Dow Theory confirming bullish move?

S&P managed to close higher for the year today and in doing so, also closed above it's 200MA, finding itself in a territory it has not been able to maintain for more than a few days in the past 6 months. Will it continue to climb higher from here? It's sometimes risky to read too much into movement of the indices this time of the year, given that volume typically is below average, but from a classical TA point of view, there are some interesting observations to note that make set of bullish arguments.

• Old school technicians will point out that the Dow Theory is confirm this move, with both the transports and Dow Industrials making higher highs.
• Bull flags are popping up on may chart indices
• Dow and S&P are showing inverse H&S breakout setup
• More and more stocks are making new 52 wk highs, also serving to confirm this move and thus offering no divergence warning.
• The up volume vs down volume Tuesday was riiiiidiculous! I am trying to get my old feed for a/d and u/d so i can run some tests, but with that kind of lopsidedness after a pretty decent sell off the previous days, in my opinion, are smart buyers. (Btw, for get what the head lines state, Tuesday's rally was purely bond market related...in particular, Spanish bond action was well received, easing concerns over the EU debacle).
• And of course the S&P has managed to close above its 200MA today

Merry Christmas. Easing back in...after being away for some time (conflict of interest removed :))

Small Fish, Big Problems....

"We are experiencing technical difficulties..."

Unfortuantely, this past weekend, i began receiving RAID failure errors on my system that is home to most of my software. I was able to get her back up, but unfortunately she does not say up long enough to do much. I have since ordered a new system. I expect it to be here within a week. Hopefully i'll be back up shortly.

Large DJT Declines In An Uptrend = ST Bullish

The Dow Jones Transportation Index has been been lagging the broader market significantly recently. On Friday, it dropped 3.4%, it's largest decline in two months. Since 1990, when the DJT has declined more than 3% while the S&P is in an intermediate term uptrend (defined as 50MA > 200MA), it has paid to buy the S&P. There have been 32 such cases. In 28 cases (or 87.5%), the S&P was trading higher within 3 days.

(Note: column '3Day+' displays the number of days it took the S&P to close higher within the next 3 days. a value of 0 indicates the market did not close higher within 3 days)

Ticker	Date/Time	Close	3Day+	%Chg N1	%Chg N2	%Chg N3
SP500	10/23/2009	1,079.60	0.00	0.00	0.00	0.00
SP500	8/17/2009	979.73	1.00	1.01	1.71	2.82
SP500	7/7/2009	881.03	2.00	-0.17	0.19	-0.22
SP500	7/2/2009	896.42	1.00	0.26	-1.72	-1.88
SP500	12/11/2007	1,477.65	1.00	0.61	0.73	-0.66
SP500	11/7/2007	1,475.62	0.00	-0.06	-1.49	-2.47
SP500	8/15/2007	1,406.70	1.00	0.32	2.79	2.76
SP500	8/14/2007	1,426.54	3.00	-1.39	-1.07	1.36
SP500	8/3/2007	1,433.06	1.00	2.42	3.05	4.50
SP500	2/27/2007	1,399.04	1.00	0.56	0.30	-0.85
SP500	6/23/2005	1,200.73	3.00	-0.76	-0.84	0.07
SP500	4/14/2005	1,162.05	0.00	-1.67	-1.38	-0.80
SP500	4/8/2005	1,181.20	1.00	0.00	0.56	-0.63
SP500	8/23/2000	1,505.97	1.00	0.16	0.03	0.54
SP500	7/19/2000	1,481.96	1.00	0.92	-0.12	-1.19
SP500	5/25/2000	1,381.52	2.00	-0.25	2.96	2.83
SP500	4/14/2000	1,356.56	1.00	3.31	6.27	5.23
SP500	3/7/2000	1,355.62	1.00	0.82	3.40	2.91
SP500	11/17/1999	1,410.71	1.00	1.01	0.80	0.73
SP500	9/16/1999	1,318.48	1.00	1.28	1.29	-0.83
SP500	8/27/1998	1,042.59	0.00	-1.48	-8.18	-4.64
SP500	8/4/1998	1,072.12	1.00	0.87	1.63	1.62
SP500	4/27/1998	1,086.54	2.00	-0.13	0.74	2.32
SP500	10/27/1997	876.99	1.00	5.12	4.81	3.04
SP500	7/15/1996	629.80	2.00	-0.23	0.68	2.18
SP500	2/16/1993	433.91	3.00	-0.14	-0.46	0.07
SP500	4/7/1992	398.06	2.00	-0.89	0.65	1.57
SP500	11/15/1991	382.62	1.00	0.68	-0.84	-1.07
SP500	8/19/1991	376.47	1.00	0.79	3.75	3.95
SP500	8/23/1990	307.06	1.00	1.45	4.68	4.65
SP500	8/6/1990	334.43	1.00	0.12	1.17	1.65
SP500	8/3/1990	344.86	0.00	-3.02	-2.91	-1.89
SP500	1/30/1990	322.98	1.00	1.89	1.80	2.46

Relatively Large Range Days In An Uptrend...

