Thursday, January 22, 2009

For GT Blog January 22, 2009

We know that Elliott Wave is an extension of Dow Theory that years earlier identified waves and included one tenet of “confirmation” in that the trend of one average (the industrials) must be confirmed by the trend of another average (the transports).

Our chart this week is that of the daily closes of the Dow Jones Industrials plotted above the daily closes of the Dow Jones Transports. Note the non-confirmation between the two plots with the Transports touching the November 2950 lows and the Industrials holding at least 500 points above the November lows.

We call this positive divergence, a situation that occurs when two lines on a chart move in opposite directions at important junctures. We had similar divergences in September 1998 and again in October 2002. This satisfies one Dow Theory tenant that the averages must confirm the trend.

A Bottom Set-Up?

Non Confirmation of Transports Low - A Higher Low on the Industrials

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