Dow Theory

In technical analysis there is a lot of confusion as to when a proper Dow Theory trend change is confirmed. I have attached a chart and email I sent on Jan 14, 2008 to a few friends and family showing the true Dow Theory Bear Market confirmation. Enjoy.

Dow Theory states that a trend change occurs when both the Dow Industrials and Dow Transports either BOTH make higher highs or BOTH make lower lows. Both indicies made lower lows the first week in 2008 for a confirmed bear market trend change. There was an important negative divergence that occcured in the transports at the October highs, which was a warning sign, but the confirmation of the Bear using Dow Theory did not occur until January 2008

Email sent Jan 14, 2008

Subject:Tuesday morning relevance

"Dow Theory says end to bull market! Confirmation by the Industrials occured last week for the first time since the bear market of 2002."