From the desk of Steve Strazza @Sstrazza
Our Top 10 report was just published. In this weekly note, we highlight 10 of the most important charts or themes we’re currently seeing in asset classes around the world.
Mixed Signals From Modern Dow Theory
This week’s new highs for the major averages lacked confirmation from their peer indices once again. A topic we often discuss is “Modern Dow Theory.” That is, instead of solely evaluating Transports and Industrials for a reading on the broader market, we should also consider the performance of Semiconductors as they’ve become the modern medium for economic transportation.
Despite the Dow Industrials ripping back to close this volatile week out at fresh highs, we’re still not seeing any confirmation from either of these critical indexes. And when we look at the Transportation Average, there is reason for concern as we’ve seen nothing but steady weakness since prices peaked in early May. As for semis, they continue to hold their own but remain trapped in a holding pattern beneath their April highs.
A decisive move above 450 in the Semiconductor Index would go a long way in supporting the latest highs from the Dow and other large-cap averages.