So what is Dow Theory saying now? It is saying that the eight-year Bull market is still going strong. The Dow Jones Transports Average did a breakout on the chart this week.
What is Dow Theory Saying Now
Dow Transports are in a strong uptrend right now and have done a breakout to an all-time high this week. We need to see confirmation of that breakout on the Dow Jones Industrial Average chart as well.
We have it! With the new all-time high in both the DJIA and the Transports, this means, according to Dow Theory, that markets are headed higher and the 8 year Bull market run still has more to go. This is great news for traders and investors.
What is Dow theory saying Now? It’s screaming BUY! Before you dismiss this indicator with your negative bias argument, consider that there’s a reason that its been around for more than 115 years. Remember, it warned of trouble in 1999 just months before the dot-com crash in March 2000. It also gave a buy signal in April 2009, almost exactly at the start of the current eight-year-old bull market.
The stock chart of Marriott International looks to be setting up into a Symmetrical Triangle after RBC Capital reiterated its Outperform rating on June 12, 2017. RBC Capital raised its price target to $109 from $92.
Marriott International Stock Chart
Notice the bullish Pocket Pivot (blue dot on the chart above) in the apex of the Symmetrical Triangle pattern. This increases the odds of a breakout. The Effective Volume shows that large players have been increasingly buying MAR as it consolidates. This positive divergence between large players and the price of the stock is bullish.
Marriott International looks like a good long entry. We see reduced volatility while prices have been consolidating in the most recent period. There is a resistance zone just above the current price starting at 104.13. Right above this resistance zone may be a good entry point. There is a support zone below the current price at 102.42, a stop order could be placed below this zone.
With the stock market hitting all-time highs, everybody wants to know if we are in a giant bubble.
You can’t trade and make money if you’re not in the market. If the fear that we are in a bubble is keeping you out, then you’re not making money.
The honey badger doesn’t care. The honey badger loves to climb walls of worry.
You can get an early read on which way the market is headed by tracking transports. Fedex is a bellwether stock in the transports industry.
The chart of FedEx just did a breakout above 180 and hit a new high. The rising Twiggs Money Flow shows FedEx is under heavy accumulation.
Remember folks, bull markets don’t die of old age, they are murdered by the Fed.
The chart below shows profit margins [blue] are falling as employee compensation [brown] rises.
Since 2015, employee compensation has started to recover as the labor market tightens and corporate earnings are falling (as a % of Net Value Added).
If you look back to the 1960s, you can see that when the labor market reaches capacity, profits fall as labor costs rise. The Federal Reserve intervenes to battle inflation from rising wages which will cause the next recession. The Fed does not usually intervene in a meaningful way until wages rise above 74% of corporate profits. In other words, we have a long way to go regarding rising wages before the Fed is going to hike rates so high that it causes the next recession.
Financial Education posted this video on if we are in a giant bubble. While I don’t agree with everything he says, he does make some good points IMO.