This is a most unusual situation. Here's the way I see it. A Dow Theory bear signal was given in May. The Averages then plunged to June lows, but instead of continuing down, the Averages rallied back towards their May highs. Part of the rallying back was due to action and rumors of further Fed stimulation.
Now comes the strange part. The economy sagged and unemployment deteriorated, just as if the Averages had continued down. Despite the resistance of the Dow and the Transports to further decline, the US economy remained on bearish-hold, just as though the bear signal in the Averages was continuing to exert its bearish pressure.
As I write, this leaves the stock market still within striking distance of its May highs, spurred on by traders who continue to hope for another round of Fed stimulant. Meanwhile, the stock market and the economy act in a state of suspended ... Log in or subscribe to continue reading.
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