Theory and Practice

Is this the real life?
Is this just fantasy?

Caught in a landslide

No escape from reality
--Queen

Classic Dow Theory posits that healthy bull markets are led by the transportation sector. It's basic supply chain management, really. For stocks (which are generally proxies of economic activity) to be strong, "stuff" must be moving.

We seem to be witnessing this theory in action. The trannies have been relentlessly marching higher--so much so that the oscillators are pinned to the ceiling.

Major indexes have been obliged to play along.

Biggest flaw in this theory that I can think of? Inflation. Massive monetization of debt and the proceeds pouring into equities create illusions of economic strength.

Reality blurs when money starts moving faster than the planes and the trains.