Last week the Dow Jones Industrial Average (DJIA) moved above its previous peak, however the Dow Jones Transportation Average (DJTA) remained below its own. This divergence between the two indexes has created a Dow Theory non confirmation…but it doesn’t matter…yet. A lot of Dow Theory proponents make a big deal out of non confirmations, but all non confirmations are not equal. The type that just happened where one average makes a new high and the other trails is what should happen. It would be extremely odd if both averages always moved above their previous peaks on the same day. When you see others suggesting that danger looms because the transports haven’t broken out yet don’t panic because this non confirmation gives us next to no useful information.
A divergence that would make me sit up and notice would be if the transports started lower and broke below their January low. A condition where the industrials have made a new high and the transports are moving lower would be a warning sign. Until then relax and enjoy the bull market that has been in place since 2009.