Saturday, July 9, 2016

Dow Theory Update for July 9: We are nearing a primary bull market signal for US Stocks

I don’t have much time to write or to post charts.

Stocks closed strongly last Friday 8th. The Industrials and the SPY (S&P 500) have bettered the last recorded primary bull market closing highs of April 20th, 2016. The Industrials failed to do so.

One of the primary trend signals according to Schannep’s Dow Theory is three indices jointly bettering the last recorded primary bull market closing highs (what he calls to be “in the clear”).

Thus, if the Transports break above their April 20th closing highs, a primary bull market would be signaled.

Without emotions, I’d honor such a signal. No arguments.

The Dow Theorist


  1. Hi Manuel- In the second paragraph, you say that '...the industrials failed to do so.'. I assume you meant that the Trans index failed to do so, correct?

    1. You are right. Typo. It is the Transports. Today (July 12) they continue below the April 20 closing highs.

  2. I appreciate your blog and all you do. I do cycle work and the April high was important on various cycle things (topping out at 10 weeks can be Dow not confirming SPX was a concern). One thing I took some comfort in was that right when the Brexit polls closed the DOW futures broke the April high. I don't think many noticed because of what ensued. I understand you use cash (and am not suggesting you don't) but was just throwing that out there as I believe had that been Cash you would not have had a primary bear signal at all on the Brexit dump. Thanks for all your hard work and for your blog.

    1. yes I use the real indices INDU, TRANS and S&P 500 (albeit sometimes as a shortcut, I use the SPY). I am not using futures. Furthermore, one of the tenets of the Dow Theory is to look only at closing prices. So any intraday (or overnight) movement is to be utterly disregarded. On a closing basis the April 20 closing highs were not jointly bettered. However, even if they had been bettered on a closing basis by the INDU and the SP 500 and, subsequently following the Brexit, the last recorded secondary reaction closing lows had been violated, we would have had a primary bear market signal as well. Please mind that the transports would not have confirmed. According to Schannep to be "in the clear" (and to consider the primary bull market re-confirmmed and to reset our "counter" to zero in order to appraise a new secondary reaction from which we can later derive a new setup for a primary bear market signal) we need triple confirmation. Thus, even if on a closing basis the INDU and the SP 500 would have bettered their April 20 closing highs, we would not have had a re-confirmation of the primary bull market.

      thx for following.

  3. Interesting article concerning the Dow Theory and particularly Schannep's and the need for the Transports to confirm apply to the current stocks market juncture:

    With all due respect to Mark Hulbert, the classical Dow Theory also has the "alternative" bull market signal, namely: The Industrials and the Transports, without the "normal" setup shoot up like a rocket (what we are seeing right now)and jointly better the closing highs of the last primary bull market. This signal is very often ignored or neglected but it pertains to the "classical" Dow Theory as well; not only Schannep's. Rhea makes this clear in his book (page 77 of my Fraser Edition). I don't have the time to write a full post but this is an important aspect, as there are THREE alternative primary bull/bear market signals in the classical Dow Theory. The most common is the "typical" sequence: bull/bear swing- secondary reaction- rally/pullback and breakdown/breakup. However, there are two additional ways of signaling a change of the primary trend under the classical Dow Theory. More on this in a future post.