Yesterday the Dow Jones Industrial Average (DJIA) closed above its last secondary high point, however the Dow Jones Transportation Average (DJTA) is still about 4% away from its last secondary high. This creates a non-confirmation where one index is making new highs while the other is lagging. When a non-confirmation occurs it puts the current trend in doubt… kinda. As I’ve said before, most non-confirmations just don’t matter. They’re normal conditions during any trend so we have to wait for both averages to agree before drawing any conclusions. Until then the long term trend is still considered bearish. But, it’s time to start watching the transports closely. If they can surpass their last high it will indicate that a new bull market has begun (or that the bear call in February was a whip saw or false signal).
Along with the non-confirmation that is inherently bullish my core market health indicators are improving rapidly. The measures of market trend and strength are improving quickly enough that one or both categories will go positive next week. Take this as a heads up to plan for possible portfolio allocation changes.
Dow Theory and my core indicators are on the edge of signaling a move to new highs, however, we need to wait for confirmation from the core indicators before getting more aggressive in the core portfolios.