We had another strange day today. Once again the market had wild swings early on but this day was really marked by the relative weakness of the Nasdaq. It was like a tug-o-war all day between the Nasdaq and the Dow. So the Nasdaq lost a bit of its relative strength today by playing catch up (catch down?) with the S&P 500. It was about 1% weaker than the S&P today but both indices broke their March trendlines today. That's not a huge deal though, I'm more concerned with the 50-day moving averages on those indices and the October low on the Russell 2000.
The Russell is now clearly below its 50 DMA so I'm downgrading the intermediate trend again
| Trend | Nasdaq | S&P 500 | Russell 2000 |
|---|---|---|---|
| Long-Term | Up | Up | Up |
| Intermediate | Up | Up | Down(-) |
| Short-term | Down | Down | Down |
(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend
*** I'm simply using the indices' relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.
Where to from here Mike?
I come and visit your site everyday. I know you have the trend table but what are your targets on s&p 500 etc.
Thanks.
Michael,
What you said about the DJT intrigued me, how is this index influencing the overall market - could you elaborate?
Jim,
It's Dow Theory. This is from http://www.money-zine.com/Investing/Stocks/Dow-Jones-Transportation/ :
"Ever since it was first introduced by Charles Dow; the Industrial Average has been used by various theorists in an attempt to predict movements in the stock market. One of these theories is called the Dow Theory.
The Dow Theory is supposedly based on the early writings of Charles Dow; however this is often disputed and interestingly the first book on the subject appeared in 1902 - the same year he died. The most common and simplified version of the theory goes something like this:
A rise in the Dow Jones Industrial Average must be "confirmed" by the Dow Jones Transportation Average in order for the rise in the market to be sustainable. This theory is based on the simple relationship that exists between "industrials" that make products and the "transportations" that ship the product. An easy to remember version is that one "makes" and the other "takes."
In reality the interaction is much more complex than it appears on the surface; however, many investors today still closely monitor the interaction of the industrial and transports. You'll often hear talk of the Dow Theory when the Industrials and Transports diverge - a situation that should raise a warning flag for stock market investors."
Thanks Mike.