The first few days of 2026 have been rewarding for investors, with the S&P 500 (SPX) up by over 1% and reaching a new all-time high. The benchmark index also received a bullish signal with the confirmation of the Dow Theory earlier this week.
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The Dow Theory is a technical analysis theory that suggests the direction of the stock market can be predicted using the movement of market averages. In particular, the theory focuses on the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJT).
What is the Dow Theory?
On Tuesday, both the DJIA and the DJT secured new record highs for the first time in over a year. That’s a bullish indicator for the S&P 500, with the index posting a positive return 77% of the time with an average return of 2.86% over the next three months, according to SubuTrade. Over the next six months, the index is positive 69% of the time with an average return of 4.56%.
At the same time, caution over the next few weeks may be warranted. Following a Dow Theory confirmation, the S&P 500 has historically fallen by an average of 0.41% over the following two weeks, with 54% of previous occurrences showing positive returns.
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