This old Wall Street investing theory suggests 2026 could see more rotation and upside
A century-old investing theory is pointing to further gains and a rotation in 2026.
TL;DR
- Dow Theory requires both the Dow Jones Industrial Average and the Dow Jones Transportation Average to hit new highs for a bull market to be confirmed.
- Both indexes have shown positive performance recently, with the Dow Jones Industrial Average rising over 1% and the Dow Jones Transportation Average gaining nearly 5%.
- The Dow Jones Transportation Average has signaled a 'head-and-shoulders bottom,' suggesting it could reach record highs in 2026.
- A simultaneous rise in both indexes could indicate a sector leadership rotation and an improvement in market breadth.
- Strong volume accompanying higher prices would substantiate the uptrend, with the 12-week rolling average of the Dow's volume increasing since August.
- For the Dow's transportation index, this year's volumes have exceeded previous years.