Dow Theory: Why Stocks Could Go Higher in 2014

The Dow Jones Industrials (DJINDICES: ^DJI  ) have soared in 2013, producing big gains for many investors and their stock portfolios. Yet as the end of 2013 approaches, investors want to know whether 2014 has more gains in store for the Dow and the broader stock market, or whether they should take their money and run. For answers, many have looked to what's known as Dow Theory.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks more closely at Dow Theory and its implications for the market in 2014. Dan notes that the technical indicator looks at both the Dow Industrials and the Dow Transports, both of which have hit new records recently. In particular, transports have benefited from the strong performance for airlines Southwest Airlines (NYSE: LUV  ) and Delta Air Lines (NYSE: DAL  ) , riding falling fuel prices and higher fee income to big share-price gains. Dan also looks at FedEx (NYSE: FDX  ) and its impact on the Transports. Dan concludes that if you believe Dow Theory, you have to wait for a clear reversal of the market's upward trend before concluding that the bull market is over.

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  • Report this Comment On December 29, 2013, at 6:37 PM, DalePlourde wrote:

    With a low valuations one of the lowest in the S&P 500 Delta is one amongst the undervalued stocks on the S&P 500. Delta is trading at 10.3 times estimated earnings while the S&P 500's PE on average is 15.4. With company record profit projections of 2.6Billion for 2013, and EPS growth of 10-15% for 2014 while tourism is growing globally Delta is a good buy, with earnings growth and undervalued stock price. As well Delta has initiated a recent dividend and 500 million of buybacks, I see further capital gains as the stock can only go higher especially with 2013 profit guided to be higher then expected Delta President Edward Bastian and top line revenue for 2014 guided for 40 billion by Bastian. This is strong earnings, in a growing tourism environment in US and internationally. I can only see upside for Delta, also the company is very involved with the communities they do business in, good corporate citizen, ethical and great for their brand.

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