On August 11th, as we were rebounding from the most recent correction, I posted the charts below to show what to look for regarding the development of a Dow Theory Bear Signal.
Fast forward one month and the two charts below show where we stand. The Industrials are playing games with us because they did reach a new intraday high, but not a new closing high. This is the same strange development that we saw in the Russell 2000 index at the beginning of June. The small-cap index set a new intraday high, and came within one point of a new closing high -- but failed to confirm highs in the S&P 500. Price action is never perfect, so it's difficult in my opinion to call this a clear non-confirmation, but who am I to argue with the creator of this theory, Charles Dow. Mr. Dow was adamant that it is closing prices ... Log in or subscribe to continue reading.