U.S. IN A BEAR MARKET ACCORDING TO CHARLES DOW

Recalling the relevant tenets of the Dow Theory which qualifies the U.S. stock market as being in the early stage of a bear market.

• The averages must confirm each other, in particular, the Dow Jones Industrial (DJI) and the Dow Jones Transport (DJT) averages. From Nov2007 to the present, both averages issued lower highs and lower lows, a typical early sign of a downtrend.
• Volume must confirm the trend. During the last 2 troughs, volume is relatively higher than the prior peak.
• A trend is assumed to be in effect until it gives definite signals that it has reversed. The recent lower highs and lower lows broke the 3 year uptrend line and has ushered in a new trend.

Although modern technicians have devised more sophisticated methods of determining trend direction and reversals, it is worthwhile to note that technical analysis has its roots grounded on the theories first proposed by Charles Dow around 100 years ago.