We are very close to a Dow Theory up trend confirmation. The reason I point this out is because if we get the confirmation, you can expect some technical buying as well as capitulation of shorts which could produce a steep climb (at least in the short term) in all the indexes.
Strict Dow Theory only uses closing prices, but I will give you both the high and the close. Here is today's DJIA vs. late April:
Close
11164 today (41 points away)
11205 April
High
11247 today (11 points away)
11258 April
Here is the information for the Dow Transports:
Close
4774.86 today (31 points away)
4806.01 April
High
4823.98 today (already exceeded April)
4812.86 April
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Now I am confused. Earlier I thought you were saying downtrend based on the candles.
ReplyDeleteHi Hannah
ReplyDeleteI noted that we put some reversal candles on all the indexes. They don't always work, of course, and require confirmation.
I also pointed out that the Federal Reserve will be conducting Permanent Open Market Operations tomorrow. See the video I did on POMO earlier this month for an explanation how this can affect the market.
Regarding the Dow Theory, there is no confirmation yet. I am just alerting those who may be interested that we are close to a confirmation, and what a confirmation might mean if it occurs.
I think we are in a triangle now and we've just started the C of an A-B-C. A has Oct 13 to Oct 19 and B back up till this morning Oct 25. C would run 5 days if time symmetrical and likely down to 1130-1140 on the S&P500.
ReplyDeleteParker
ReplyDeleteThanks for the DOW Theory update. I have also been a long time subscriber to Tim Wood. He has done a great job with the market for the past several years.
I have become a big fan of your work.. and your new sentiment indicator is very smart. I have been a fan of Terry for nearly 30 years. It seems we are on the verge of something momentous. Either this market begins to roll over in a serious way, or all the work that Terry has done, and your work, the work of many others, and of course, my own :) will seem to be of little value.. a signal that the market is playing by a new set of rules.. a completely strange new world as if we have entered a new dimension where the old physics do not work.
I got a sell signal last Tuesday using my momentum indicators..... it is still intact...
Keep up the good work.
Bill
Bill
I have also followed Terry for quite a while- and your recent refinements are refreshing. However, I agree with Bill- if this market doesn't start to roll over soon, we are going to have to find a new playbook. Example- todays modest decline in the s&p 500, completely wiped out as soon as POMO begins at 10:15am.
ReplyDeleteWe could also get a higher close on the DJT vs. the April highs, but not on the Dow, so that would be a divergence that people would take note of (looking back of course). But something to keep in mind. The 200 week moving average has been the strongest support and resistance barrier to the S&P 500 going back to the 70's. It does get broken by a few weeks at times...but it is right near the gap at 1202 (the avg. is at 1194 right now).
ReplyDeleteAn interesting post at Zerohedge a short while ago.."Day Trading is Dead"..
ReplyDeletehttp://www.zerohedge.com/article/guest-post-here%E2%80%99s-proof-day-trading-dead
talking about the capitulation of the trading houses, losing to the big HFT traders.
I am not a day trader, but you can say that I am a short term trader.. especially since late April, 2010, and for the foreseeable future. I have always liked short term trading, and I have been pretty good at it. But it does feel to me as if something is changing..HFT in combination with the FED POMO seems to be changing the behavior of the market. I am not ready to say it is bad.. just that I don't have the same confidence in what my signals are telling me.
I study the "Bull" case fundamentally, and it does not make sense.. the reasons offered for the advance since the Summer require that the I ignore what seems to me to be the actual data, and accept only the promotional headline arguments.
Bill
I think you have to ignore logic when trading and just follow the price action and the technicals. I am sure from 1932 to 1937 and the big up moves in the late 60's and early 70's made no sense. The market will eventually bottom out 3-4 years before the worst is over, which means that either 2009 was the time hold your nose and buy, or 2015-2016 will be the time to buy. Seems like it should be the latter based on all historical trends.
ReplyDeleteI hate to be a loud mouth, but I just looked at the Dow Transports and I don't see any case that can be made supporting weakness in the near term... that sucker has been over-bought since early Sept and it looks like it wants to go higher. Or, on the other hand, that Bullish momentum has to dissipate at some time and now would sure be a good time. In that case we would have a nice double top at just the right time.
ReplyDeleteI really wish I had an intuitive thought.
Bill
Bill
BillH
ReplyDeleteThanks for the kinds words.
It does seem we are on the verge of something momentous. Never before in history have we made an all-time high in stocks (Oct 2007), then wiped out 12 years of gains in less than 17 months (March 2009), then regained 61.8% of that loss in less than 14 months (April 2010). The swings are hard and fast.
Just a note, the Dollar and VIX bottomed in April prior to the top in the S&P. The dollar on 4/14 - 6 days before the final top, and the VIX on 4/12 - 8 days before the final top. The dollar bottomed on 10/15 (6 days) and the VIX on 10/13 (8 days) from yesterday's top (the highest level reached so far). That may not mean the top is in, but it is something worth noting.
ReplyDeleteI meant to address the comments of Anonymous above......I was a Registered Representative of the NYSE in 60's and 70's, as well as the 80's and early 90's, well trained by a couple of major wire houses. In fact, in those days, all the Bull moves made sense to me.
ReplyDeleteIt was not until the early 2000's that I could no longer see a connection to price and fundamentals. And no longer could see a reason to be a "buy and hold" tool of the Wall Street Investment Sales Industry. I fell back on the TA tools I had learned over the years, and was quite happy with my investment results.
Which is what is causing me heartache now.. I am not certain the TA tools I have come to understand and trust are any longer of value. Just ask the "Price and Volume" guys how they feel about their TA tools. Something smells like change is in the air. Then, again, it could just be Indian Summer.
Bill
Thanks Anonymous for the information re: 200 week moving average resistance + recent VIX and dollar bottoms.
ReplyDeleteTo BillH regarding Dow Theory and in particular Tim Wood's work: As far as I understand, Tim has never given a Dow sell signal based on his work that there has been no joint violation of secondary lows of Dow Jones Industrial Average and Dow Jones Transport Average on an intermediate basis. He contended the flash crash low was not an intermediate move as there were too few days in scope. Hence there were no joint violation of secondary lows reached ever since the correction started. As a result, his original thesis reached in Apr 09 that Dow's primary trend is up remains unchanged. As a corollary, that means even if we see the Apr high eclipsed jointly by both Dow Industrial and Transport, there is no Dow buy signal.
ReplyDelete