Dow Theory Revisited

The Dow Theory is the first and foremost expounder of the term Divergence.  The two daily graphs immediately above show the daily closing prices of the Dow Jones Industrial and Dow Jones Transportation averages courtesy of StockCharts.com.  Notice that the Transportation average made a lower low and has yet to make a new high.  Note well that in the above chart of the Dow Jones Industrial average the price has continued to make higher highs and higher lows.  Price is the most bullish indicator of the $INDU.  If the $TRAN does not make a new closing high  above 4045.11, the Dow bull market will be put on hold because of the divergence of the trends of the Transportation and the Industrial averages.  The Transportation average must close above 4045.11 to maintain its technical up-trend.  If the Transportation average closes above 4045.11 then cover your shorts and take your losses because we are going higher.  It has been my experience in the past, NOT to trust a rally on declining volume. This is most noticeable in the above charts.  At a critical juncture like this, Goldman can make the Transportation Averages do whatever they want.  Thus we cast our fates to the wind.