Roughly every month, I try to post the results of a compilation of financial indicators that measure the current risk/reward picture for US markets. Long-time readers are familiar with this compilation, which I call the “Bear-o-meter”. For those new to my blog: The Bear-o-meter is a risk/reward measurement against the US markets. It is not Read More
Dow Theory signalling change?
There are 6 tenets of Dow Theory- originally coined by Charles H. Dow (1851–1902), journalist, founder and first editor of The Wall Street Journal and co-founder of Dow Jones and Company. The first three tell us that the market discounts all known information, that there are three trends in a market (up, down, sideways) and Read More
Bear-o-meter drops a point
Gotta admit I was a little surprised at today’s reading of the Bear-o-meter. My last reading of the compilation, which was taken at the end of October , showed an improvement in risk/ reward. The Bear-o-meter had moved into the “neutral” risk/reward zone with a score of 4 – that, from its prior reading taken Read More
Pay no attention to the man behind the curtain!
Some Technical Analysts have pointed out the divergence between the Dow Industrials and Transports lately. Basically, a new high on the Dow Industrial Avg (INDU) should be confirmed by a new high on the Dow Transportation Avg (TRAN) to be considered “healthy”. Really, the confirmation between the two averages is just one more breadth indicator. Read More
Dow non-confirmation
The chart below illustrates a few incidences where the Dow Industrials and Dow Transports diverged over a few months. As you can see, when the industrials (green line) were moving up while the Transports (red/black line) moved down, you eventually saw a correction in the industrials. Conversely, we saw the transportation stocks rise while the Read More
Dow divergence
When the transports diverge, or fail to make new highs while industrials are making new high, this can be an advanced warning of a correction. I’ve made a point of warning readers of Dow divergences or non-confirmations by the transports on this blog in the past. For those who follow my blog, you will know Read More
Does the transports bear suggest a market pullback?
The Dow Theory contains a tenet suggesting the Dow Transportation index must confirm the highs and direction of the Industrials. As I, and other Technical Analysts have discussed over the past weeks – we are currently witnessing a divergence in the direction of the Transports vs. the Industrials.. The DJTI has been moving down since Read More
What Dow Theory may be telling us about the market
Dow Theory states that Dow Industrials and Transports averages must confirm each other (amongst other components of that theory). If these two indices diverge, it’s potentially bearish. The DJIA and S&P 500 have broken out to new all-time highs recently. When the Transports (TRAN) and Utilities (UTIL) indices didn’t confirm the highs on the Industrials, Read More
Dow Theory says stay in the market for now.
Given the volatility of late, one might turn to the Dow Theory to ask if markets are showing signs of a top. There are many components to the Dow Theory. The main tenants involve identifying the market’s phase, trend identification, volume confirmation, and finally market average confirmation. We’ll be looking at market average confirmation today Read More
We’ve had the “Zig”, what about the “Zag”?
Stockcharts.com, as well as other charting software services, offer a tool known as the “ZigZag” tool. The ZigZag tool is not an indicator—it simply filters out smaller price movements. Stockcharts has a default setting of 5% (although you can change this as you wish). The 5% setting ignores all price movements less than 5%, Read More