Primary Trend Bullish


While only the Dow Industrials and Dow Transports figure in classic Dow Theory analysis, we like to see all the major averages in uptrends. Today, we like what we see.

The Dow Industrials, S&P 500 Index, Nasdaq Composite, and Russell 2000 Index of small stocks closed at all-time highs on Nov. 21 — the first time that has happened since 1999. The Dow Transports, while more than 3.5% from the all-time high of 9,217.44 reached in December 2014, recently hit 20-month highs.

Also encouraging is the shift in market leadership, with cyclical and small stocks performing best since midyear and since Election Day. Investors are discounting a more inflationary environment, with better growth and higher interest rates.

Those expectations have weighed on consumer-staples and utility stocks. But both groups have traded mostly sideways since slumping in the two days following the election, partly because bond yields have edged only slightly higher since jumping on those two days.

With the primary trend in the bullish camp, a constructive stance toward stocks is appropriate. Our buy lists have 86.6% to 88.1% in stocks.

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