NEW YORK - Both the Dow Jones Industrial Average and the Dow Jones Transportation Average have topped their January highs, developments that are regarded as a bullish signal by followers of the more-than-a-century-old Dow Theory.
The Dow industrials already had exceeded their January highs back in July, but the transportation counterpart only caught up on Friday, after the better-than-expected July jobs report.
"According to the Dow Theory, this signals a new primary uptrend and is a bullish indicator for the market," wrote Mary Ann Bartels, technical research analyst at Bank of America-Merrill Lynch, in a note.
The theory holds that as industrial firms' profits are rising, so is their output. This production has to be transported, one way or the other, and indications that it's advancing signal profits should rise down the line.
And according to the Dow Theory, gains in the Dow industrials should be matched by those on the transportation average.
The Dow transports include the stocks of railroad transportation services firms, such as Union Pacific, some air carriers such as Southwest Airlines, parcel shipping companies such as FedEx, and ocean-transportation firms such as Overseas Shipholding Group.
On Friday, the Dow transports closed at 3,749, topping its Jan. 6 closing high of 3,717. The Dow industrials closed at 9,370, also above their January closing high of 9,015.
On Monday, meanwhile, both averages pulled back along with the broad market, ahead of a busy week including the Federal Reserve's monetary-policy meeting on Tuesday and Wednesday.
The Dow industrials fell 32 points, or 0.3 percent, to 9,337. The Dow transports slipped 38 points, or 1 percent, to 3,710.
The S&P 500 Index dipped 3 points, or 0.3 percent, to 1,007, while the Nasdaq Composite Index lost 8 points, or 0.4 percent, to 1,992.
Not everyone, of course, is buying the Dow Theory signals.
Since July 23, when the Dow industrials first broke through their January highs, Jeffrey Saut, a market strategist at Raymond James, had warned that should the transports fail to follow suit, it would create a "giant upside non-confirmation" _ that is, a reason to turn bearish.
But even with the transports finally catching up, Saut believes that too much of the market's "energy" has been used up in the process.
"Here we are, a Dow Theory 'buy signal' has finally been registered, and by our pencil so much energy has indeed been used to accomplish it we think the equity markets are a short-term 'sell,'" Saut wrote in a note.
Many strategists are growing increasingly skeptical of the market's advance, as measured by the S&P 500, now up by more than 50 percent since hitting lows in March. The market's run only saw a brief interruption with a few weeks of selling in late June and early July.
Others are pointing to what could be more worrying signs.
While the Dow transports include global freight-shipping firms, some prefer to rely on the Baltic Dry Index, which tracks the international shipping rates of dry bulk cargo.
That index fell below 3,000 for the first time since May last week to close its worst week since October of 2008, according to Commerzbank. On Monday, it tumbled another 135 points, or 4.6 percent, to 2,772.
"The index often reacts well ahead of the commodities sector," strategists at Commerzbank said in a note.
On Monday, metals, including gold futures, fell. See Metals Stocks. And the materials sector of the market fell the hardest on the S&P 500, weighed down by Nucor Corp. (NUE) and AK Steel Holding (AKS), both off more than 4 percent.
Crude futures also fell, losing 0.5 percent to $70.60 a barrel.
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