Sevens Report: Q1 Stock Rally Shows Classic Dow Theory ‘Bull Trap’
Transports’ weakness undermines Industrials’ record highs
Decoding Modern Bull Traps: A Dow Theory Perspective on Market Sentiment and False Signals
The Sevens Report said the Dow’s record-setting first-quarter rally fits the mold of a classic “bull trap” under Dow Theory. While the Dow Jones Industrial Average surged to new highs, the Dow Jones Transportation Average remained negative year-to-date—a divergence Charles Dow viewed as a warning of waning economic momentum.
The lack of confirmation from transports, which track logistics and shipping demand, suggests that market optimism may be misplaced. Sevens cautioned that without both averages advancing in tandem, the rally risks unraveling.
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