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Category Archives: Dow Theory
The Recession of 2014-2016
On January 15, 2016, we said the following in our conclusion to our Dow Theory assessment:
“What are we looking for from Dow Theory now? We’re hoping that the Dow Jones Industrial Average can decline below the August 2015 low to confirm what the other indexes have already done. Additionally, we’re looking for the INDPRO to continue its trend lower to confirm that we are in a recession and a bear market. We think that if we are in a recession, the NBER will label either the December 2014 or August 2015 peaks as the beginning of a recession in approximately six to nine months from now.”
On September 30, 2018, in a New York Times article titled “The Most Important Least-Noticed Economic Event of the Decade” said the following:
“Sometimes the most important economic events announce themselves with huge front-page headlines, stock market collapses and frantic intervention by government officials.
“Other times, a hard-to-explain confluence of forces has enormous economic implications, yet comes and goes without most people even being aware of it.
“In 2015 and 2016, the United States experienced the second type of event (Irwin, Neil. "The Invisible Recession of 2016." New York Times Sep 30 2018, Late Edition (East Coast) ed. ProQuest. 3 Apr. 2019 .).”
As time passed, and after not getting a recession call from the National Bureau of Economic Research, we rationalized away, or pushed back the expected date of a recession call. It was not until reading this article from the New York Times were we able to realize that our initial take was accurate and timely.
Posted in Dow Theory, recessions
Dow Theory: December 2018
Our May 10, 2018 posting says all that we need to say. At the time, we said the following: Continue reading
Posted in Dow Theory
Transaction Alert
The NLO team executed the following transaction(s): Continue reading
Dow Theory: September 2018
Ideally, the Dow Jones Industrial Average (DJIA) closes above the January 2018 peak today.
Dow Theory: August 2018
Review
On May 10, 2018, we said the following of the Dow Jones Industrial Average and Dow Jones Transportation Average:
“…we want to know whether these two indexes decline below the late March (Industrials) and early April (Transports) lows. A joint decline below these levels would be the strongest indications that a bear market is eminent.”
Since that time, neither index fell below the indicated low points.
Dow Theory: Where Are We Now?
In this posting we’ll outline the performance of the Dow Jones Industrial Average and the Dow Jones Transportation Average within the context of the Dow Theory. Additionally, we’ll see where we are in terms of the economy which Dow Theory is supposed to give some indication on.
Bitcoin Target Update
On April 2, 2018, when Bitcoin was trading at $7,049, we said the following:
“The $9,148.23 level is the point where we believe the price of Bitcoin could rise to before a retest of the $11,479.73 level, if remotely possible. Based on the recent volume characteristics, we think that the $9,148.23 is in the works.”
As of April 27, 2018, Bitcoin is priced at $9,278.22 and has achieved our target of $9,148.23 as outlined in Dow Theory.
The April 2, 2018 assessment came after our February 17, 2018 review when Bitcoin was trading at $11,092.15 and we said the following:
“…before a new high (substantially above the $19,343) is achieved, we expected a retest of the $6,914.26 level (or something close, like, $7,000-$7,200).”
On April 6, 2018, Bitcoin declined as low as $6,620.41. All of the assessments have been based on the work of Charles Dow’s Dow Theory and Edson Gould.
Below is the updated assessment of where Bitcoin is headed from here.
Posted in Bitcoin, Dow Theory, Edson Gould
Altria Review
On July 31, 2017 we did a technical review of Altria (MO) that covered the Coppock Curve, Dow Theory and the Spare/Tengler relative models. This posting is an update of that review.
Bitcoin: April 2018
On February 17, 2018, we said of Bitcoin:
“…before a new high (substantially above the $19,343) is achieved, we expected a retest of the $6,914.26 level (or something close, like, $7,000-$7,200).”
We will continue to revisit the parts where we got the analysis right because this is where Dow Theory was correctly interpreted. Below is the charting of the February 5, 2018 low and the subsequent rise and the retest of the low on April 1, 2018.
Posted in 50% principle, Bitcoin, Dow Theory
Bitcoin Upside Targets
Like Ethereum, Bitcoin is rebounding nicely from the February 5, 2018 low. Below are the upside targets for Bitcoin:
Posted in 50% principle, Bitcoin, Dow Theory, ethereum
Ethereum Upside Targets
As Ethereum recovers from the low set at $695.08 on February 5, 2018, the expected upside targets are as follows:
Posted in 50% principle, Dow Theory, ethereum
Duke Energy: Downside and Time Targets
We’re very fascinated by the recent price activity of Duke Energy (DUK) and have decided to outline our thoughts on the downside targets that may exist for the stock. Below we have applied Dow Theory and Gould’s Speed Resistance Lines for what we believe to be conservative estimates that may help investors avoid buying high, allow for buying low, or reduce loses.
Dow Theory says that investors should always refer back to the last time a given stock had performed the worst, on a fundamental basis, as the benchmark for estimating the prospects for going forward.
"The point of importance for those who deal in industrial stocks is whether the capitalization of the companies into which they propose to buy is moderate or excessive, when compared with the aggregate earnings of the various concerns forming the combination in a period of depression. It is probable that consolidated companies will be able to earn as much in the next period of low prices as the companies forming the combine were able to earn in the last one; hence the very foundation of investments in industrials should be knowledge of what these companies earned, say in 1893 to 1896, making, perhaps, reasonable allowances for economies under consolidation. Where the earnings so shown would have provided dividends for industrials now active, the fact must be regarded as a very strong point in favor of those stocks (George W. Bishop Jr., Charles H. Dow: Economist, Dow-Jones & Company,Princeton, 1967, page 11.)"
If price action is a forward reflection of company fundamentals and investor sentiment, then the period from the 2003 low is the best starting point for our review. The decline in DUK from the 2001 peak to the 2003 low was the worst decline in magnitude when the stock fell more than -70%. We’re not suggesting that DUK will fall by that much this time, instead, we’re watching for the intermediate stages that lead up to a possible –70% decline.
Posted in Dow Theory, DUK, Edson Gould, SRL, time target, worst benchmark
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Details of the Ideal Transaction
On January 12, 2016, we took a position in Helmerich & Payne (HP) at $47.41. At the time, HP was coming off of a high of $118.29.
According to Dow Theory, an investor should only expect one half of the previous move. With this in mind, we charted an upside target of approximately $79.16 as the likely point for selling the stock as outlined in our July 2, 2016 posting.
On January 13, 2017, we sold our holdings in HP at $78.31 for a gain of +74%. For reasons unknown, HP declined from $78.31 to $43.02 by September 1, 2017, a decline of –45%. An outline of the change from February 3, 2014 to January 12, 2018 is charted below.
The Rationale
Naturally, this is the most ideal transaction that we could engage in. Below we will lay out our observations on how we accomplished this task.
First and foremost, Helmerich & Payne is a high quality oil and gas driller that survived the crash that was experienced after the 1970’s. In our view, if a company can increase their dividend over many years and survive a period that put a lot of competitors out of business, then you’re dealing with a good management team. What follows are the details that we are looking at.
Posted in 50% principle, Dow Theory, Helmerich & Payne, HP, seeking fair profit
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