The tremendous 26 percent rally in the Dow Jones transportation average since its January low is turning heads of traders and Dow theorists alike. What does the ramp in this supposed barometer of the underlying economy mean for the market from here?
Dow theory, one of the oldest market adages, holds that for any rally in the Dow Jones industrial average to be sustainable, it must be accompanied by a new high from the Dow transports. In general, investors take the transportation index, which includes trucking, railroad and airline companies, as an early indicator of economic trends.
Employing data from Kensho, a quantitative tool used by hedge funds, CNBC Pro ran a study to find out what the market did next after the the Dow Jones transportation average rose 25 percent or more in three months.