Study the market for a few months, and you're bound to come across the idea of "Dow Theory."Charles Dow is the legendary founder of both the Wall Street Journal and the Dow Industrials Average. There are several ideas contained in his Dow Theory system of market analysis, but one of the main points is to monitor both industrial shares (the manufacturers of goods) and transportation shares (the transporters of goods). This gives the investor a "big picture" view of the economy and stock market. Dow said if both manufacturers and transporters were enjoying higher stock prices, they were "confirming" a bull trend.
You probably know the Dow Industrials is near a yearly high. Today's chart displays the other side of the equation, the Dow Transportation Average. This index tracks America's largest railroad, trucking, and freight companies. It just broke out to a new yearly high.
Some of the smartest investors in the world are calling for stocks to head lower... and at least in the very short term, the market is extended to the upside. But looking at things from a wide perspective, we can see the Fed's gigantic E-Z-Credit program has goosed the economy into high gear... and the trend is UP.
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