According to Dow theory, once the primary trend is established, that trend must be considered intact until it is "authoritatively" reversed, which in this case would require a joint move by the averages back below their previous secondary low points. On July 23, 2009 the primary trend, in accordance to classical Dow theory, was confirmed as bullish. In spite of the fact that our longer-term work continues to suggest that this is a bear market rally that should ultimately prove to separate Phase I from Phase II of a much longer-term secular bear market, nothing has occurred to date to indicate that the bear market rally has run its course. I do have statistical based DNA Markers that have appeared at every major top since 1896 and once those markers are in place, the stage will be set for the Phase II decline to begin. I look for this setup to occur later this year and I will be covering those developments in the monthly research letters at Cycles News and Views.

Shorter-term, the market is a bit overbought and we are seeing some signs of a short-term top. Once this short-term top is in place, the key will be whether or not enough weakness follows to turn my intermediate-term Cycle Turn Indictor down. If so, then the market will at that time be at risk of an intermediate-term cycle top as well as being at a Dow theory secondary high point. It will then be the structural developments that will be key and I suspect will take the market down into a summer low. The decline into this summer low will put the market at risk of triggering a Dow theory primary trend change. From that anticipated summer low I look for the DNA Marker to begin to form. The current Dow theory chart can be found below. At this time, there is no Dow theory non-confirmation and therefore no indication of a primary trend change.

Now, I want to look within the Transportation sector itself in order to see where the underlying strength and weaknesses lie. In the next chart below I have included the Dow Jones Transportation Average along with the Dow Jones Marine Transportation Average. As you can see, the Marine average remains much stronger than the overall Transportation Average.

Next, I have the Dow Jones Transportation Average along with the Dow Jones Air Freight Average. Note that the Air Freight Average has not bettered its February high as has been the case with the overall Transportation Average. Thus, this is currently a weak sector within the Transports and if we were to see this weakness spread to other sectors it would serve as a warning of further weakening Transports and perhaps of trouble from a Dow theory perspective.

The overall Dow Jones Transportation Average and the Dow Jones Rail Road Average is next. In this case, the rails are pretty much in step with the overall Transportation average. So, in looking at this sub-sector, all appears well here at this time.

Lastly, I have included a chart of the Dow Jones Transportation Average along with the Dow Jones Trucking Average. As with the Rails, the Truckers are pretty much in step with the overall Transportation Average.

We have looked at these sub-sectors before, but the point in looking at them here again is to look beneath the surface of the overall Transportation Index in an attempt to see if there is any sign of weakness that could serve to give us a heads up on any Dow theory developments that may be potentially trying to develop. At this time, there is little evidence of any major Dow theory development.

I have begun doing free market commentary that is available at www.cyclesman.info/Articles.htm The specifics on Dow theory, my statistics, model expectations, and timing are available through a subscription to Cycles News & Views and the short-term updates. I have gone back to the inception of the Dow Jones Industrial Average in 1896 and identified the common traits associated with all major market tops. Thus, I know with a high degree of probability what this bear market rally top will look like and how to identify it. These details are covered in the monthly research letters as it unfolds. I also provide important turn point analysis using the unique Cycle Turn Indicator on the stock market, the dollar, bonds, gold, silver, oil, gasoline, the XAU and more. A subscription includes access to the monthly issues of Cycles News & Views covering the Dow theory, and very detailed statistical-based analysis plus updates 3 times a week.