Dow Theory Stock Market Sell Signal Reconfirmed
Stock-Markets / Dow Theory Aug 24, 2015 - 06:22 PM GMTIf ever there was proof of the continued relevance of Dow Theory, the price action of the last 3 days provides all the evidence required.
Today’s market collapse at the open took out the October lows in both the Dow Transports and the Dow Industrials. This move to ever lower lows reconfirms the initial Dow Theory Sell signal triggered earlier this year.
Technically all major indices are falling apart. The market is in fact so weak it is hard not to come to the conclusion that it is foreseeing a recession of some description.
The chart of the % of stocks above the 200 Price Moving Average (PMA) finally shows the 100 DMA crossing the 200 DMA. This is a technical “death-cross” The only indicator not in bearish agreement is the NYSE Advance/Decline line. When this indicator show a similar 100/200 DMA crossover, I believe it will only be a matter of time, based on historic precedent, before a recession will materialize.
In the short term, based on the extremity of the oversold position, it is reasonable to expect a counter rally however, for now, the bull is dead.
Chart: Dow Theory 3 Day Comparison: Dow Transports/Dow Industrials
Chart: % Of Stocks Above The 200 PMA: Daily
Chart: NYSE Advance/Decline Line: Daily
Charts: courtesy of Worden Bros.
By Christopher M. Quigley
B.Sc., M.M.I.I. Grad., M.A.
http://www.wealthbuilder.ie
Mr. Quigley was born in 1958 in Dublin, Ireland. He holds a Bachelor Degree in Accounting and Management from Trinity College Dublin and is a graduate of the Marketing Institute of Ireland. He commenced investing in the stock market in 1989 in Belmont, California where he lived for 6 years. He has developed the Wealthbuilder investment and trading course over the last two decades as a result of research, study and experience. This system marries fundamental analysis with technical analysis and focuses on momentum, value and pension strategies.
Since 2007 Mr. Quigley has written over 80 articles which have been published on popular web sites based in California, New York, London and Dublin.
Mr. Quigley is now lives in Dublin, Ireland and Tampa Bay, Florida.
© 2015 Copyright Christopher M. Quigley - All Rights Reserved
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