Sometimes the old plays are the best plays. A market theory that's been kicking around since before your great-grandparents bought their first stocks just triggered another buy signal, and if history is any guide, this three-year-old bull market might not be done yet.
Adam Turnquist, chief technical strategist at LPL Financial, pointed out the development in a note to clients on Monday. The signal comes from Dow Theory, which sounds like something you'd find in a dusty textbook but remains surprisingly relevant for understanding market trends.
"A Dow Theory buy signal has been triggered, reinforcing the case that the primary trend for the broader market remains higher," Turnquist wrote.
The concept itself is straightforward. When industrial stocks and transportation stocks climb together, the broader market usually follows along for the ride.
The Logic Behind Dow Theory
Dow Theory goes back to the early 1900s, developed by Charles Dow, who co-founded and edited The Wall Street Journal. The framework relies on two benchmarks: the Dow Jones Industrial Average and the Dow Jones Transportation Average. The key principle is confirmation.
Here's why it makes intuitive sense. If factories are producing more goods, somebody needs to ship those goods. When industrial companies and transportation companies both rally at the same time, Dow figured it meant the economy was genuinely expanding and the market trend was healthy.
It's a simple idea, but getting both pieces to line up at once doesn't happen all the time.
Why The Signal Triggered Now
According to the analysis from LPL Financial, both halves of the equation have broken out together.
The Dow Jones Industrial Average has been trending upward since breaking to new highs back in August. It lagged behind the broader market during 2025, but still delivered a 13% price return for the year.
The Dow Jones Transportation Index fell behind earlier in the cycle, but it's making up for lost time now.
Transportation stocks have jumped 17% over the past six weeks and just hit their first record high since late 2024. That breakout completed the confirmation pattern Dow Theory requires.
With both indexes pushing to new highs together, the buy signal switched on.
Transportation Stocks Stealing The Show
Recent performance numbers show transportation shares outpacing the rest of the market.
Over the past three months, transportation stocks have beaten both industrial shares and the wider market. The SPDR S&P Transportation ETF (XTN) has surged 18.3%. The iShares US Transportation ETF (IYT) has climbed 11%.
Both outperformed the SPDR Dow Jones Industrial Average ETF (DIA), which rose 7.9%, and the Vanguard S&P 500 ETF (VOO) during the same stretch.
Individual transportation names drove those gains. Sun Country Airlines Holdings Inc. (SNCY) rocketed 60.6%. Kirby Corp. (KEX) climbed 56.4%. Matson Inc. (MATX) rose 50.6%. J.B. Hunt Transport Services Inc. (JBHT) gained 49.6%. Allegiant Travel Co. (ALGT) jumped 49.3%.
Those aren't just good numbers. Those are the kind of moves that get people's attention.
What The Historical Track Record Shows
Dow Theory buy signals have carried real weight historically.
Since 1964, the S&P 500 has posted average 12-month forward returns of 11.1% following similar signals. The median return sits at 13.9%. Across the last dozen Dow Theory buy signals, stocks finished higher 83% of the time.
No indicator works perfectly, and past performance doesn't guarantee future results. But there's a reason technical analysts still pay attention to this framework after more than a century. It's particularly meaningful when it lines up with improving market breadth and stronger sector leadership, which appears to be the case now.
The transportation sector catching up to industrials suggests the market's strength is broadening rather than narrowing. That's typically a healthier sign than when just a handful of mega-cap stocks are doing all the heavy lifting.
What This Means For The Bull Market
For investors watching the market's direction, the message from this century-old framework is pretty clear. The bull market's primary trend remains intact, and if historical patterns hold, there may still be another leg higher ahead.
The fact that transportation stocks are finally participating after lagging for much of the cycle adds credibility to the signal. It suggests economic activity is expanding across different sectors, not just concentrated in a few hot areas.
Of course, market theories don't come with guarantees. External shocks, policy changes, or shifts in economic conditions can always change the picture. But when a framework that's survived more than 100 years of market cycles flashes a buy signal, it's worth paying attention to what it might be saying about the road ahead.
Right now, Dow Theory is saying the bull market likely has more room to run.
