The stock market, however, appears to be flashing some worrisome signals, according to the Dow Theory.
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The Dow Theory is largely derived from the writings of Charles Dow, co-founder of The Wall Street Journal.
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Over the long Memorial Day weekend, I rediscovered my copy of The Dow Theory, by Richard Rhea, from 1932.
Richard Moroney, editor of the Dow Theory Forecasts , believes that this momentum will continue due to strengthened financials.
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Richard Moroney, editor of the Dow Theory Forecasts investment newsletter, recently recommended BBBY as a long-term buy for his subscribers.
"We can't dismiss it entirely, " said Bruce McCain, chief investment strategist at Cleveland's Key Private Bank, referring to the Dow Theory.
Yes, says Richard Moroney, editor of the Dow Theory Forecasts newsletter.
Of course, central to the Dow Theory is that the action of the Dow Jones Industrials must be confirmed by the action of the Dow Jones Transportation Average.
There are countless strategies, indicators and systems that are mentioned in the popular press with such catchy names as the January Indicator, Dogs of the Dow, Elliott Wave Theory, Dow Theory, Sell in May and Go Away, and the Fed Model.
Followers of the century-old "Dow Theory" maintain the industrials and transports need to move in lock step to confirm a market's trend.
Portfolio manager Richard Moroney, who's also editor of the Upside and Dow Theory Forecasts newsletters, finds that stocks earning consistently superior scores on his "Quadrix" quantitative tended to continue earning high scores for attractiveness.
He has a theory he calls the "added digit theory" about how the Dow Jones develops, and periodically suffers from long periods of depressed prices, known as a "bear market" .
Using one of the oldest methods to discern the direction of the Dow, Richard Moroney, editor of Dow Theory Forecasts notes that the new high in the industrials is by definition a bullish event.
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U.S. stocks moved higher last week, but the Dow Industrial Average lagged, which prevented a Dow Theory Buy Signal.
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Click here for the names and details in Dow Theory Forecasts.
Special Offer: With the Dow Jones Industrial Average above 11, 205 and the Dow Transports also at new highs, Dow Theory is giving a strong buy signal.
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As a result, Thursday ended with a Dow Theory Buy Signal with new 2010 closing highs for both the Dow Industrials and Dow Transports.
Special Offer: Use Dow Theory Forecasts to gauge the overall trend of the market and to find the best stocks to buy.
Two other top-performing letters, as ranked by Hulbert Financial Digest, recommending the stock are Forbes Growth Investor and Dow Theory Forecasts.
In brief, the theory posits that when the Dow Jones Transportation Index diverges from the Dow Jones Industrial Index, it is a negative sign for future stock market returns.
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It should be noted that even though I have followed the Dow Jones Averages closely for over 30 years, I have never relied solely on Dow Theory methods to generate stock market buy or sell signals.
The Transports ETF (NYSE:IYT) is leading the market higher, which is healthy according to Dow Theory.
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What would end this bearish market call is a Dow Theory Buy Signal, which is defined as follows: A Dow Theory Buy Signal will be confirmed if the Dow Transports close above its May 3rd high at 4, 806.1, and the Dow Industrials close above its April 26th closing high at 11, 205.03.
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Trading at 10 times estimated 2013 earnings, 30% below the median for its peer group, UnitedHealth Group is a Dow Theory Forecasts Focus List Buy and a Long-Term Buy.
Special Offer: Use Dow Theory Forecasts to gauge market trends and to find the best stocks to buy.
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