Dow Theory On Bullish Track

The S&P 500 closed at the bull market's high of 4582.22 on Friday. Chart technicians continue to ring the alarm bells. The index is 11.9% above its 200-dma, which is 4094.1 (chart). Sentiment is too bullish. Breadth is too narrow. Valuations are stretched. The bears are capitulating. Run for the hills!

Yet, last week, the Dow Theory flashed a bright green signal. That's because the Dow Jones Transportation Average (DJTA), which bottomed last year on September 19, jumped 1.75% on Friday, only 2.0% below its record high on October 29, 2021 (chart). A breakout above the previous record high would be a strong vote of confidence in the economic outlook. The DJTA has been a good leading indicator of the DJIA since late 2021.