Cancelling Dow Theory Sell Even As Volume Declines

  • Jason Goepfert

    Jason Goepfert

    Published: 2018-04-19 at 13:58:46 CDT

This is an abridged version of our Daily Report.

Cancelling the Dow Theory sell signal

After the Dow Industrials and Transports fell into a Dow Theory sell signal, Transports have caught fire. They just hit a 50-day high, which technically doesn’t cancel a sell signal but it might as well.

Forward returns in both indexes were very good when one of them rebounded so much so quickly after a sell signal.

A low volume rebound

As the rally in stocks progresses, volume has been tepid compared to when stocks were dropping.

That’s typical for how declines and rebounds work, and not a sign of a “low grade” rally. Future returns were about equal after high-volume rallies vs low-volume ones.

Negative pattern

Major index funds like SPY and IWM carved out a short-term negative pattern on Wednesday by gapping up then weakening while forming a tight intraday range.

Oil risk rises

The risk level for crude oil has hit 8 again, an area that suggests high risk. According to the Backtest Engine, when the reading was 8 or higher, over the next month, oil rallied 42% of the time.

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The post titled Cancelling Dow Theory Sell Even As Volume Declines was originally published as on on 2018-04-19.

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