Dow Theory Divergence

Truckin,' got my chips cashed in
Keep truckin,' like the do dah man
Together, more or less in line
Just keep truckin' on
--Grateful Dead

Interesting divergence taking place between the Dow Industrials (DJI) and the Dow Transports (TRAN). Currently the Industrials are tickling all time highs as they challenge upside resistance in a 'pennant' pattern.

At the same time, the Trannies are in danger of breaking down as they chew thru downside support in a 'pennant' pattern.

Dow Theory suggests that, in healthy markets, upside moves in the Industrials should be confirmed by the Trannies. The theory is that industrial and transportation stocks should be joined at the hip as they both operate in similar supply chains.

Right now, one is leading the other. Will be interesting to learn which is the leader here and which is the follower.

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