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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.

Also, click here to view the full article on Ainvest.com published on September 19th, 2025. However, to see the Sevens Report’s full comments on the current market environment sign up here.


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Dow Theory Update

What’s in Today’s Report:

  • What the Early-November Squeeze in the Dow Transports Means for the Broader Equity Markets

Stock futures are little changed this morning as a hot U.K. inflation report is digested ahead of more retail earnings.

U.K. CPI rose 4.2% vs. (E) 3.9% year-over-year which is pushing the pound higher against most of its peers as rate hike expectations rise.

Today, there is just one economic report: Housing Starts & Permits (E: 1.587M, 1.630M) but it is another very busy day of Fed speak: Williams (9:10 a.m. ET), Mester (11:20 a.m., 12:40 p.m. ET), Waller (12:40 p.m. ET), Daly (12:40 p.m. ET), Evans (4:05 p.m. ET), and Bostic (4:10 p.m. ET).

There is also a 20-Year Treasury Bond auction at 1:00 p.m. ET that could move yields and investors will be closely watching earnings releases from notable retailers ahead of the open: TGT ($2.87) and TJX ($0.81) as well as NVDA ($1.10) after the close.