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camistocks (< 20)

It's official: it's a bull market... according to Dow Theory

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July 23, 2009 – Comments (17)

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. :-)

17 Comments – Post Your Own

#1) On July 23, 2009 at 9:14 PM, madcowmonkey (< 20) wrote:

How in the hell is that guy in the last picture not making a painful look on his face! That has to be computer geeked!

That NADAQ chart on volume is really impressive! I closed some of the short etf's I had today on the idea this monster is going higher.

Great post with confirmation of the dow theory. Who knows on the gap, but there isn't too many times that a gap hasn't been filled.

Nice to see some type of humor on here, even if it is a bull poking some poor guy in the arse:) 

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#2) On July 23, 2009 at 9:34 PM, FOCKEWOLF (< 20) wrote:

I agree it`s a Bull all right, more like "Bullshit! I`m not buying. Untill oil prices rise, companies start making preal profits and the housing market really improves it`s not happening. I`m looking down the street but I don`t see any bull`s and I`m not getting horned, I`m just stepping on bullshit.

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#3) On July 23, 2009 at 9:39 PM, madcowmonkey (< 20) wrote:

Maybe you shouldn't be looking down the street and start looking where your stepping.

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#4) On July 23, 2009 at 9:40 PM, binve (< 20) wrote:

cami, LOL! awesome man :) I am not fully on board with the new bull market. I do think this correction will go higher. So I think higher prices until the fall, but I am still bearish. I am an odd duck :). But the pics (and the captions) were great!! :) Thanks man :)

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#5) On July 23, 2009 at 10:20 PM, portefeuille (99.60) wrote:

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Bond Risk Falls in Europe on CIT Rescue, Fed Strategy Optimism

July 21 (Bloomberg) -- The cost of protecting European corporate bonds from default fell to the lowest in 10 months after commercial lender CIT Group Inc. averted bankruptcy and the Federal Reserve outlined its plans to stem inflation.

...

 

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CDS report: Credit markets surge amid equity rally

Credit and equity markets enjoyed another strong session today, easily offsetting yesterday’s profit taking. The Markit iTraxx Europe index tightened well below 100bp, trading around 96bp. The Markit iTraxx HiVol index consolidated its position below 200bp at 186bp, while the Markit iTraxx Crossover breached the 650bp level. Both the FTSE and Dow have returned to 2008 year-end levels, and rising Treasury yields provided further evidence of rising risk appetite.

...

Newspaper publishers, hardly the darling of investors over the last few years, rallied strongly today after New York Times Co became the latest firm in the sector to beat expectations. Its profit of eight cents a share, excluding one-off items, confounded expectations of a four cents a share loss. Advertising revenue continues to fall, but stringent cost-cutting measures have maintained profitability. Credit investors have appreciated the firm’s debt reduction efforts, leading to considerable spread tightening in recent months. Gannett Co, which beat earnings expectations last week, tightened in tandem today.

...

 

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UPDATE: iTraxx Indexes Tighten After Strong Data, Earnings

LONDON (Dow Jones)--Spreads on European credit-derivative indexes tightened Thursday after positive U.K. retail sales figures and better-than-expected second quarter earnings from Credit Suisse Group.

Shortly after 1105 GMT, the Markit iTraxx Europe index of 125 investment-grade borrowers was quoted at 98.7/99.7 basis points, tighter compared with Wednesday's closing level of 101 basis points.

The tightening has taken the index below the psychologically important 100 basis-point level for the second time this week. The index also broke through that ...

 

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... and this is "where it comes from".

 

(from here)

 

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#6) On July 23, 2009 at 10:22 PM, portefeuille (99.60) wrote:

... so the spread for nytimes bonds has narrowed to ca. 400 bps, i.e. 4%.

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#7) On July 23, 2009 at 10:26 PM, portefeuille (99.60) wrote:

Das letzte Mal, daß ich in einer Stierkampfarena stand, war bei einem Héroes del Silencio Konzert in Málaga. Bedeutend ungefährlicher!

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#8) On July 24, 2009 at 11:24 AM, anchak (99.84) wrote:

Good post.....and I think due to this confirmation some money managers will be forced to buy.

However for full balanced view - Cami I will link two of your earlier excellent blogs - the timings are key here

FEB 10,2009:Dow Theory buy signal ahead? Deflation or reflation?

This blog was essentially on the point that Transports were a little divergent in the leg down till that time.

Analogy: GV had a comment till day before on the same point. While I said about 7 days back - that TRAN will make the high in a matter of days. We were both wrong looks like.

This of course is the key one:

February 25, 2009 :Dow Theory confirmation, what now?

And do we need to say what happened about 7 days after?

Cami....You obviously know that I did go partial long...and I have only 1 short SRS . But I am major cash. I think if the frenzy continues - I will continue to hit-and-run and do some plain vanilla index longs etc.

But I have my own theoretical timing line - and that is still standing - this is a bull no doubt ( 20%+ is , correct?) - but within a secular bear.

Be careful my friend, stay long, stay safe ! 

 

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#9) On July 24, 2009 at 7:58 PM, AWF (< 20) wrote:

Higher Highs on both the INDU and DJTA confirming this Bull move! Needless to say the S&P,INDU and DJTA are above their 52week MA--If -If -If these levels hold at the month end closing then the confirmation is solid.

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#10) On July 24, 2009 at 8:39 PM, camistocks (< 20) wrote:

madcow - he is a Spanish matador, a "true" man who knows no pain, no emotions... So no pain in the face (at least for now...) ;-)

I agree we are going higher, 1200 for the SPX, 11'000 for the DOW and 2400 for the Nasdaq...

 

FOCKE - oil already rose about 100% from the lows....

 

binve - I'm glad to have made you laugh despite us having a contrary opinion. ;-)

 

portefeuille - contracting credit spreads are never a bad thing, I would say...?

Ich war nie in einer Stierkampfarena. Aber für ein Konzert würde es mich reizen...

 

anchak - it always starts with a "short covering rally", that turns out to be a "bear market rally" and then turns into a cyclical bull market, and then may turn into a full primary bull market, that breaks the highs in 2007... ;-)

Thanks for your good wishes...

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#11) On July 24, 2009 at 8:54 PM, camistocks (< 20) wrote:

AWF - I wish I could be 100% safe with the Dow Theory confirmation, but I'm not... ;-) I think we will see new highs until months end into August. And since all the indicators I follow have turned bullish, I think, that Mr. Market will do his usual thing in fooling as many people as possible...

But the trend is your friend, and it's looking up....! (Or down...?) ;-)

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#12) On September 29, 2009 at 12:37 PM, portefeuille (99.60) wrote:

was gibt es neues, camistocks?

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#13) On January 06, 2010 at 9:16 PM, portefeuille (99.60) wrote:

yeaaayyyyyy, camistocks is back!

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#14) On January 06, 2010 at 9:24 PM, camistocks (< 20) wrote:

hey portefeuille! Ja ich habe eine Pause gemacht und auch keine blogs mehr gelesen. Aber wie heisst ein altes Steirisches Sprichwort: "I'll be back!"

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#15) On January 06, 2010 at 9:40 PM, portefeuille (99.60) wrote:

supi!

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#16) On January 07, 2010 at 1:29 AM, anchak (99.84) wrote:

You better be back man!

HNY 2010!

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#17) On January 07, 2010 at 1:21 PM, camistocks (< 20) wrote:

Hey anchak! I hope you have remained long all the way up since July...:-)

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