Category Archives: Dow Theory

Canadian Natural Resources Downside Targets

Below are the downside target for Canadian Natural Resources applying Dow Theory.

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Eli Lilly Downside Targets

The data covered is from February 8, 2018 to March 12, 2024.

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Twitter Tape: Raising Rates & QT

It was mentioned that in order to save the banking system, it is necessary to raise interest rates.

“Either they raise rates rapidly to save the bond market — or they lose the whole banking system. This will become obvious and existential (soon)”

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As we’ve noted in the past, the history of rising rates has been very good for markets under the right conditions.  However, the real question is, how is it beneficial to have Quantitative tightening (QT) or a balance sheet unwind?

One of our favorite examples is found in the unwind of the Reconstruction Finance Corporation.

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When the government gets out of the business of bailing out, the reverse of the “crowding out effect” takes place.  As noted by us:

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This is consistent with Dow Theory which says, when the government gets involved, they take away the risk portion of the market.  This could mean that the market crashes due to government meddling.  However, according to Dow Theory, it typically means that whatever the government got involved in will trade more like a government bond, flat to middling at best.

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This concept of trading like a bond can best be seen in nationalization of railroads during the period 1918-1921. This is also seen in the performance of Fannie Mae.

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In this case, the wild upside potential before government control in 2008 cannot and will not be seen after government control.  This in spite of the fact that from the 2009 lows, Fannie Mae has jumped +600%.  Again, contrast that with +6,000% move before 2005.

See also:

Balance Sheet Unwind and Dow Theory

On February 2, 2024, we said the following:

“True bears aren't impressed with this faux low in the Fed's Balance sheet. Neither are we. However, the lower it goes, the less government crowding out, the more markets boom.”

We also included the following posting to support our view:

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Dow: Spanish Flu vs. Covid-19

A comparison between the Dow Jones Industrial Average during the Spanish Flu Pandemic and the Covid-19 Pandemic. Continue reading

Dow Theory: Technical Take

We outline the current market conditions based on the technical attributes applying the work of Charles H. Dow.

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Sugar Downside Targets

Below is our downside targets for Sugar applying Dow’s Theory. Continue reading

DJIA Downside Targets

Below is our update on the Dow Jones Industrial Average applying Dow’s Theory. Continue reading

S&P 500 Downside Target Update

This posting will update the downside targets for the S&P 500 Index using Dow Theory.

Dow’s Theory: 2020-2023

Applying Dow Theory from the March 23, 2020 to March 17, 2023 period, the downside targets for the S&P 500 Index are: Continue reading

Russell 2000 Downside Target Update

Below is our update on the Russell 2000 Index applying Dow’s Theory. Continue reading

Important Lessons in Dow Theory

On August 10, 2022, we did a review of the market based on Dow Theory.  What follows are key lessons that will benefit you in your use and misapplication of Dow’s technical theory. Continue reading

What Burry Sees is Dow’s Theory

On January 23, 2023, Michael J. Burry posted a chart that we will deconstruct as it relates specifically to Dow Theory.

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Above is a charting of the S&P 500 from 2000 to 2003.  Burry has circled in red a potential scenario that is expected for the current market.  Although it seems straightforward, there are three potential outcomes that are addressed in Dow Theory.  Below we outline how to interpret the period in question. Continue reading

Dow Theory on Bitcoin

It isn’t a bull move without… Continue reading

1972-1975: Dow’s 50% Principle #DowsTheory

Below is a great charting of Dow’s 50% Principle from the work of Richard Russell. Continue reading

Russell 2000 Downside Targets & 50% Principle

Below are the downside targets for the Russell 2000 Index applying Dow’s Theory. Continue reading