According to Dow Theory - Bear Market

[UrmaBlume]

According to basic Dow Theory we are in a Bear Market when the market makes lower highs and lower lows as demonstrated in the chart below.

While the theory is dated, current fundamentals, technicals and the increasing shorting by professionals all lend credence to the chart below which plainly says BEAR.

Can anyone make a technical or fundamental case that this is a bull market? The pros have been huge shorts for months, I agree.

[stephenNUTS]

I am not an historian,but the the accepted Dow Theory on the street for years was when both its Industrial and Transportation averages confirmed a Bull or Bear market with simultaneous moves in the direction of the market.

e.g In order for a confimred breakout in a new Bull market...the DJ Industrial average,and the Transportation average would have to BOTH make NEW HIGHS ,or in a new Bera market ...both make NEW LOWS as confirmation.

When a divergence occurred prior...it was considered an early "warning" sign that a reversal was in order.

IMO the signal is WAAAAY to antiquated,as well too late to rely on.By the time you waited for these signals... your portfolio would be crushed,...or you were chasing stocks at new highs ala the dot.com era.

I gather in its day before computer age,technical advances,etc...I guess it was followed?

There are many more reliable indicators and technical tools IMO now

SF [img]/images/graemlins/cool.gif[/img]

[Mr. Now]

There is a little more to Dow Theory than what you are representing here. You make no mention of confirmation for example.

The Dow price is currently moving in a consensus pivot zone- the area on and around the 200DMA and 200EMA. Price tension seeks resolution one way or the other.

One way to play this is tension (if it in fact exists) is to buy an out-of-the-money put below the current price, and an out-of-the money call above the current price.

[Jimbo]

Even though bull and bear markets are only perception and not reality I still like the topic. [img]/images/graemlins/smile.gif[/img] Pretty easy to tell, in a bull market stock prices are rising and people think they will continue to rise, in a bear market prices are falling and people feel they will continue to fall.

Most bull markets end in a recession or a severe crash of 20% or more of a decrease in the DOW market value. In times of low unemployment, low inflation and high production I would say that is a bull market.

I did get a smile from this though:

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The pros have been huge shorts for months, I agree.


[/ QUOTE ]

How did they not all go broke already? Didn't the DOW just set an all time high? After more thought maybe we will enter a bear market now. There is no one that went short with enough money left to cover their short positions, ergo no buyers so perhaps the stock prices have nowhere to go but down now.


Jimbo

[ArturiusX]

Wasn't there supposed to be an unprecedented bull markets dow theory in like March?

[kimchi]

I'm not sure why you posted that chart since from that timeframe it isn't clear which way the long term trend is going.

Whether or not we're in a bull or bear market depends upon the timeframe you are trading within. 3 different traders can take 3 different positions in 3 different timeframes and all can have an +EV strategy.

I think US investors over-focus on the US market. The US has been an appauling place to invest for foreigners for some years now (in comparison to other markets), especially with the weakening $US.

There's always a bull market somewhere or in something.

[ArturiusX]

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I think US investors over-focus on the US market. The US has been an appauling place to invest for foreigners for some years now (in comparison to other markets), especially with the weakening $US.

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You mean, the last few months, right? Last few years it hasn't been appalling.

[whyherro]

I can't imagine why we would need to classify the market as "Bull" or "Bear". Right now I can't imagine a bigger waste of time that plugging around with technical indicators.

We are on the brink of one of the most bizarre catastrophe's in recent memory. There is so much wreckage in the market right now (and possible still much more to come if the AAA tranches of these subprime securitizations actuall see impairment), the thing to do is sift around and find some good value.

[kimchi]

[ QUOTE ]
[ QUOTE ]

I think US investors over-focus on the US market. The US has been an appauling place to invest for foreigners for some years now ( in comparison to other markets ), especially with the weakening $US.

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You mean, the last few months, right? Last few years it hasn't been appalling.

[/ QUOTE ]

I mean over the last few years like I said, although appaulling is perhaps a bit harsh.

From a UK investor's perspective investing in major markets over the last 5 / 3 years:

USA 25% / 13%
Div bonds 26% / 9%
EU 126% / 67%
Japan 47% / 19%
Asia 162% / 99%
UK 91% / 50%

I imagine an Asian or European investor's figures would be along the same lines.

Investing in The US for foreigners over the last 5 years has been about taking on the risk without the return. As you can see, UK investors would have been better off leaving their money in high-interest savings accounts for 5 years than investing in the US despite recent market highs.

[Jimbo]

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Investing in The US for foreigners over the last 5 years has been about taking on the risk without the return. As you can see, UK investors would have been better off leaving their money in high-interest savings accounts for 5 years than investing in the US despite recent market highs.


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Yeah unless you happened to choose RIMM, GOOG or 100's of other stocks up from 100% to over 200% in the last 12 months. I think these generalizations are useless, after all, who has all their money in an index fund?

Jimbo