ETF Expert

I am not a proponent of "Dow Theory." For me, deciphering future trends by evaluating the price movement of the Dow Industrials, the Dow Transports and the Dow Utilities is… well… an exercise for the mind.

(Note: "Dow Theorists" may interpret what they see differently. In that manner, there's a lot in common with Rorschach ink blots where different psychologists rarely agree with what the "results" mean.)

That said, I believe that all theories merit consideration. Like portfolio weighting, it's up to the individual to decide how much weight he/she wishes to attach to the info.

For instance, according to proponents, the Dow Industrials can not genuinely enter a bull market unless the Dow Jones Transportation stocks are also moving higher. In fact, the transporters should be rising first because their profits rise as they move "stuff" from manufacturers to big industrial companies. The 3Ms, IBMs, Home Depots and Caterpillars of the world would then see profits rise as they sell more to small businesses and consumers.

Okay… so the economy gets better when more "stuff" is being moved. Transporters tell us when that is happening. And the iShares DJ Transports (IYT) has indeed hit new 10-month highs… climbing at a more rapid rate than the Dow Jones Industrials Trust (DIA).

Yet if the markets are in fact recovering… in anticipation of an economy that is recovering… then why is global shipping giant U.P.S. warning that demand may not pick up substantially? And isn't it equally plausible that transporters in IYT fell further from the bear top to the March bottom such that IYT is merely returning to a similar place that it held prior to the credit collapse?

Actually, no matter how one chooses to look at it, transporters and conglomerates are both moving in the same direction. Moreover, stock assets of virtually all flavors are hitting 10-month highs.

So whether 'Dow Theory" tells you something meaningful or not, even the biggest skeptics are having a tough time persuading folks that the markets will "retest the March lows." Sidelined money continues to flow in on the dips… even if those dips haven't been present since the first week of July!

If you'd like to learn more about ETF investing… then tune into "In the Money With Gary Gordon." You can listen to the show "LIVE", via podcast or on your iPod.

Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.