Medium-term trading for months
The BSI turned up sharply but is still short of being positive and has the system on Neutral since August 24, 07.
The Dow dipped below 13,000 and gave a medium-term trading signal to Short on Strength since August 15, 07.
Dow Theory of inter-market confirmation
Charles Dow's precept was simple: if the economy is performing
well, then he expected the Industrials and Transports to do well together. As such he looked for them to be trending and making new
highs or lows together to confirm a primary Bullish or Bearish trend.
Today the situation is a lot more complex with most manufacturing being done in Asia, but the Industrials are still a significant sampling of the US economy, and with global trade the Transports are more important than ever. Since his precept was about measuring a Bullish or Bearish primary trend, I use momentum indicators on all three major Dow indices to confirm a strong Bullish or Bearish trend. Signals are generated from the daily charts for faster signals, and monthly charts for more long term investing.
When all three indices show positive PPO then we have a confirmed Buy signal, with one index negative we have a Reduce on Strength signal or Accumulate on Weakness (when coming up from a Wait in Cash signal), with two indices negative we have a Wait in Cash signal, and when all three indices are negative we have a confirmed Short on Strength signal. The system is rarely short and quick to cover to minimize risk since the markets typically go up with inflation over the long term.
Daily charts give faster signals
| Signal Date | Fast Signal | Dow Index | Index Value |
| Aug 15,07 | Short on Strength | Industrial | 12,861 |
| Jul 26,07 | Wait in Cash | Transports | 5,265 |
| Jun 06,07 | Reduce on Strength | Utilities | 504 |
| Apr 10,07 | Buy | Industrials | 12,574 |
| Feb 27,07 | Reduce on Strength | Industrials | 12,216 |
| Oct 03,06 | Buy | Transports | 4,469 |
| Aug 30,06 | Accumulate on Weakness | Industrials | 11,384 |
| Jun 05,06 | Wait in Cash | Transports | 4,608 |
| Jun 05,06 | Reduce on Strength | Industrials | 11,059 |
| Jun 01,06 | Buy | Utilities | 411 |
| Nov 03,05 | Accumulate on Weakness | Industrials | 10,523 |
| Oct 06,05 | Wait in Cash | Utilities | 409 |
| Sep 20,05 | Reduce on Strength | Industrials | 10,482 |
| Jul 26,05 | Buy | Transports | 3,741 |
| Jul 11,05 | Accumulate on Weakness | Industrials | 10,520 |
| Jun 24,05 | Wait in Cash | Industrials | 10,298 |
| Jun 08,05 | Accumulate on Weakness | Industrials | 10,477 |
| Apr 07,05 | Wait in Cash | Transports | 3,719 |
| Mar 18,05 | Reduce on Strength | Industrials | 10,530 |
| Nov 02,04 | Buy | Industrials | 10,034 |
Charts courtesy of StockCharts.com
Charts courtesy of StockCharts.com