Christmas Day Massacre
This is an ominous chart. This is the Dow Jones Transportation Average (DJT). And it looks dangerous.
It has been getting killed in December. The MACD has crossed over, well above the 0 line. The three moving averages show a bear market.
The DJT comprises companies that move things like Uber, Delta, and FedEx. When it is falling it means that business is slowing.
Here is the Dow Jones Industrial Average (DJIA) chart:
The DJIA is made up of a broad swath of blue chip stocks like Disney, Coke, and Home Depot.
Both charts have broken their respective support lines. Both are in downtrends, with MACD bearish crossovers.
When the Transports and the Industrials agree, it historically has given us a clear sign of where the stock market is heading.
I’ve been using the Dow theory for years. Back in 2013, I used it to confirm one of the biggest bull markets of all time, writing:
“Back in May, I wrote in this space that the Dow Theory signaled a screaming buy on the Dow Industrials.
Since then, the Dow Industrial Average has added more than 1,000 points — and is now trading at 15,610…You can’t argue with those returns.”
Today, it is warning of a downturn.
Dow Theory
If you’ve never heard about Dow theory before, here’s a little background…
The idea was dreamed up by Charles H. Dow in the late 1800s. Charles also happens to be the guy who founded the Dow Jones Industrial Average, as well as a small-town rag called the Wall Street Journal.
Dow’s idea was simple: If the industrial companies are doing well, then they have to ship stuff. And if the shipping companies are doing well, then they must have something to ship. So strength in the companies that make up each index indicates strength in the economy.
Furthermore, if the transports and the industrials confirm each other, then you have a trend, up or down.
If the transportation companies are lagging, it could foreshadow a fall in industrials. That’s the logic, anyway.
As you can tell by the chart above, the transports just cracked. The industrials confirmed. The trend is bearish.
Christmas Massacre
Most Decembers are relatively peaceful in the stock market. Investors lay on longs in retail; brokers try to push the market higher for year-end bonuses and sell their losers for the year due to tax loss deferments.
But this year it’s different. Volatility is high. The Volatility Index (VIX), just shot up to 27 before pulling back to 15 today. Speculation is high. Retail investors are all long and jacked up on margin.
The tech stocks and the AI stocks continue to outperform while the old-school industrials continue to sell off. Will the bifurcated market continue and for how long? That’s the $29 trillion question.
Merry Christmas for those who celebrate,
Christian DeHaemer
Outsider Club
Naked Old Men:
https://www.outsiderclub.com/finlands-bitcoin-bonus/
Thanks Boomer:
https://www.outsiderclub.com/the-best-boomer-stock-to-buy/
Brit Says What?:
https://www.outsiderclub.com/brits-2025-market-predictions/
