MARKETS SPECTATOR: How now, bullish Dow
Primary uptrends in both the Dow Jones transports and industrials averages point to a secular bull market, a view confirmed by legendary analyst Ralph Acampora.
From a textbook point of view, the market enters a bull phase when the transports and broader Dow Jones Industrials Average confirm each other, according to Investopedia.
However, the fact that transports has moved to all-time highs yet the industrials is not quite there yet has thrown a bit of a cloud over the situation.
It looks like semantics to me. In my eyes, both of the averages are confirming each other (primary uptrends) and it's not long before the DJIA breaks to all-time highs.
The charts below show the Dow Jones Transportation Index at all-time highs with the Dow Jones Industrials Average just below its all-time high. Also, the broad-based S&P 500 is not far from breaking out to all-time highs as well.
All in all, from a technical analysis point of view, it looks incredibly bullish.
In fact, legendary technician Ralph Acampora, a pioneer in the development of market analytics and with a global reputation as a market historian and technical master, believes we’re in the early stages of a secular bull market.
Below are the 11 reasons behind Acampora's secular bull market call.
1. The March 2009 low was and is a generational low – just like the October-December 1974 bottom. We will work our way irregularly higher.
2. NYSE breadth is at all-time new highs, meaning the majority of stocks are doing very well.
3. With close to 50 years experience I have never seen so many people so negative on the stock market for so long.
4. The market has doubled since the March 2009 low and there is still trillions of dollars on the sidelines. This is more fuel for the bull.
5. The 10-year yield broke above 1.9 per cent recently. The bottom in yields is in and the air is slowly coming out of the bond bubble.
6. Rotation is the lifeline of every bull market. The long overlooked financials are leading – this is very bullish.
7. Most markets around the world are doing well despite local problems. Negative news has been largely discounted.
8. China has bottomed. It will help power the global recovery and Japan is boosting its stimulus.
9. The European bellwether – the DAX – is about 2 per cent away from an all-time new high. That has to be a fantastic omen for Europe.
10. Like the late 1970s, the Street is contracting because the equity market is out of favour with the public – don’t follow the herd.
11. Lastly, don’t fight the Fed. We all have a vested interest in a strong stock market.