Dow Theory Split Decision

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Dow Theory Split Decision
Richard Moroney, Dow Theory Forecasts 10.05.06, 5:40 PM ET

CHICAGO -
Benefiting from lower interest rates and oil prices, the Dow industrials have surged more than 1,100 points since July, reaching all-time highs and moving well above their May high. But the Dow transports have yet to confirm the move above the May highs, and confirmation is central to the Dow theory.

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As founding Dow Theorist William Hamilton said in 1928, “Half an indication is not necessarily better than no indication at all. The two averages must confirm each other.”

The last confirmed signal under the Dow theory was May’s reconfirmation of the primary bull market. The Dow transports reached a significant low in July, when they closed below the June low of 4441.32. But that low was not confirmed by the industrials, so May’s bull-market indication remained intact.

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