Bear Market Rally Targets

Now that a bottom has been established, within the context of a bear market, we can calculate the bear market rally targets according to Dow Theory.  The upside targets are:
  • 11,527.87
  • 11.767.18
  • 12,073.49
  • 12,724.41
  • 12,807.51
A new bull market would be considered when the Dow Industrials and Dow Transports jointly exceed the prior highs set in May 2011, respectively.
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3 responses to “Bear Market Rally Targets

  1. Sorry for the question if I've missed something obvious from past posts – but how has a bottom been established already? Yesterday's action seemed like a big dead cat, and I'm not so sure we don't go below the 10,000 lvl…

  2. NLObserver Team

    Greetings James,

    You didn’t miss anything from the past at all. Sometimes our site is a flowing stream of consciousness.

    At the time of any reversal of the downtrend on a closing basis, we must assess the upside prospects for a bear market rally. Naturally, we did not know that today would be a down day. However, August 9th will remain the pivot for the reversal as long as the Dow Jones Industrial Average remains above the low of that day.

    We will continually go through the same process of taking any day that closes up after new lows have been “established” and estimating the Dow Theory bear market rally targets.

    Although Richard Russell follows the interpretations of Robert Rhea by considering only the closing price of the Dow Jones Industrials and the Dow Jones Transportation Averages, we believe that the intraday lows and highs reflect the extremes of emotion in the market. On this subject, according to George W. Bishop, Charles H. Dow had a contrasting view than Robert Rhea in the following thought:

    “Dow believed that the stock market discounted future events. He noted that stocks ran to extremes and at times discounted shadows as wells as substance. Hamilton believed that the stock market, and the Dow-Jones industrial and railroad averages, did the same. Rhea believed that the “daily closing prices” of the Dow-Jones averages discounted coming events.”

    Bishop, George W.. Charles H. Dow and the Dow Theory. Appleton-Century-Crofts. 1960. Page 234.

    We’re firm believers in reviewing the “shadows” provided in the intraday movements in order to gain clues as to what the market might be suggesting. The August 9, 2011 intraday low is the bottom…for now.

  3. Makes sense, thank you for explaining!