Dow theory says that for a main trend to be valid, the Dow Industrials and the Dow Transports should agree on their main trend direction.
On March 1st of this year, the Dow Transports topped out with a high near 9600 and went through a 2 1/2 month downtrend that ended near May 19th. Then it had a one month countertrend rally that ended on 6/19. That counter trend rally ended near 9500, so the previous high was not broken. While that was happening, the Dow Industrials kept going up and kept breaking to new highs.
So since March 1st the Dow transports changed its main trend direction from up to down. It's a "big red flag" and saying that it could be starting a new "bear market" and it could also lead the other indexes to the downside.
The next index you want to watch is the Nasdaq 100. The Nasdaq-100 along with its neighbor the NASDAQ composite, have also been relentless to the upside and breaking to many new highs. But back on June 9th, it stopped going up and in one day went down -200 points to start a new downtrend.
I believe the NASDAQ is now the second index to lead the party to the downside. In fact other popular indexes have also rolled over with the "Transports" back on 6/19 and are now in a new downtrend, that could last another 2 1/2 months.
So the Transports and the NASDAQ could be leading the way down and if the Dow Industrials do not break to new highs on its next strong rally, then it could "confirm" Dow Theory with a new down trend direction and maybe the start of a new "bear market". Time will give us the final "confirmation".
Happy Trading, Robert H. Anderson