Dow Theory

A few comments on Dow Theory and a pending "sell" signal

- The Dow Theory "buy" and "sell" signals are very reliable - almost 90% over the past 90 years
- Dow Theory "buy" and "sell" signals are usually late - about 1/3 into a new bull or bear market
- The principle is a little complex but the basic rule is the DOW Industrials and the DOW Transports must confirm one another
- Three technical events must occur the get a buy or sell signal
- One of the averages makes a new 52-week high or low (1)
- The other fails to confirm and trades down to a "significant" low sometimes when the other is at a new 52-week high (2)
- Both rally and then trade below the "significant" low posted by the weaker average (3)