Friday, April 18, 2008

Dow Theory Buy Signal

Market Watch also has an article on the Dow Theory which gave a buy signal today.

ANNANDALE, Va. (MarketWatch) -- The Dow Theory appears poised to go on a buy signal as of Friday's close.All that's needed for that to happen is for the Dow Jones Industrial Average to close above precisely 12,743.19. That certainly looks likely, since the Dow as of midday was some 125 points higher than that. The Dow Theory, for those who don't know, is the oldest market-timing system still in widespread use. Though its adherents do not always agree on all aspects of their interpretations, the theory's general outline is clear enough: A buy signal is generated when both the Dow industrials and the Dow Jones Transportation Average reach significant new highs, while a sell signal is triggered when both averages reach significant new lows.

I'm not sure how much relevance Dow Theory has today, but the sell signal it generated last November 23 didn't do much for investors except generate a tax bill. The sell signal was just about 1% higher than where we are now.

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