Best of the Week
Most Popular
1.UK House Prices Momentum Crash Threatens Mini Bear Market 2017 - Nadeem_Walayat
2.Perfect Storm - This Fourth Turning has Over a Decade of Continuous Storms to Come - James_Quinn
3.UK House Prices Momentum Crash Warns of 2017 Bear Market - Video - Nadeem_Walayat
4.Billionaire Investors Backing A Marijuana Boom In 2017 - OilPrice_Com
5.Emerging Markets & Basic Materials Stocks Breaking Out Together - Rambus_Chartology
6.Global Currency Reserve At Risk - Jim_Willie_CB
7.Gold and Silver: Your Stomach Is Probably Wrenching Right Now - The_Gold_Report
8.Warning: The Fed Is Preparing to Crash the Financial System Again - Graham_Summers
9.Basic Materials and Commodities Analysis and Trend Forecasts - Rambus_Chartology
10.Discover Why A Major American Revolution Is Brewing - Harry_Dent
Last 7 days
North Korea Is Far From Being Irrational… It Has A Plan - 18th Aug 17
US Civil War - FUNCTIONAL ILLITERATES TRYING TO ERASE HISTORY - 18th Aug 17
Bitcoin Hits New All-Time High Over $4,400 As It Catches Paypal In Total Market Cap - 17th Aug 17
3 Psychological Ingredients behind Great Web Content - 17th Aug 17
The War on Cash - Rogoff, Orwell and Kafka - 17th Aug 17
The Stock Market Guns of August, Trade Set-Up & Removing your Rose Tinted Glasses - 16th Aug 17
Stocks, Bonds, Interest Rates, and Serbia, Camp Kotok 2017 - 16th Aug 17
U.S. Stock Market: Sunrise ... Sunset - 16th Aug 17
The Next Tech Crash Could Delay Your Retirement by a Decade - 15th Aug 17
Gold and Silver Precious Metals Nearing Breakout - 15th Aug 17
North Korea Showdown: Pivotal Market Turning Point - 15th Aug 17
Tech Stocks DOT COM Bubble Do-Over? - 14th Aug 17
Deep State Conspiracy or Chaos - 14th Aug 17
From the Trans-Atlantic Axis and the Trans-Asian Axis - 14th Aug 17
Stock Market Intermediate Correction Underway - 14th Aug 17
The Islamic State Jihadi Pivot to Asia - 13th Aug 17
Potential Pivots Upcoming for Stocks and Gold - 13th Aug 17
North Korean Chinese Proxy vs US Military Empire Trending Towards Nuclear War! - 12th Aug 17
Gold Stocks Coiled Spring - 12th Aug 17
Neil Howe: The Amazon-Walmart Rivalry Will Determine the Future of Retail - 12th Aug 17
How to Alton Towers Half Price Discount Entry 2017 and 2018, Any Time, No Pre-Booking! - 12th Aug 17
Top 3 Technical Trading Tools Part 2: Relative Strength Index (RSI) - 11th Aug 17
What Makes Women Better Investors - 11th Aug 17
Crude Oil Price Precious Metals Link in August - 11th Aug 17
Influencer Marketing Predictions All Businesses Should Take Into Account - 11th Aug 17
Really Bad Ideas - Government Debt Isn’t Actually Debt - 10th Aug 17
Gold Sees Safe Haven Gains On Trump “Fire and Fury” Threat - 9th Aug 17
Why Is The Stock Market Not Trading On Fundamentals Lately? - 9th Aug 17
USD/CAD - Can We Trust This Breakout? - 9th Aug 17
New Monthly Rebate to Help Reduce Your Trading Costs - 9th Aug 17
Stock Market Divergences Are Now Appearing! - 9th Aug 17
Is Inflation an issue or did the Fed Mess Up? - 8th Aug 17
Top 3 Technical Trading Tools Part 1: Japanese Candlesticks - 8th Aug 17
Researchers Find $10 Billion Hidden Treasure In A Dead Volcano - 8th Aug 17
What Happened to Thousands of Sheffield's Street Trees 2017 - Fellings Documentary - 8th Aug 17
Solar, Bubble, Banks, War, and Legal Tender: Five Reasons Why You Should Buy Silver Now - 7th Aug 17
CRASH - If Some People Do It, Nothing Bad Happens, But If Everyone Does It, All Hell Breaks Loose - 7th Aug 17
Gold and Silver : The Battle for Control - 7th Aug 17
Precious Metals Sector is on Major Buy Signal - 7th Aug 17
Stock Market - Has Time Run Out? - 7th Aug 17
Get Ready for an Historic Upside Gold and Silver Run - 7th Aug 17
BOOM! Bitcoin Rockets To New All-Time High As Cryptocurrencies Surge Higher! - 7th Aug 17
U.S. Dollar: This Crash Signals the End - 6th Aug 17
Predicting The Price Of Gold Is A Fool’s Game - 6th Aug 17
Asda Sales Collapse and Profits Crash! UK Retailer Sector Crisis 2017 - 6th Aug 17

Market Oracle FREE Newsletter

3 Videos + 8 Charts = Opportunities You Need to See - Free

Dow Theory Divergence Indicates Increased Stock Market Risk

Stock-Markets / Stock Markets 2015 Apr 03, 2015 - 04:44 PM GMT

By: Christopher_Quigley

Stock-Markets

If ever you wanted an example of Dow Theory “Divergence” the Dow indices comparison chart below provides it.

