What Every Investor Should Know about the Dow Theory?

What Every Investor Should Know about the Dow Theory?

The transports topped out in November of 2014, and according to the Dow theory this is a big negative;  the Dow Industrials should have followed suit. Instead, the Dow soared higher paying no heed to this theory proving to a large degree that this argument has lost its value. After all, it is a theory and the definition of a theory is “a supposition or a system of ideas intended to explain something, especially one based on general principles independent of the thing to be explained.”

Dow Jones Transportation Index 26 September 2016

As early as 2006 we offered an Alternative Dow Theory that has proved to be far more accurate and reliable than the original Dow theory.  Just to let this sink in, the transports topped out almost two years ago and instead of trending lower the markets have surged to new highs. If you look at the above chart, the Transports appear to be finally gathering momentum and to break out. In the Dow theory alternative, we stated it was the Utilities that lead the way as opposed to the Dow transports, well let’s see if that holds true. The reason we are using older charts is to illustrate the power behind this alternative theory fully.

Dow Jones Utility Index

The Alternative Dow Theory Has A Better Track Record than its predecessor

In the chart above, the utilities pulled back after the Dow transports, let out some steam and then soared to new highs. Even though the correction appeared to be strong, the Dow utilities held above the main uptrend line.  It is all but obvious that the Dow utilities are a better barometer of what one should expect from the markets.  The Utilities topped in Feb of 2015, and after that, the Dow trended sideways before correcting, illustrating that they follow the lead of the Utilities and not the Dow transports.

The Dow utilities bottomed towards the end of August 2015 and rallied until Nov of 2015 before pulling back again. The Dow followed in the utility footsteps. It bottomed in Jan of 2016, while the utilities bottomed on Dec of 2015; once again leading the way.  The Dow utilities rallied until July 2016 before pulling back.

The Dow rallied until Aug of 2016, proving again that the utilities are a better indicator of market direction than the Dow transports.  At this point, it appears that the utilities are building momentum to take off again. If the pattern holds, then the Dow should follow in its path.

 

How are the Dow Industrials and Dow Transports faring in 2017?

Dow Industrials and Dow Transports faring in 2017

Well, as you can see the transports took off like a rocket after September 2016 and have not looked back since. The picture of the Dow industrials is almost identical to that of the Dow Transports.

Dow Jones Industrial Average Index - Dow transports

Once again, we have clear evidence illustrating that the Dow utilities provide a much clearer picture of where the Dow is heading as opposed to the Dow Transports.

Out with the Old Dow Theory and In with the New Dow Theory

The Dow utilities and the Dow industrials both traded to new highs; this means rather than leading the way up the Dow transports are propelling individuals to draw the wrong conclusion. The Dow Theory ceased to work properly a long time ago, and in the era of hot money, it is having a hard time trying to be relevant. The alternate Dow Theory that focuses on the utilities is a better option. Thus, maybe it is time to put this 100-year-old theory to rest; we will let you be the judge.

Paying attention to what the utilities are doing going forward could prove to be rewarding. Once the Dow utilities start to trend upwards, it should serve as a strong signal that the Dow is going to follow in its path. Applying the principles of Mass psychology and Contrarian investing we were able to state with confidence that the experts were wrong when they stated this market would crash in 2014, 2015, 2016 and so far in 2017. In fact, we went on record to the state over and over again that this Stock Market Bull would trade to heights that would shock everyone.

 

Published courtesy of the Tactical Investor

 

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Originally posted 2017-07-25 10:00:20.

Dow 22K Predicted In July 2017; Next Target Dow 30k?

Dow Jones predictions

Dow Jones predictions: The Dow appears to have broken through the top of the Channel formation that fell in the 20,800-21,000 ranges. If it closes above 21,300 on a monthly basis then despite the markets being overbought, the Dow could surge past 22K before running into a strong zone of resistanceMarket Update June 18, 2017

Give the resiliency of this market; the Dow could very easily trade to 22K before it trades to 19K.  The masses need to show some enthusiasm; if they don’t and the market pulls back strongly, then it has to be viewed as a screaming buy.  For now, the masses seem to be locked in the pessimistic mode.

The bullish sentiment has never traded to the 60% ranges even once this year; it did not even make it to the 55% ranges, and that is very telling. On the same token, the number of individuals in the neutral camp has generally continued to trend higher and higher.  Market Update July 6, 2017 

What’s next for the Dow Jones?

Not only did the Dow Jones trade to 22K but it surpassed this target and is now dangerously close to striking 23K.  The sentiment is still not bullish, so the path of least resistance is upward.  As for Dow 30K;  there is a good chance that the Dow could strike this target. We discuss that in full detail in this article titled “Dow Could Trade to 30K But not before This Happens ”

If you prefer to watch a video; then the video covers the essential points of the above article

Dow forecast by longforecast.com

2020/01/03. Dow Jones Industrial Average index forecast for next months and years.

Dow Jones forecast for January 2020.
The forecast for beginning of January 28538. Maximum value 29368, while minimum 26044. Averaged index value for month 27914. Index at the end 27706, change for January -2.9%.

DJIA forecast for February 2020.
The forecast for beginning of February 27706. Maximum value 28512, while minimum 25284. Averaged index value for month 27100. Index at the end 26898, change for February -2.9%.

Dow Jones forecast for March 2020.
The forecast for beginning of March 26898. Maximum value 29007, while minimum 25723. Averaged index value for month 27248. Index at the end 27365, change for March 1.7%. Read More

 

Dow forecast by investinghaven.com

Our Dow Jones forecast for 2020 and 2021 is strongly bullish. We expect the Dow Jones to peak near 32,000 points in 2020. It will continue its rise in 2021. We forecast a crash in the Dow Jones in 2022. Investors should get the maximum out of the bullish potential from our Dow Jones forecast for 2020 and 2021. Note that this another critical piece in our annual series of forecasts because it paints a very clear picture of our general market forecasts for 2020: bullish stock market (not only this bullish Dow Jones forecast but all global stock markets), bullish peak in precious metals, some commodities bullish, strongly bullish crypto markets.

Why This Dow Jones Prediction?
What we are really interested in is to understand whether the stock bull market is the place to be invested in for 2020 and 2021. We want to be invested in bull market trends, and the Dow Jones prediction will help with this.

As said before we are on the lookout of markets that become a multi bagger in 6 to 9 months time. We committed before on this: Forecasting The 3 Top Opportunities Per Year Becomes Invsting Haven’s Mission. If we get the high level trend right we can know in which direction to look for these extraordinary returns. Read More

 

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Originally posted 2017-12-06 15:58:04.