Monday, September 08, 2008

Dow Theory Has Nothing To Do With Cycles or Foreign Markets

So says market commentator, Tim Woods in his editorial last Friday.

  • Back in 2006 and 2007 everywhere we turned we heard about China and their enormous consumption of commodities and why the Chinese were largely responsible for fueling the commodity boom. During this same time, we were seeing one of the longest extensions of the 4-year cycle in US stock market history. Then, between July and October of 2007 we began to see a Dow theory non-confirmation occur. By November this non-confirmation had evolved into a full blown orthodox Dow theory bearish trend change. I want to point out that Dow theory has nothing to do with cycles or the foreign markets, but that the Dow theory non-confirmation and trend change occurred in conjunction with the extended 4-year cycle as well as the top in the Chinese and other equity markets. In late 2007 commodities began yet another leg up that evolved into a parabolic advance into 2008. We are now on the right hand side of that parabolic commodity advance. This is also true in regard to the Chinese stock market as well.

Do read rest of his article Global Markets, Commodities, and the Economic Downturn