Dow Theory

[Bullitt]

I'm inclined to say Dow Theory is now signaling a bear market after cracking the February 28 low. Rules generally say it must make a significant low, rally at least 3%, then break down past the previous low. This would mean the trend is now down and bear market rules apply.

Some theorists would consider the December 2018 or even the 2009 low to indicate the death of the secular bull. By that time, does it really matter?

20% is a bear market definition loosely comes from the WSJ in 1990 when markets cratered during Desert Storm. Ironically, that bear market call turned out to be right near the low. Jack Schannep, a very successful Dow theorist, defines a bear market a 16% drop in both the Dow and S&P 500 over a period of time when it comes with his secondary signals which are for the most part, an art.

 

[Bullitt]

Looking like today gave a Dow Theory buy signal in DJIA. Looking for confirmation from transports.

 

[Bullitt]

Transports confirmed uptrend yesterday.

Meanwhile, 50% of AAII is bearish and the guessers are still waiting for "healthy retest" to get back in. Two questions:

1. Will you really get back in if the market goes down 10% from here? I mean it, really. It's so easy to say now, but the news will be pretty dire if the market goes down 10% from here.
2. What is your plan if the bottom is already in?

 

[Bullitt]

Dow theory validated the current bull market as both DJIA / TRAN made new cycle highs at the close today. Both managed to make these new cycle highs after their respective secondary reactions lower.

Dow theory gave an initial buy signal on 4/6.

 

[Bullitt]

Still on April 6 buy signal.

Transports and DJIA now both above 200 DMA.

Outlook: Uptrend jeopardized on a close below 25k DJIA and 8750 in TRAN. New high above recent June cycle would only confirm uptrend.

 

[Bullitt]

Still on a buy signal, as transports are holding up.

DJIA is in a secondary reaction lower with a measured move to 26,500. Below 26,500 would be time to re-assess since the transports will surely be dragged lower.

 

[Bullitt]

Watching 33,300 (4-5% drop lower) on the DJIA for a sell signal. Transports have already given a non-confirmation sell.

 

[Bullitt]

My interpretation is we had a non-confirmation bear market signal from Transports as it reached 14,500, but Industrials did not confirm the move lower.

Transports reversed and made a new secondary reaction high this week. Industrials confirmed this move. Long term bull market still intact, short term correction is over.



In addition, the Head and Shoulders pattern in the DJIA has been negated. This often leads to large bullish moves.

 

[Bullitt]

There were some holdouts who said it's not a dow theory buy until both averages make new highs. Okay then, yesterday Transports made new highs thanks to the pump and dump ramp manipulators at reddit. They managed to drive Avis 108% higher which resulted in a 6%+ gain in the transports.

 

[Bullitt]

Dow Theory bullish signal is hanging on a string. DJIA is sitting on support with any move lower giving a secondary bear reaction. TRAN still has around 8% downside wiggle room before turning bearish.

S&P is looking bearish with the break of the March low. Nasdaq is already in bear market territory down around 24% from the highs.

 

[Bullitt]

With today's transports getting hammered and dropping below the September 2021 low, Dow Theory is fully bearish, aka, bear market. I would expect further capitulation/panic selling to arrive next.

 

[Bullitt]

Close to a buy with today's DJIA close, but still will need confirmation from Transports to end the bear market according to Dow Theory.

We'll want to see a close around 14,600 in the Transports and close above 34,500 in the Industrials in the next few days.

 

[Bullitt]

Correction to previous post. We'd need a close above around 15,600 in Transports.

We'll want to see a close around 14,600 in the Transports and close above 34,500 in the Industrials in the next few days.

Transports still about 1,000 points away and Industrials are just 100 points away.

Inverse H&S (bullish) on weekly Industrials and sitting near the break line on the close.

 

[Bullitt]

Buy signal will be confirmed by industrials and transports if we close the day at current or higher levels.

 

[Bullitt]

Crazy thought, but DJIA has been forming a base since February 22 and currently is sitting right around the buy point at the 39,250-39,300 area.