Ask Colin

Is the Dow Transports index still relevant?

The detailed question was:

The Dow Transports is starting (4 June 2015) to diverge from the main index the Dow Jones industrials - is this index as relevant it once used to be?

I assume  you have already read the answer in Ask Colin on this issue. 

As I am primarily concerned with the Australian market, I do not use that aspect of Dow Theory sine the ASX stopped providing a Transport index. Prior to that I do some work on it, but it is not well out of date – see the 1998 article Are We in a Bull Market  under Technical Analysis Textbook on the Learning Centre menu on the members website.  

This part of Dow Theory was originally conceived when most goods were moved in the US by rail and the index was called the Dow Rails index and was only railway stocks. It has been broadened to Transport stocks generally. I have not come across any research work on how well the new index operates in Dow Theory, but bear in mind that as I cannot use it in Australian it would have been only passing interest and I may have missed it.

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