By Richard Russell
I started Dow Theory Letters in 1958 on the basis of reading the averages. As you can see on the weekly charts below, the Industrials plunged lower in October along with the Transports. Following the October plunge, both averages rallied to new highs.
From there the Transports moved sideways while the Industrials continued higher -- to unconfirmed new highs. Following the January lows in the Industrials, the Dow surged higher into the 18,000 area. The Transports, however, failed to rally and moved into a sideways consolidation. The Dow did not confirm the weak action in the Transports.
As I write, the Dow is higher by 11 points, but the lagging Transports are down 69. The Sharply lower Transports have not shaken the Dow or the Nasdaq. My reading of the averages is that they want to go higher. It appears to me that the Transports and the Nasdaq are controlling the market.
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