Future Retirement Success
  • Politics
  • Business
  • Investing
  • Stocks
  • Politics
  • Business
  • Investing
  • Stocks

Future Retirement Success

Stocks

New Dow Theory Confirmed Sell Signal

by October 1, 2022
October 1, 2022
New Dow Theory Confirmed Sell Signal

OK, so we know the market is going down. And, save for a mid-summer bear market rally, the S&P 500 and Nasdaq have been in fairly consistent downtrends.

Last week, I highlighted the extreme bearish readings in the AAII Survey (it’s worth noting that this week NAAIM Exposure Index also reached its lowest level since March 2020) and we’ve also covered the weakening breadth conditions. Today, I wanted to share the most recent check on the “confirmed bearish market” checklist. The New Dow Theory registered its first sell signal since June, confirming a broad market decline.

So what is the new Dow Theory?

It starts with Charles H. Dow, who truly laid the foundations for modern technical analysis. He pioneered the concept of market indexes and created tools and measures that have evolved into the practice of trend-following.

ChartCon 2022 is happening in just a week! This week, I chatted with Tom Bowley, Mary Ellen McGonagle and Leslie Jouflas about our Interactive Market Outlook Panel. We’ll be discussing the results of THIS SURVEY, so take a minute to add your voice to the discussion!

We have so many ideas and perspectives to share with you, and you don’t want to miss this rare opportunity to learn from some of the top names in technical analysis! Sign up for ChartCon today.

One of his core concepts was to measure the strength of the market by considering two groups of stocks: the Industrials (the producers of goods) and the Railroads (the distributors of goods). The idea was that if these two main parts of the economy were in good shape, then the market was strong, but if one side was trending higher while the other index did not confirm that trend, then something was broken.

The Railroad Index eventually became the Transportation Index, and that leads us to the chart of what we call Traditional Dow Theory.

In last weekend’s report to my premium subscribers, we talked about the Dow Theory sell signal, which was confirmed when both the Dow Industrials and Dow Transports made a new swing low. But while those indexes both made new lows last week (along with many individual stocks, I might add), the S&P 500 and Nasdaq Composite had not done so. This brings up to the New Dow Theory, which I would suggest is a modernized version of what Charles Dow was really trying to capture.

Here we are reviewing the patterns for the “old economy” stocks (S&P 500) vs. the “new economy” stocks (Nasdaq Composite). If both of these confirm new highs, as they did in April 2021, then the market uptrend is confirmed. If one makes a new high but the other does not (see January 2022!) then it is considered a non-confirmation and a potential reversal.

What can this chart tell us of the current market environment? Well, as of this Friday’s close, both the S&P 500 and the Nasdaq have made a new swing low, as they both undercut their low from June 2022. That means we now have a New Dow Theory sell signal.

But didn’t we know the market was already going down? Absolutely. And that means you will most likely have continued sell signals, as we did in January and May and June. Every time these indexes both make a new low, it confirms the direction of the overall market trend.

What would a market bottom likely look like, using this chart? Ideally, there would be a bearish non-confirmation at the bottom, meaning one of the indexes makes a new low while the other makes a higher low. It does not always happen, to be certain, but when it does occur, it tends to be a great signal of a potential inflection point.

The most basic way to use this indicator is to look for them both to make a new swing high. Which they did back in August, just before both indexes found resistance at the 200-day moving average. We highlighted this signal back in August, leading us to very much consider the prospects of higher prices ahead.

In the end, the market trend was once again defined this week, as a new sell signal indicated that, for the foreseeable future, the trend is down. Which means that, until we get a valid buy signal, the path of least resistance remains down.

RR#6,

Dave

P.S. Ready to upgrade your investment process? Check out my YouTube channel!

David Keller, CMT

Chief Market Strategist

StockCharts.com

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

The author does not have a position in mentioned securities at the time of publication.   Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

0
FacebookTwitterGoogle +Pinterest
previous post
MUST-SEE VIDEO: “Maybe God Is Tapping Me On The Shoulder Saying, ‘This Is What I Freed You Up For.’” – Trump-Endorsed Kari Lake Tells Her Brave And inspiring Story
next post
Arizona Has A SOROS-BACKED Democrat Running For District Attorney In Maricopa County

You may also like

The Halftime Show: Deciphering the Fed After Jackson...

August 29, 2023

A Practical Options Strategy to Trade Home Depot

June 4, 2024

Countertrend Rally in the Works for SPX? What...

October 30, 2023

Finance, Family, Society: Finding a Good Balance

March 8, 2023

Silver’s Surge is No Fluke—Here’s the Strange Ratio...

June 6, 2025

From Tariffs to Tech: Where Smart Money’s Moving...

June 6, 2025

HY Bond A-D Line Showing Liquidity Problem

February 17, 2023

Learn From Dave’s Trades

August 10, 2022

PRO TIPS on the NEW StockCharts Release!

February 6, 2024

US Stocks May Be Trending Higher: Check Out...

April 6, 2023

    Get free access to all of the retirement secrets and income strategies from our experts! or Join The Exclusive Subscription Today And Get the Premium Articles Acess for Free

    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Trump warns of ‘serious consequences’ if Elon Musk funds Democrats

      June 7, 2025
    • Musk jokes about reconsidering stance on Big Beautiful Bill after Schiff’s praise

      June 7, 2025
    • Musk deletes explosive posts about Trump and Epstein files

      June 7, 2025
    • House witness flips script on Dem who ambushed him during hearing with unearthed tweet: ‘Iceberg is ahead’

      June 7, 2025
    • Call with China’s Xi, and Trump-Musk exchange fueled barbs during 20th week in office

      June 7, 2025
    • Trump’s conservative allies warn Congress faces critical ‘test’ with $9.4B spending cut proposal

      June 7, 2025

    Categories

    • Business (8,152)
    • Investing (2,019)
    • Politics (15,568)
    • Stocks (3,136)
    • About us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: futureretirementsuccess.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 futureretirementsuccess.com | All Rights Reserved