A Look at the Stock Market via Dow Theory

June 11, 2025

Throughout various editions, we have intermittently offered a general view of the stock market. Our sharing of these stock market perspectives has typically addressed the behavior and structural health of the market landscape.

Today we do so through the lens of Dow Theory.

Dow Theory offers that the stock market is offering a healthy general landscape when either the Dow Jones Industrial Average or the Dow Jones Transportation Average advances above a previous high point. Importantly, once one of the two eclipses a previous high point, Dow Theory confirmation then arrives when the other joins in by advancing above a previous high point as well.

Keeping this simple, it is all about trend. A healthy market leaves in its wake a series of higher highs, i.e., a defined uptrend.

A truly healthy market, let’s say, a robust and strong, no-doubt-about-it bulled-up type market, will leave in its wake a series of higher highs across numerous well-recognized stock market indices.

For example, the NASDAQ Composite, and the S&P 500, the Russell 2000 small-cap index, along with indices that are equally weighted so as not to be skewed by a few heavily weighted and outperforming individual companies.

There are numerous indices that we can include here, but the point is in a really strong bull market we see a plethora of well-recognized stock market indices moving onward and upward to a series of higher highs.

Here in 2025, as well as dating back to the bottom of the 2022 notable downturn, we have not seen really strong bull market behavior emanating from the broad stock market landscape as offered by a wealth of well-recognized indices putting in consistently higher highs.

Importantly, to be certain, there are indices that have done so, and with this, there have been upside opportunities. What has been absent though is a robust and strong overall stock market landscape whereby there is no doubt we are experiencing a really strong and solid bull market.

Moving back to our central theme of Dow Theory, it too has offered the lack of a truly strong and solid bull market since the 2022 lows. Again, to emphasize, we are speaking structurally here for the whole of the stock market, not whether there have been X areas of the stock market that have offered performance opportunities.

Let’s take a look at messaging from collective stock market participants through the lens of Dow Theory.

Click For Larger View: https://schrts.co/ujbArUtP

The above is a 5-year chart presented on a weekly basis for the Dow Jones Industrial Average. The 5-year view gives us some perspective on what has unfolded post-Covid. The weekly chart takes out a lot of daily trading noise as each bar within the chart represents one full week.

We have inserted a few lines to aid in a visual understanding of what has been transpiring in the above 5-year period.

Our red horizontal line begins as the post-Covid high point was put in, which morphed into the notable downturn in the stock market, circa 2022.

For its part, the Dow Jones Industrial Average bottomed in late 2022 but then struggled around through 2023. Our blue arrow highlights the launch point of the Dow actually putting in a higher high by early 2024, which proceeded as a trend.

Our black horizontal line highlights the end point of the Dow’s trend, which walked us into the notable drop of early 2025. Note how the Dow’s drop in that period walked it all the way back down to our red horizontal line, which was the launch point of the Dow’s previous trend.

The 2024 trend was erased rapidly in early 2025. This takes us to current messaging from market participants.

While off the lows of 2025, we remain well south of the previous high point, as noted with our black horizontal line. The Dow lost its trend and, to this day, remains trendless.

Through Dow Theory, this offers a less than robust stock market landscape, as a higher high point for either the Industrial Average or the Transportation Average has not presented itself.

This takes us to the Transportation Average.

Click For Larger View: https://schrts.co/AzvERzFX

The above is also a 5-year weekly chart to match the layout of the previous Industrials chart.

Overall, the Transportation Average is more challenged than the Industrial Average. Our blue arrow highlights the solid uptrend, post-Covid, as it was posting a series of higher highs. As we entered 2022, the above Transportation Average also turned south.

Unlike the Industrial Average, the above Transportation Average has been unable to put together any trend since the post-Covid uptrend. Our red horizontal lines highlight a large range from late 2021 to the current day.

To the far right portion of the above chart, we see the Transportation Average is off its early 2025 lows, and yet, it remains well south of the previous high area. The Transportation Average has struggled for over four years and hence has been trendless.

Dow Theory

Reduced to simplicity, Dow Theory is about trend and trend confirmation from a sidekick index.

Simply, one of the two indices needs to put in a higher high, i.e., an uptrend. Once established, the other index confirms the trend by also putting in a higher high, whereby its own new high trend has begun.

When both the Industrials and the Transports are trending, we have Dow Theory confirmation of a healthy, ongoing bull market. Currently, neither index is even near its previous high, let alone offering a new high breakout.

When noting the two together over the previous few years, we can see we have not had a Dow Theory confirmation since the early stages of the post-Covid bull market. Since late 2021, the Transports in particular have struggled. The Industrials have been stronger and yet, have less than stellar performance in recent years.

The lack of Dow Theory confirmation has been corroborated in other areas of the stock market. Some of these areas we have addressed in previous editions over the last year plus.

Overall, the above tells us, along with corroboration of other market areas, that collective stock market participants have been, and continue to be, selective in what they are willing to bid up on a trend basis.

Dow Theory is one more aspect of the market landscape that affirms selectivity, at this juncture, continues to be the operative approach.

I wish you well…

-Ken from Mind Your Stops