It's official: it's a bull market... according to Dow Theory
And so today the Dow Transports confirmed the Dow Industrial by crossing above its previous main high. This means that according to Dow Theory, we are in a secondary bull market. (or also called cyclical bull market). Here, the Dow broke its previous high in June a few days ago...
And today the transports confirmed the Industrials by also closing above its previous highs:
But err... secondary, cyclical, wtf am I talking about...? According to DT there are primary (or secular) and secondary (or cyclical) trends. For example the bull market from 1982 until 2000 was a primary bull market trend and it had secondary bear markets/ corrections for example in 1987, 1991 and 1998, which never really broke the uptrend. However during the 1970s we had several secondary or cyclical bull and bear markets which each lasted about 1-2 years, all inside a primary or secular bear market.
Or the NYSE. Riding up the 20 dma, breaking through the 200 dma, then correction a bit to "catch new breadth".
Or let's have a look at the Nasdaq. Clearly broke above its previous high in June and look at the buying volume. 12 days without a pullback and it's increasing...
A look at the S&P 500, same picture break out and not only confirming the old red bullish reverse head and shoulders formation, but having built a new one, see the green letters. So the left shoulder is now from Nov to end of Dec, the head from Jamuary until June, and the right shoulder is from June to a few days ago. Neckline is around 945 (red dotted line and now support). Its new target is 1200 at minimum! Next resistance is at 1020 (black dotted line).
So we know have different signals that this is a bull market.
The first was of course the strong and constant run from the March lows to the June highs "riding on the 20 SMA". As you can see on the chart the indices spent most of the time above the 20 SMA. That indicates persistant buying.
Then of course we went through the 200 SMA. Normally. when an index is above the 200 SMA and stays there it indicates a bull market.
Then we had the so called "golden cross", where the 50 SMA crosses the 200 SMA.
And personally I thought the best signal was that the head and shoulders, a reversal formation, was negated.
And now we have Dow Theory confirming a bull market.
If it stampedes like a bull, if it mooohs like a bull, then, maybe it is a bull indeed... Here, a bunch of "short sellers", who were standing in the way of a bull stampede... Noone told them to do so, but hey...
Take this, short seller!
There you have it, shortie...!
There is however one negative thing (Ahhh, I knew it...) and that is that so called open gap in many indices like the SPX and the Nasdaq in mid July. These gaps usually must be "filled" or retestet. But not all indices gapped up, for example Dow and transports and NYSE didn't. So who knows, maybe that gap will be negated too...?
OK, so go out and ring those bells, shout it out from the towers all over the land: it's a bull market. :-)