Can the Dow Theory be successfully applied to sectors?
Yes, and it works great. In most cases, there is even more outperformance and
drawdown reduction versus Buy and Hold than when applied to Indexes. In a
future post, I will explain why the Dow Theory works with sectors and what
sectors stand to profit most from the Dow Theory. In the meantime, as an
appetizer, I applied the Dow Theory to XRT (retail sector ETF). The results are
1) The Dow Theory increased total profits by 164.37%
2) Maximum drawdown was cut by 52.6%. On a close trade basis, it was cut by 69.89%
More will follow soon.
Manuel BlayEditor of thedowtheory.com