Dow Jones Primary Trend
Dow Jones Industrial Average (DJIA) is one of higher, if not the most quoted financial barometer in it field, and has become identical with economic markets. When individuals tell the market has moved up or down by a particular number of points, they’re relating to variations in the Dow.
There’s been a number of talk about equity market breadth both in the U.S. and, but one thing I’ve not seen mentioned throughout the contest is Dow Theory.
While there are five assumptions of Dow Theory, now I want to focus on the aspect regarding confirmation among three averages–the DJones Industrial Avg, DJones Transportation Avg and Dow Jones Utility Average–by establishing their main trends.
Let’s turn off with the DJones Industrial Avg, which is trading at 5 month highs and 4.20% below its all-time highs. From a structural context, momentum remains in a bullish range, the 200-week moving average is going up, and prices are still advancing in a series of higher highs and higher lows.
There’s not a lot of evidence that this is anything new than a secondary downtrend within a primary uptrend.
Dow Jones Transportation Average
The Dow Jones Transportation Average is still hitting six-month highs and is just 2.30% below its all-time greats. Again, from a structural viewpoint, we’re seeing much of the same we saw in the Dow Jones Industrial Average.
Prices hit an upside aim in January and have been merging since, now moving back toward their highs. Again, a secondary trend followed by a continue of the primary trend is normal behavior.
The third relevant index is the Dow Jones Utility Average, which is striking seven-month highs and is trading 6.25% below its all-time highs.
Last year, prices broke above the upside aim hit in July 2016 and did not hold higher, confirming a failed breakout and correcting 17%.
It met this secondary trend with buying at the uptrend line from its 2002 lows as momentum diverged positive.
Despite this initial lack and several-month divergence from the alternative two indexes, services have recovered and appear to be continuing their main trend higher.
One final remark here is that the Dow Jones Utility Average is not a traditional part of Dow Theory, but we still find value in controlling it, as the three change in tandem over the long term.
The Bottom Line About Dow Jones Theory
While Dow Theory isn’t necessary a great tool to make precise buy or sell signals, it is a great barometer to identify potential divergences that often presage a change in the broader market’s main tendency.
As of now, we’re seeing confirmation from all three indexes resolving their year-to-date ranges to the upside. If the market was nearing an important turning point, we’d expect to see a negative divergence in at least one of these indexes, but there are not anyone.
When there’s a lot of noise, it sometimes helps to take a step back and use simple exercises like the one above to get an aim view of the broader market’s primary trend.
For now, it looks like it heading the market for higher prices, but we’ll keep to monitor these charts for any changes that might alter that thesis.