TRANSPORTS BREAK THROUGH RESISTANCE -- INDUSTRIALS ARE CLOSE TO DOING THE SAME

DOW TRANSPORTS HIT FOUR-MONTH HIGH ... The Dow Transports have finally broken through chart resistance at their early June high. Chart 2 shows the Dow Industrials trading just above their June high and on the verge of a similar breakout. As I suggested last week, a decisive close through that barrier would constitute an intermediate-term Dow Theory buy signal. A Dow Theory buy signal occurs a upside breakout in one of the two Dow Averages is confirmed by a similar upside breakout in the other.

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CNF LEADS TRANSPORTS HIGHER ... Chart 3 shows CNF Transportation surging through its March high on rising volume. It's the day's top transportation performer. Two other leaders are shown in Charts 4 and 5. EXPD has broken through its June high and its 200-day moving average. Norfolk Southern is right behind it. Notice that the relative strength ratio for NSC has just started to rise over the last month. That's not only a good sign for the transports, but also suggests that investors are becoming more optimistic on the economy. That's because today's transportation leaders are considered to be economically-sensitive stocks. That strong action is confirmed by recent strength in cyclical stocks that rise and fall with the economy.

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