| Technical Analysis $TRAN $UTIL $INDU DOW In Pound |
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| Monday, February 19, 2007 |
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The first part of the update is about looking at the DOW and SP500 through the eyes of the POUND (As a follow-up to the new years update video)
Also looking at the $TRAN $UTIL and $INDU as they all made new all time highs (in $USD), the last time this happened was in 1998. So what happened to the DOW after it did that? Keep in mind that this voice update specifically talks about "the price" of the DOW and Transports (and in this case also the Utilities) that there is no such thing as "Subjective DOW Theory". The interpretation of DOW Theory is very straight forward. They confirm or they don’t. By making new all time highs it does confirm the bullish move until the day of the reversal. Versus chart patterns, Elliott wave and even some indicators and oscillators which are of the more "subjective" variety.
2/19/07 - Technical Analysis - $TRAN, $UTIL,$INDU,DOW as seen in Pound Sterling - Dow Theory
In this update, I will analyze the major indexes from another perspective. I will explain how the major US indexes are viewed in terms of Pound Sterling / British Pound. It is always good to analyze markets from a different point of view This is especially now, because the world is now a global economy. All the markets affect each other and are interconnected. Are the British / Europeans attracted to investing in our markets or not? Do they stand to make money by investing in our markets or not? Are there any incentives for them to get into our markets?
All foreigners see our markets differently because they are investing in US equities with their respective currencies. In order to trade US equities, they have to exchange their currencies into dollars before they invest. There has been less incentive to invest in US markets due to the decline in the dollar. Why would one exchange / trade a currency that is performing well such as the Pound Sterling, which is hitting all time highs, for a currency that is being devalued? That is not a sound investment strategy. Therefore, their view point is interesting because it tells us how they view our market. Are the US equities performing as well for them as they are for us? Is the recent performance in the Dow as compelling to a British or European investor as it to an American? Let us look at the charts and find out.
If a British investor or European investor were to have bought into the $INDU or $SPX last spring (2006), they would not have made any money yet. From their point of view the DOW has not been as compelling an investment as it is for Americans who trade in Dollars. The $ DOW/$INDU have only been making new highs in U.S. dollars, until recently. This is due to the decline in the dollar. The $INDU and $SPX, are not making new highs in Sterling or Euros. As a British or European investor, you would just now, as of February '07, be breaking even. The investing picture is just now, looking more inviting from a foreign standpoint, as it is now breaking out to new 52 week highs in their currencies. It appears from the charts of the $INDU and $SPX, that the Pound Sterling may drop. A drop in the Pound Sterling or Euro would have to occur for the Dow/ $SPX to outperform their currencies. An alternative scenario that could play out would be one where the DOW continues higher without a drop in their currencies. In this case, the $INDU rallies and consequently outperforms their currencies percentage wise. From a UK and European standpoint that would make the thought of investing in US equities much more compelling and attractive. Furthermore, one could argue that the influx of foreign money into US equities would boost the markets higher.
I have mentioned this significant fact in the trading room. Therefore, I want to bring it to your attention. Last week, the $INDU, $TRANS & $UTIL made all time highs concurrently on the same day! Mark Anderson sent me the information showing me that this has not occurred since 1998. Thanks Mark! As far as Dow Theory is concerned, new highs in the $TRANS always confirm the highs in the $INDU. This is considered a bullish confirmation. Highs in one, cannot happen without highs occurring in the other. Otherwise it would be a false signal, one of non -confirmation. The transports confirm or they don't. It is Black or white. There is no subjectivity according to Dow Theory. All three indexes making new highs simultaneously on the same day is even more bullish according to Dow Theory. What happened the last time this occurred in 1998? After the 3 indexes made highs concurrently the Dow dropped sharply only to reverse and resume its bullish trend. The NASDAQ also went from 1300's in October all the way to 5000 in 2000. Lets look at the charts. (Scroll all the way down to look at the charts. the last chart.)
$INDU:$XBD - Dow Jones Industrial Average in Pound Sterling - Weekly Chart- Ascending Triangle Breakout
Key Technical Analysis Points to Remember: Bullish Continuation Ascending triangle Pattern Breakout of triangle - Price trading above exponential moving averages (EMA's) - EMA's trading in a bullish fan. All of the indicators and oscillators have bottomed and are in a 123 bullish trend reversal and are moving up along with price and showing bullish divergence.
$SPX:$XBD - S&P 500 Index in Pound Sterling - Weekly Chart- Ascending Triangle Key Technical Analysis Points to Remember: Bullish Continuation Ascending triangle Pattern - Has not broken out of the triangle yet. Price trading above exponential moving averages (EMA's) -- EMA's trading in a bullish fan. All of the indicators and oscillators have bottomed and are in a 123 bullish trend reversal and are moving up along with price and showing bullish divergence.
$INDU-- Dow Jones Industrial Average Highs of 1998 chart As I have already stated, the last time the $INDU and the $TRANS and the $UTIL made new highs simultaneously was in April of 1998. When you look at the chart, you can see that the $INDU began to top in April. It stalled prior to putting in a high at 9412.60 in July. Then you witness a sharp drop below the 13 EMA, represented by a massive (candle) stick down This is followed by a low that is placed in August at 7379.70. Notice how this low is right above the 34 EMA, which acts as magnet for price drops on pullbacks. The drop also occurred on light volume, which is a bullish confirmation signal. Then in September 1998 the $INDU resumed it's prior bullish upward trend. The sharp drop that occurred during the summer months is a sign of classic bull market action. Bull markets try to leave as many people behind as possible, by shaking out the participants. That year the lead to one of the strongest bull markets in US history.
Edited by :Andrea Victoria Friend aka Daisy
Editorial Assistant for Trending123.com
daisy@trending123.com
DOW IN POUND
SP500 IN POUND
DOW OVER THE PAST 2 1/2 YEARS
$TRAN OVER THE PAST 2 1/2 YEARS
$UTIL OVER THE PAST 2 1/2 YEARS
THE LAST TIME THIS HAPPENED WAS IN THE SPRING OF 1998 WHEN THEY ALL MADE HIGHS TOGETHER NOW IT WASN'T PRETTY 2 MONTHS LATER BUT THE REBOUND WAS VERY FAST AND THEN THE NASDAQ BUBBLE WAS BORN.
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