support, or the new bottom in each average is what we are waiting to see formed.
What we are looking for is the Dow Jones Industrials and the Dow Jones Transportation Averages to be in sync with each other. They can be in sync in an upward direction or a downward direction. This syncing of the two averages serves as a forecast of the probable direction of the general market. What you need to remember is – when the general market is trending up or down the majority of stock prices are going to be moving in the same direction. It doesn’t matter whether the individual companies are good or bad, their stock prices have a high probability of following the primary trend indicated by the Industrial and Transportation Averages.
People wonder why these two averages are important. The reason is they represent two different parts of the economy. The Dow Jones Industrial Average is a stock market index that tracks the performance of 30 large, publicly-owned companies in the United States. The Dow Jones Industrial companies are involved in producing goods and services used by a large portion of the public, representing a wide range of industries. The Dow Jones Transportation Average is a stock market index that tracks the performance of 20 large, publicly-owned transportation companies in the United States. The Dow Jones Transportation companies are involved in transporting goods and materials to and from producers and consumers, including airlines, railroads, trucking, and shipping companies.
Used together in this way, the Dow Jones Industrial Average and the Dow Jones Transportation Average are a measure of the economy in the United States. When things are slowing down economically the companies in the averages aren’t generally doing as well. When the economy is gaining the companies in the averages are generally doing more business. This activity is reflected in their stock prices.
Charts courtesy of Stockcharts.com http://Stockcharts.com
