(Bloomberg) -- U.S. stocks may climb further after rallying to an eight-month high, according to followers of the century-old Dow Theory. As the Dow Jones Industrial Average climbed to the highest level since Nov. 5 yesterday, the Dow Jones Transportation Average, a measure for airlines, shipping companies and railroads, broke through a May peak as it surged to the best level in six months. Dow Theory says that when the measures of industrial and transportation companies both post new highs, equities are likely to gain. “I consider the primary trend of the market as having turned bullish under the Dow Theory,” said Nick Batsford, a technical analyst at Hobart Capital Markets Ltd. in London.
Dow Theory is named for the developer of Dow Jones & Co.’s averages, Charles H. Dow, who died in 1902. Both gauges reaching new highs is considered a sign of strength in the U.S. economy, under the assumption that when companies are expanding, they ship more goods. The Dow industrials gained 2.1 percent to 9,069.29 yesterday while the transportation index, which includes companies such as FedEx Corp. and Burlington Northern Santa Fe Corp., added 3.3 percent to 3,506.12.
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