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Wednesday, March 21, 2012

$INDU - $TRAN: Dow theory. Similarities and differences

Dow Jones Industrial

Dow Jones Transport

Dow theoryThe two averages should be moving in the same direction. When the performance of the averages diverge, it is a warning that change is in the air (wikipedia).

In the first divergence,Dow Transport reaches a new high but Dow Industrial don't and some time before we saw a fall of both indices.

Now, with the second divergence, is Dow Industrial the one that reaches a new high and Dow Transport don't. We will expect a fall of both indices,soon?.

In the blue circles we are showing the coincides and in the red circles we are showing some differences.

1 comment:

  1. We see the diviergence because the ES and other leading index (SPX) are being pumped by cheap money (banks 0%) to maintain a false market euphoria, but we can see all this higher highs are with very low volume and no normal investors participation.