Reply #1: WrapUp by Tim W. Wood [View All]

THE DOW REPORT
Did Santa Come Early?

The Santa Claus rally began out of the October intermediate term lows and many of the indexes have formed non-confirmations with this latest advance. Those familiar with Dow theory know that it is non-confirmations between the Industrials and the Transports that are among the basic principles of Dow theory and no other averages are considered. The Primary Dow theory non-confirmation extending back to 1999, as marked in red on the chart below, still exists today. The Secondary Trend, which turned up in July, remains bullish. However, the Secondary non-confirmation, as noted in blue below, also remains intact. Therefore, at this time, we have two non-confirmations, at two different levels, still in place today. According to Robert Rhea, when the averages are not in agreement, they are shouting “be careful.”



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Confirmations and non-confirmations between the Industrials and the Retailers is also important to watch. With us now in the Christmas shopping season, I have been reporting on this index and will continue to do so throughout the remainder of this year. As reported in previous reports and as shown in the chart below, non-confirmations between these indexes are also very important. Thus far, this shopping season has not been sufficient enough for the Retailers to better their summer highs. As a result, we still currently have an intermediate term non-confirmation in place between the Industrials and the Retailers. In the past such non-confirmations have resulted in declines of at least intermediate degree.

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