Is the Market Topping?


Indicators may be signaling that it's time for investors to turn cautious, says Peter Miller of Barron's, who explains what he's watching.

Nancy Zambell: My guest today is Peter Miller, the Director of Statistics at Barron's. We're talking about market direction. We've had a great January. February had some pullbacks, but we also came back and hit 14,000 again. What does the market look like, according to your statistics right now, Peter?

Peter Miller: Nancy, the main tool I like to use is the Dow Theory, and how it's placed out on the quarterly, weekly, and then a daily level.

As we've seen through most of January and February, and quite frankly from the end of December, is that transportation has dragged up the Dow. Clearly transportation has hit higher highs. Even in spite of the sometimes lingering Dow, it's pulled it up to near its level of highs.

While that is a good sign, what we have seen over the past two weeks on a daily basis is something I like to monitor-both the industrials and transportation. If you look at the Dow Theory, it's really about agreement-one dragging the other, or disagreement where one might revert back to another previous level, and the changes on a daily basis.

Nancy Zambell: When they disagree, does that indicate a change in the trend?

Peter Miller: It typically does. Usually, I track which one is going in a negative direction, as opposed to the one that's going into a positive direction on a daily basis.

Nancy Zambell: What has it looked like recently?

Peter Miller: Over the last ten trading days, we've had an anomaly that I like to refer to as tremors-six in the last ten trading days.