Grant: Dow Theory Suggests A Correction Is On The Horizon

The age-old Dow Theory gets a mention in the latest issue of Grant’s. According to Grant’s it is the only reliable way of measuring US economic growth. (Grant’s argues that as traditional methods of measuring economic growth don’t seem to be influencing Federal Reserve policy decisions, perhaps due to concerns about the data, Dow Theory is a more reliable indicator.)

According to the Theory, when the Dow Industrial and Dow Transportation index move in lockstep, economic strength is showing through. However, when the two indexes move apart, the implications are concerning. Year to date, the DJTA is lagging its industrial peer by 6.3%. What’s more, while the DJIA sits only 1.5% below its all-time high printed earlier this year, the DJTA...