Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stop Believing The 'Economy' Is The Same As The Stock Market - 12th Jul 20
Spotify Recealed as The “Next Netflix” - 12th Jul 20
Getting Ahead of the Game: What Determines the Prices of Oil? - 12th Jul 20
The Big Short 2020 – World Pushes Credit/Investments Into Risk Again - 11th Jul 20
The Bearish Combination of Soaring Silver and Lagging GDX Miners - 11th Jul 20
Stock Market: "Relevant Waves Vs. Irrelevant News" - 10th Jul 20
Prepare for the global impact of US COVID-19 resurgence - 10th Jul 20
Golds quick price move increases the odds of a correction - 10th Jul 20
Declaring Your Independence from Currency Debasement - 10th Jul 20
Tech Stocks Trending Towards the Quantum AI EXPLOSION! - 9th Jul 20
Gold and Silver Seasonal Trend Analysis - 9th Jul 20
Facebook and IBM Tech Stocks for Machine Learning Mega-Trend Investing 2020 - 9th Jul 20
LandRover Discovery Sport Service Blues, How Long Before Oil Change is Actually Due? - 9th Jul 20
Following the Gold Stock Leaders as the Fed Prints - 9th Jul 20
Gold RESET Breakout on 10 Reasons - 9th Jul 20
Fintech facilitating huge growth in online gambling - 9th Jul 20
Online Creative Software Development Service Conceptual Approach - 9th Jul 20
Coronavirus Pandemic UK and US Second Waves, and the Influenza Doomsday Scenario - 8th Jul 20
States “On the Cusp of Losing Control” and the Impact on the Economy - 8th Jul 20
Gold During Covid-19 Pandemic and Beyond - 8th Jul 20
UK Holidays 2020 - Driving on Cornwall's Narrow Roads to Bude Caravan Holiday Resort - 8th Jul 20
Five Reasons Covid Will Change SEO - 8th Jul 20
What Makes Internet Packages Different? - 8th Jul 20
Saudi Arabia Eyes Total Dominance In Oil And Gas Markets - 7th Jul 20
These Are the Times That Call for Gold - 7th Jul 20
A Reason to be "Extra-Attentive" to Stock Market Sentiment Measures - 7th Jul 20
The Beatings Will Continue Until the Economy Improves - 6th Jul 20
The Corona Economic Depression Is Here - 6th Jul 20
Stock Market Short-term Peaking - 6th Jul 20
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Stock Market Investing Dow Theory Overview.

Stock-Markets / Dow Theory May 03, 2019 - 07:37 AM GMT

By: Christopher_Quigley

Stock-Markets

Applying Dow Theory To Investment Practice.

I first came across Dow Theory in 1989 when I lived in Belmont, San Mateo County, California. I thought its creators Charles Dow and William Hamilton had unique insight into stock market behaviour. Accordingly, for over ten years I developed a course incorporating their fascinating insights and have been solidly teaching their market philosophy for over 12 years; writing my first published on the topic in 2007.

One of the most difficult tasks I have encountered teaching this subject is how to prevent students


becoming too engrossed in trying to “time” short term Dow Theory buy and sell signals rather than focus instead on the long term market fundamentals Dow and Hamilton had discovered. They articulated that the main “trend was your friend” and once this trend was identified, ideally following a recession, the investment task was to stick with this trend until it was exhausted. They were not supporters of short term trading. This is more difficult to apply than it sounds but practice makes the challenge easier with each passing year. So, like a baseball coach, my main job is motivating students to believe in themselves and apply the knowledge received and stay the course. Dow and Hamilton advised their readers that if one managed to “catch” just four or five main stock market investment trends in one’s investment career one could retire comfortably investing a reasonable initial grub-stake. Case in point: if you caught our current bull trend, which commenced in March 2009, had you invested in the Dow Industrials you would now be experiencing a gain (all figures approx.) of 280%; the S & P 500 has provided a rise of 315% and the NASDAQ  has exploded to the tune of 575%. Once you get this picture you quickly realise that Dow Theory type investing is the only way to go and can make you seriously wealthy or at least financially comfortable at the end of an investment life-cycle of 20 - 30 years. Applying standard margin (normally allowing you double investment capital) and using leveraged ETFs such as TQQQ (3 times NASDAQ Index), OPRO (3 times S & P 500 Index) and UDOW (3 times Dow Industrial Index)  your potential future gain could be hyper-charged, if you know what you need to do and when you need to do it. The current bull market is “long in the tooth”, and a significant correction or recession is due within the next 2 – 3 years, based on historical precedent. For those who are prepared and in a position to apply Dow Theory strategies such a recession, while catastrophic for most, will be a boon to a the initiated few.

Given the above, I am constantly asked why more investors do not follow the Dow Theory investment strategy. The answer: PATIENCE.  Most folk just don’t have it. They equate investment performance with trading action and nothing could be further from the truth, in my experience. One of the greatest exponents of this fact is the famous guide and mentor Warren Buffett. He is often quoted expounding the truths of Dow Theory, though he may not give just reference. In one of his recent missives he stated: “in times of over-valuation I drink (invest) with a fork. In times of value I drink with a bathtub”.

Current Market Dow Theory Technicals.

Divergence is developing between the Dow Industrials and the Dow Transports. In addition while the S & P 500 and The NASDAQ have reached previous highs the main Dow Indices have not. Thus there is above average investment risk about. It is also important to keep in mind that while there has been  significant rallies following the 2018 winter pull back, since last October the S & P 500 is down .57% (approx  half of one per cent), the NASDAQ is up only 1.06% and the Dow 30 has suffered a loss of 1.93%.

From a purely Dow Theory technical analysis point of view The Dow Industrial averages must break the 26,828 price point and the Dow Transports the price level of 11,570 for the March 2009 bull to be back in place. However, on the bearish stance, if the Dow Transports breaks the 9,896 level and the Dow Industrial the 25,450 price point there is a strong possibility that the December lows are going to be retested. I would like to see this retest occur as it would give a much more stable technical picture to overall market technical structure.

Chart: Dow Industrials: Daily.

Chart: Dow Industrials: Weekly.



Chart: Dow Transports: Daily.

Chart: Transports: Weekly.

Chart: S & P 500: Daily.

Chart: S & P 500: Weekly.

Chart: QQQ: Daily.


Chart: QQQ: Weekly.

Charts: Courtesy StockCharts.Com.

Christopher Quiqley

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.

© 2019 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

© 2005-2019 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

6 Critical Money Making Rules