A Dow Theory buy signal imminent? Breakout or fake-out?

熊胆牛心

Media reports say that some prognosticator said that the Dow Theory is close to issuing a buy signal. This is wrong. The Dow Theory gave a buy signal 14 months ago, on 7/23/09, and has not given a sell signal since. Since the Dow Theory already is on a buy signal, it cannot issue a new buy signal.

On Monday, the Dow Theory registered a non-confirmation, where the Dow-Jones Industrial Average rose to a new 4-month closing price high but the Dow-Jones Transportation Average closed below its 4-month closing price highs. If such a non-confirmation persists, it may prove to be a warning to be alert for a possible minor trend reversal to the downside.
Consumer Discretionary stock sector Relative Strength Ratio (XLY/SPY) rose to another new 3-month high on 9/20/10 and remains bullish. The Ratio remains above both SMAs and the 50-day SMA remains above the 200-day SMA. Absolute price rose to a new 4-month high.

Industrial stock sector absolute price rose to a new 4-month high on 9/20/10 and is now bullish again, with the 50-day SMA above the 200-day SMA.

Materials stock sector Relative Strength Ratio (XLB/SPY) fell to a 3-week low on 9/20/10 and turned neutral by crossing below its 50-day SMA.

Emerging Markets Stocks ETF (EEM) absolute price rose to a new 5-month high on 9/20/10, confirming a bullish trend.

NASDAQ Composite/S&P 500 Relative Strength Ratio rose above 12-week highs on 9/20/10 but remains neutral.

The S&P MidCap 400/Large Cap Relative Strength Ratio (MDY/SPY) rose further above 7-week highs on 9/20/10 and remains bullish.

Gold nearest futures contract rose to another new all-time high on 9/20/10, again confirming its preexisting secular bullish trend.

Copper nearest futures contract price rose above 5-month highs on 9/20/10, again confirming its preexisting intermediate-term Secondary Uptrend. Strength in Copper suggests confidence about prospects for the world economy.

S&P 500 Composite (SPX, 1,142.71) rose 17.12 points or 1.52% on 9/20/10 to a new 4-month high. Stock indexes opened higher and added to gains as the day progressed. Volume fell 16% on the NYSE and fell 22% on the Nasdaq, however, thereby denying full technical confirmation. Upside volume on rallies has been relatively low for months, suggesting a lack of confidence. On-Balance Volume for the SPY remains bearish, below both SMAs and with the 50-day SMA below the 200-day SMA. Pure price momentum indicators perked up, showing renewed vigor for the short term. Longer term, absolute price of SPX remains neutral, above the 50-day and 200-day SMAs, but with the 50-day SMA below the 200-day SMA. Even with Monday’s probe into new 4-month high territory, substantial upside price follow-through with volume confirmation may be needed to validate a trend change. False breakouts have become more common in recent years.

ranchgirl

It seems this morning article, not afternoon. Actually transportation is very strong today, if you need a confirmation, you got it.