Dow Theory is or was great when it really mattered, Charles Dow came up with the ideas behind Dow Theory when he was running the Wall Street Journal in the early 1900's, it wasn't until after his death that Dow Theory was actually born, but back then it made a lot of sense; the Dow Industrials were true industrials like the US no longer has and the transports were the railroads that delivered all of this stuff, if one diverged from the other, it was significant, after all, the Industrials can't be in good shape if there's a fall in shipping traffic right?
Well we are a services oriented economy now, IBM is one of the Dow Industrial's largest components, I'd say their closer to services than a production line and transports, they may be more reflective of EBAY or Amazon stocks now than IBM, however dumb money reads the theory in a book and they trust it.
Remember this low volatility, slow melt-p with no pullbacks when investor sentiment was at record levels? It was a perfect time for dumb money to enter and enter they did, I just wonder?
Why all of the sudden did transports just break away with the industrials? There's a -1.42% differential between the two over the last two days alone after having moved together tick for tick all year.
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