This article appeared online at TheNewAmerican.com on Tuesday, April 10, 2018:
Investors who religiously follow Wall Street’s oldest, most successful market-timing tool, the Dow Theory, likely liquidated some, most, or perhaps all of their investments on Tuesday. They are already also likely regretting the move.
Strictly speaking, as The New American has noted in a series of three articles dating back to March 23, the theory tracks two primary indicators: the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Index (DJT). Investors following Charles Dow’s thinking (he never used his own theory to trade stocks) went on yellow alert following the market sell-off that began in late January. The market rebounded but never hit new highs. That put in place the floor — called “support” — for those two indexes. The theory states that if a subsequent sell-off takes those two indexes below the previous lows, investors should sell and wait for a better opportunity to buy back into the market.
For the record, the Dow pierced the floor several times but the Transportation Index — the Transports — didn’t, although it came close. Although The New American is not a market-timing newsletter, the remarkable bull market since the election of President Donald Trump has simply demanded that TNA track and follow it from a historical perspective.
The floor “support” for the Transports — based on its bounce back in February — is 10,136. A sell signal was generated on Monday when that index closed below it, at 10,119.
Those who sold any part of their stock holdings on Tuesday missed the rally on Tuesday that took the Dow to 24,408, a gain of 428 points (1.6 percent).
Is this a head fake? Raymond James’ chief investment strategist, Jeffery Saut, thinks so. In a note to his clients Saut explained why: