Finally, A Hopeful Signal

Fri, Aug 17, 2012 - 9:22am

The following is an excerpt from Richard Russell's Dow Theory Letters

Two days ago, amid all the low volume and sluggishness, the Transports gave us just a hint of something hopeful. It was a breakout of the declining trendline, as you can see on the chart. The Transports have been the laggers all year, and it seemed as though if the Industrials closed above their May peak, the Transports would not confirm. Now with this little upside breakout, the Transports are giving us a ray of hope. Maybe, just maybe, the Transports will add on a few more point, and get in the game.

Below, the Industrials are now very close to their May 1st peak of 13,279.32.

Bond buyers in a death-grip. Below is the yield on the bellwether 10-year T-note. Investors looking for safety have been piling into US Treasuries, even though it cost them, since they were receiving negative yields. It was one of the biggest bond bubbles in history. But now, it seems that the fun's over. The yield on the bellwether 10-year note is spurting higher as you can see on the daily chart below. As investors flee the notes and bonds, the yields (which are inverse to the price) head higher. The drop in bonds is going to cost investors billions in losses. If this keeps up, the Treasuries could become competitive with equities, something else for the stock market to worry about.

Below, the new GDOW is fast becoming a favorite of mine. It's a D-J Industrial Average (150 blue chip stocks) for the whole world. GDOW has now rallied above both its 50-day and 200-day MAs, which is a bullish signal.

So what's happening? The Dow is almost at its May peak -- GDOW is looking better, the no-yield (bought for safety) bonds are getting whacked. Is the future of the whole world becoming brighter? Is it morning on the planet earth?

I still want to see what happens if the Dow closes alone above 13,279,32. As I write, the D-J Transports are still over 100 points below their May peak of 5285.97. Below is a one-year chart of the D-J Transports.

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