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

THE DOW REPORT
More Non-Confirmations

Today we will apply the Dow theory concept of non-confirmation to a few more sectors. Understand that non-confirmations are warnings, not timing tools. Non-confirmations can exist briefly while one average hesitates temporarily before confirming the move of the other average. Or, the non-confirmation can remain, in which case it will ultimately mark a turning point. Although the great Dow theorist Robert Rhea did not put specific time limits on confirmations, he did explain that more authority is given to confirmations that occur sooner rather than later.

In the chart below we have the Dow Jones Industrial Average in the upper window and the Dow Jones Financial Index in the lower window. The intermediate-term top in February 2004 was marked with a non-confirmation between these two averages. Also, the March 2005 top was marked by a non-confirmation. Both of these non-confirmations are marked in blue.



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In the next chart below we have the Industrials vs. the Banking Index and here too, the story is the same.



more...

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