Dow Theory adherents got their buy signal Wednesday after U.S. stocks ripped higher in the wake of the Federal Reserve’s non-taper call.
SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) and iShares Transportation Average ETF (NYSEArca: IYT) both logged all-time closing highs on Wednesday.
The Dow industrial and transportation indices both recording new all-time closing highs is a reconfirmation of the primary bull market, noted technical analyst Ralph Acampora tweeted Thursday. He said the signal cancels the negative stance he took in early August.
According to Dow Theory, the industrial and transportation should confirm each other and make new highs together in a healthy bull market. Dow Theory is one of the oldest approaches in technical analysis.
Dow Theory buy and sell signals have outperformed a buy-and-hold strategy since 1897, according to a recent blog post from Global Macro Monitor.