Broker Check
Dow Theory

Dow Theory

| March 26, 2018
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Financial analyst and journalist Mark Hulbert at MarketWatch.com penned a column this week stating that “it would take only a small stock market drop next week to trigger something big”.  The market, it seems, is just barely above a “sell” signal from the famous “Dow Theory”.  By some accounts, the Dow Theory has been a market-beater since the 1920’s, and has quite a few followers.  If triggered, the sell signal could generate an excessive amount of selling.  A Dow Theory sell signal is activated when both the Dow Jones Industrial Average and the Dow Jones Transportation Average fall short of reaching a previous high and then penetrate their recent lows on the next decline.  As of Friday’s close, the Industrials closed below its trigger, while the Transports sit just 37 points above.  In the chart below, the red line is the Dow Industrials, and the yellow line is the Dow Transports.  Their respective trigger lines are the horizontal lines.

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