Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stocks Primary Bear Market- Dow Industrials vs Transports

Stock-Markets / Dow Theory Mar 08, 2008 - 06:31 PM GMT

By: Tim_Wood

Stock-Markets Best Financial Markets Analysis ArticleFrom a Dow theory perspective, the primary bearish trend confirmation that occurred on November 21, 2007 remains intact. According to Dow theory, it's the close that counts and up until March 7, 2008, the averages have both been operating within the boundaries of the previous two secondary high and low points. According to Dow theory such movement is of no forecasting value. In other words, once the trend is authoritatively established it must be considered to be intact until it is reversed and price movement between two secondary high and low points does not reverse the trend.


Such movement is simply “neutral.” As of March 7, 2008, the Industrials have broken below their previous low. But, the Transports have not. Thus, we now have a non-confirmation between the two averages. This non-confirmation does not invalidate the existing primary bearish trend. It does however put us on notice that something could be trying to change. Let me make it perfectly clear that until such change actually materializes the existing primary bearish trend remains very much intact. This non-confirmation could continue to grow, or it could fail with a break by the Transports below their January low.

As William Peter Hamilton suggested in his Dow theory book titled The Stock Market Barometer in 1922, the Dow theory is a tool to gauge general business conditions. As I'm sure you will all agree, since the Dow theory primary trend change was confirmed on November 21 st , business conditions have indeed deteriorated as has been seen by the steady stream of poor economic news.

I have included the current chart of the Industrials and the Transports below. It was the break below the August secondary low point that served to confirm the primary trend change on November 21 st . The bearish primary trend was further confirmed in January when the averages broke below the November lows. As stated above, the price action between the January lows and March 7, 2008 occurred between the previous secondary high and low points on both averages. With the price action on March 7, 2008 breaking below the January low on the Industrials, we now have a non-confirmation as is noted in red.

We can also look within these specific averages for additional hints. As an example, I have included a chart of the Industrials along with the Dow Jones Top Ten Index in the lower window of this chart. The Top Ten Index is comprised of the top ten dividend-yielding stocks within the Industrials. Note that this index has now moved below its January low as well. This is telling us that we are seeing a consistent erosion between the Industrials and this subset of the Industrials.


In the next chart below I have included the Transports in the upper window and the Dow Jones Air Freight Index in the lower window. Both of these indexes have bounced approximately the same percentage out of their January lows and like the Transports the Air Freight Index is holding above the January low. But, note that the Air Freight Index has formed a short-term divergence with the Transports. Price has not yet broken down out of this short-term divergence, but the divergence is telling us that we are seeing some degree of deterioration by this subset within the overall Transportation Average.

Next, we have a chart of the Transports verses the Dow Jones Marine Index. Here too, the Marine Index bottomed in January along with the Transports. Since that low both of these averages have pretty well confirmed each other. But, we are now seeing the Marine Index showing more relative weakness than the Transports in that it has broken down much further than the Transportation Average itself. Thus, this sub-set of the Transports is weakening.


In the next chart below I have again included a chart of the Dow Jones Transportation Average along with a chart of the Dow Jones Railroad Index in the lower window. In this case both averages topped in July and last made a joint low in January. But, in this case the Railroads are showing more relative strength and have recovered nearly to their July high. This is a positive, but this alone does not change anything. It does however show where much of the strength within the Transports is coming from. With the Rails now declining it is important to watch this subset for further erosion.


The next sub-sector of the Dow Jones Transportation Average that I have included is the Trucking Index. Here too, these averages deteriorated out of their divergent July top and last made joint lows in January. Again, from those lows, both averages have rallied. In this case, the Truckers have formed a short-term divergence, or non-confirmation, with the overall Transportation Index. So, like the Air Freight Index we are seeing deterioration within the Transportation Average by this subset, but price has not yet broken down out of this divergence.


The bottom line is that the Dow theory primary trend change is still very much intact. Yes, there is now a Dow theory non-confirmation intact. There is no way to know if this non-confirmation will hold or if it will fail. It is for that reason that we must view it as a potential warning, but at the same time we must respect the existing bearish primary bearish trend that is still in force. In the mean time, watching the subsets of the Transports may provide insight as to whether this non-confirmation it going to hold.

From a cyclical perspective, which has absolutely nothing to do with Dow theory, the move into the extended 4-year cycle low remains on track. From my seat, the key to guiding me as we move down into the 4-year cycle low falls on the shoulders of my intermediate-term Cycle Turn Indicator. This indicator is designed to identify important intermediate-term trend changes. This indicator identified the 1929 top and the crash that followed as well as the top of the 1930 rebound and beginning of the decline into the 1932 low. It also called the 1987 top beautifully. At present, I “feel” like the market is holding on by the skin of its teeth. But, if the Cycle Turn Indicator called these other major declines, then odds are it will signal any major decline in the present. Until such time we are operating in an environment with the existing Dow theory primary bearish trend, a Dow theory non-confirmation and the backdrop surrounding the unwinding of this extended 4-year cycle.

I have begun doing free Friday market commentary that is available at www.cyclesman.com/Articles.htm so please begin joining me there. Should you be interested in more in depth analysis that provides intermediate-term turn points utilizing the Cycle Turn Indicator, which has done a fabulous job, on stock market, the dollar, bonds, gold, silver, oil, gasoline, the XAU and more, those details are available in the newsletter and short-term updates. A subscription includes access to the monthly issues of Cycles News & Views covering the Dow theory, and very detailed statistical based analysis plus updates 3 times a week.

By Tim Wood
Cyclesman.com

© 2008 Cycles News & Views; All Rights Reserved
Tim Wood specialises in Dow Theory and Cycles Analysis - Should you be interested in analysis that provides intermediate-term turn points utilizing the Cycle Turn Indicator as well as coverage on the Dow theory, other price quantification methods and all the statistical data surrounding the 4-year cycle, then please visit www.cyclesman.com for more details. A subscription includes access to the monthly issues of Cycles News & Views covering the stock market, the dollar, bonds and gold. I also cover other areas of interest at important turn points such as gasoline, oil, silver, the XAU and recently I have even covered corn. I also provide updates 3 times a week plus additional weekend updates on the Cycle Turn Indicator on most all areas of concern. I also give specific expectations for turn points of the short, intermediate and longer-term cycles based on historical quantification.

Tim Wood 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