Why some investors are worried about rise

While some investors cheered when the blue-chip index closed above that level Tuesday for the first time since May 2008, some were wringing their hands. The Dow Jones industrial average has left the Dow transportation average behind, and that could mean trouble. "There's a risk that stocks could slide," says Bruce McCain, chief strategist at Key Private Bank. Adds Dennis Slothower, editor of the investor newsletter Stealth Stock Daily: "When the Dow leads everything else, that's not a healthy sign." The rap on the Dow is that it tracks the biggest, most financially stable companies. Technical analysts, who study previous stock movements to anticipate future ones, say you have to look at other indexes, too. Take the Dow Jones transportation average. It tracks railroads, shipping companies and airlines — the businesses that move people and goods through the economy. This collection of 20 stocks fell three per cent in February, counting reinvested dividends, while the better-known Dow Jones industrial average rose 2.5 per cent. Since last April, the high for most indexes last year, the transports have dropped six per cent, compared with a 1.2 per cent gain for the Dow. Technical analysts say that if one index reaches a high and the other doesn't, that means the rally could falter. They say that's what happened before stocks tanked in 1929, 1937 and 2000. The analysts disagree over how much to worry now. And the Dow is not the only index climbing fast. A day after the Dow closed at 13,005, the Nasdaq composite index of technology stocks briefly broke through 3,000 for the first time in 11 years. Still, there are worrisome signs besides transportation stocks that the rally may not last: The price of gas is up, too. The average for a gallon of unleaded is $3.74 (Dh13.7), the highest on record this time of year. Some investors believe gas prices are the biggest threat to the rally because when people pay more at the pump, they often spend less elsewhere. The Russell 2,000 is still off its high. The popular index of smaller stocks, the kind of iffy outfits that surge when investors feel like taking big risks, has rallied eight per cent this year but is still six per cent below its high of April 29. Traders are scarce. About four billion shares are trading every day on the New York Stock Exchange, compared with about 4.4 billion last year. That suggests investors aren't buying with much conviction. Main Street still isn't bullish. Investors pulled $137 billion from US stock mutual funds from last June through January, according to Strategic Insight, an industry consulting group. Investors trying to guess where stocks are heading like to follow the transports because if consumers and businesses are buying more, then all those goods have to be trucked, shipped and flown somewhere, and stocks should be rising. Technical analysts like to see them rising together with the Dow industrials, and the two hitting highs together. When one hits a high, and the other lags, the technical crowd sees trouble. However, not everyone is not convinced that we're at a turning point now, and that the rally could falter. Fred Meissner, the writer of the Fred Report, an advisory service for technical investors, doesn't think so. He says the transports, far from lagging the Dow in hitting a high, are actually leading the Dow.