Quick observation clearly shows that the Dow Transport Index (White Line) is collapsing while the Dow Industrials (Green Line) is holding its own. Divergence is an indication of increased market risk and means that the future trend is in doubt and “in play”.


The question now is will the Dow Industrials pull up the Dow Transports or will the Trannies prevail and force down the Dow 30.

To help answer that question we need to look more closely at the Dow 20 Transport Index. The daily chart below indicates that the December 2014 low has been violated and that the 200 daily moving average has been broken. This is bearish. Thus on probability I see the Dow 30 being pulled down by the Dow 20.

Should this occur and the Dow 30 December low of 17068 be broken the Dow Theory sell signal triggered in early January, will have been confirmed.

Dow Theory Comparison Chart: Dow Industrials and Dow Transports.


Dow Transports: Daily Chart.

British General Election Brings Renewed Uncertainty To Euro Land.
Just as everyone thought stability was returning to the Euro area it now transpires this is not the case given that the British people will now be going to the polls May 7th.

Should the Conservative party win, David Cameron the outgoing Prime Minister has stated he will hold a referendum to decide whether he can bring England out of the European Union.

Currently his party is on track to win an overall majority.

This development has grave implications for Ireland as the UK is Ireland’s main trading partner.  Accordingly Enda Kenny the Prime Minister of Ireland has set up a special task force to deal with the matter. Here is what the Irish Times had to say about the issue yesterday:

“British prime minister David Cameron kicked off the British general election campaign this week, describing it as “the most important general election for a generation”. The election on May 7th will also have crucial ramifications for Britain’s relationship with the European Union.

While domestic political issues such as the economy and the National Health Service are likely to dominate the election campaign over the next six weeks, beneath the day-to-day campaigning lie deeper questions about Britain’s place in the wider world and the EU.

Cameron has committed to holding a referendum on EU membership by 2017 – a date that coincides, ironically, with Britain’s presidency of the Council of the European Union during the first half of 2017.

A referendum is almost certain should the Conservatives win a majority on May 7th. If not, the party would need the support of any coalition partners. The Tories’ current coalition partners, the traditionally pro-EU Liberal Democrats, have indicated they could be prepared to back an EU membership referendum in return for other concessions.

Officials in Brussels are watching developments in Westminster quietly from afar. With the configuration of the next British government unclear, the European Commission is under no pressure to formulate a position on the British question.

After the election, the question of a British renegotiation of EU membership is likely to become more pressing. Both European Council president Donald Tusk and European Commission chief Jean-Claude Juncker are understood to be open to working constructively with Britain, despite Cameron’s campaign against Juncker’s candidature for the EU’s top job last year. But the core issue remains how far Britain can secure changes within existing EU treaties.

Cameron’s pledge to hold a referendum two years ago was predicated in part by a belief that the EU treaties would be reopened anyway in the coming years to facilitate greater euro-zone integration, offering Britain the opportunity to demand its own changes. Now, the prospect of treaty change looks remote.

For Ireland, the costs of a British exit would be enormous, affecting everything from the fragile peace agreement in Northern Ireland to the huge trade in goods and services between the two islands.

Ireland would also lose a key ally around the EU negotiating table. Within the chorus of national positions that make up the 28-member EU, Britain and Ireland are aligned on a number of key issues, particularly in the area of the single market and commerce. This includes common positions on everything from the EU-US trade deal to new EU data protection rules and financial services regulation.

The establishment of a special unit within the Department of the Taoiseach (Ireland’s Prime Minister) to deal with a possible British exit shows the Government is taking the threat of “Brexit” seriously. Nonetheless, Ireland faces a delicate balancing act over the coming years in Brussels – demonstrating to its European partners that it remains committed to the European project, while working constructively with Britain on a reform agenda in which both countries share much common ground”.

This renewed complexity in European affairs is bound to have a detrimental effect on the value of the Euro. It is highly likely it will add new energy to speculation whether the Euro can indeed survive a British withdrawal. When one takes into consideration the fact that the Greek debt crisis is in no way resolved it thus remains highly probable that the Dollar will continue to grow in strength vis-a-vis the Euro. This is not good news for US corporate earning going forward given their market foot-print in Euroland. Should the European Union become even weaker as a result of the English referendum there is a distinct possibility that a sharp decline in European GDP figures will herald a significant pullback in the US stock market for where earnings go share prices are sure to follow.

Charts courtesy of Worden Bros.
News Source: Irish Times 2nd. April 2015

By Christopher M. Quigley

B.Sc., M.M.I.I. Grad., M.A.
http://www.wealthbuilder.ie

Mr. Quigley was born in 1958 in Dublin, Ireland. He holds a Bachelor Degree in Accounting and Management from Trinity College Dublin and is a graduate of the Marketing Institute of Ireland. He commenced investing in the stock market in 1989 in Belmont, California where he lived for 6 years. He has developed the Wealthbuilder investment and trading course over the last two decades as a result of research, study and experience. This system marries fundamental analysis with technical analysis and focuses on momentum, value and pension strategies.

Since 2007 Mr. Quigley has written over 80 articles which have been published on popular web   sites based in California, New York, London and Dublin.

Mr. Quigley is now lives in Dublin, Ireland and Tampa Bay, Florida.

© 2015 Copyright Christopher M. Quigley - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Christopher M. Quigley Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife