Daily update 12/7 Dow Theory buy signal

The transports made a new all time high today finally joining the Dow.  Last night I showed the transports chart with a lot of volume that I wondered about.  A friend went through the entire list and did not see any unusual or heavy volume (tnx sunny).  The volume was there in the two data feeds I normally used.  I went over to look at stockcharts.com and the unusual volume was not present there.  I have to conclude it is likely a data error. 

Panic buying ensued mid day.  Listening to Art Cashin it would appear it was a jamb job to get the transports to a new high.  Breadth was +73%.  New highs were 417.  That is just slightly above the 7/1 number.  New lows dropped down to 12.  Certainly quite the move off the 200 SMA.

I connected the first three peaks with a trendline just for fun and it turns out that is where the futures ended the day.  Funny how stuff works like that in a totally random market.  I guess we can say the futures are a little overbought here.

The green count finally crossed 50 today.  I still find this rather odd to be so low looking at the price chart.  This is either one whale of a negative divergence or a sign the market has more room to run on the upside before getting overbought.

Now that we have a Dow theory buys signal what happens now.  The Dow theory sell signal back in Feb. marked the exact closing low for the Dow.  In other words it was a massively failed signal as there was no further downside.  Is this the start of a really big break out?  Could it be we end up with another massively failed signal?  I sure wish I knew. 

The VIX got down to 11.33, but reversed to close positive and back over 12.  For years the market has had trouble going higher after the VIX dropped under 12.  The bull pressure charts suggest that the bulls might have some difficulty pushing higher as well. 

Tomorrow is another ECB meeting with a press conference before the U.S. open.  It is widely expected they will announce an extension of the QE program currently scheduled to end in March.  I wonder if today's buying around the world could have been simply a front run to that event.  There is some talk they might announce something related to tapering the purchases.  However, I could not find any kind of consensus on that.  With the big run up it is possible there is a bit of a sell the news reaction no matter what they announce.  If they talk about some kind of tapering it could move the bond market considerably.  That could bleed over into stocks.  The whole thing could end up being a non event.  I just don't have a clue on that.

While the red/green count is not showing an overbought condition.  A look at price shows the market very overbought.  The transports just moved up over 15% in just over a month.  A monster move that makes one wonder if it is sustainable.  I think this is the major focus over the next few days to see if this index can stay broken out.

Bob