Over the past three days, the S&P 500 has traded in a range that exceeded 1.8% of it's previous day's close. Looking back for similar instances in an intermediate term up trend (50MA > 200MA), we find 16 occurrences. in 13 cases (or 81.25%), the S&P was trading higher the very next day. That is significantly higher than the 52% odds of higher random next day close.

It is also interesting to note from the table below that om 14 of the 16 cases (87.5%) the market has generally traded significantly higher 40 trading days out (2 months). Of course, as can be seen by observing the dates, the bulking of these signals occurred during the dot net bubble.

Ticker	Date/Time	Close	Day+	%Chg N1	%Chg N40
SP500	10/23/2009	1,079.60	0.00	0.00	0.00
SP500	8/16/2007	1,411.27	1.00	2.46	10.67
SP500	8/7/2007	1,476.71	1.00	1.41	4.26
SP500	10/26/2000	1,364.44	1.00	1.11	-4.29
SP500	10/19/2000	1,388.76	1.00	0.59	-5.52
SP500	10/13/2000	1,374.17	1.00	0.03	0.44
SP500	5/23/2000	1,373.86	1.00	1.83	8.86
SP500	5/11/2000	1,407.81	1.00	0.93	4.82
SP500	4/14/2000	1,356.56	1.00	3.31	8.32
SP500	3/15/2000	1,392.14	1.00	4.76	1.13
SP500	3/9/2000	1,401.69	0.00	-0.47	2.21
SP500	2/23/2000	1,360.69	0.00	-0.53	4.91
SP500	1/31/2000	1,394.46	1.00	1.06	8.12
SP500	1/5/2000	1,402.11	1.00	0.10	0.50
SP500	10/21/1999	1,283.61	1.00	1.41	10.71
SP500	5/26/1999	1,304.76	0.00	-1.79	4.00
SP500	1/14/1999	1,212.19	1.00	2.56	7.84

USD Lower Lows Signals S&P Short Term Buy

The two buy signals discussed here and here have been fulfilled successfully with today's higher close.

Looking at the chart of the US dollar(on a closing basis) from the 2007 to present shows that the S&P and the dollar have been moving inversely in what appears to be lock steps. This is interesting to me because it was 2007 where we topped and eventually began a decline that would lead us into a recession. Since 2007, in a trending market (defined by the S&P 50 MA trading above the 200MA), when the dollar has made a new 40 day low, but the S&P did not make a 40 day high , the S&P typically goes on to make a higher high within 3 days .

• There have been 49 prior instances since 2007. In 44 cases (or 89.8%) , the market went on to make a higher high within 3 days.
• In 41 cases (83.7%) of the times, the market closed higher within two days.

(Note: column '3Day+' displays the number of days it took the S&P to close higher within the next 3 days. a value of 0 indicates the market did not close higher within 3 days)

Ticker	Date/Time	3Day+	%Chg N1	%Chg N2	%Chg N3
SP500	10/22/2009	0.00	0.00	0.00	0.00
SP500	10/21/2009	1.00	1.06	1.06	1.06
SP500	10/13/2009	1.00	1.75	2.18	1.35
SP500	10/8/2009	1.00	0.56	1.01	0.72
SP500	9/17/2009	1.00	0.26	-0.08	0.58
SP500	9/11/2009	1.00	0.63	0.95	2.50
SP500	9/8/2009	1.00	0.78	1.83	1.69
SP500	8/5/2009	2.00	-0.56	0.77	0.44
SP500	11/26/2007	1.00	1.49	4.39	4.44
SP500	11/23/2007	3.00	-2.32	-0.87	1.97
SP500	11/21/2007	1.00	1.69	-0.67	0.81
SP500	11/20/2007	2.00	-1.59	0.07	-2.26
SP500	11/9/2007	2.00	-1.00	1.88	1.16
SP500	11/8/2007	3.00	-1.43	-2.41	0.43
SP500	11/7/2007	0.00	-0.06	-1.49	-2.47
SP500	11/6/2007	0.00	-2.94	-2.99	-4.38
SP500	11/2/2007	2.00	-0.50	0.70	-2.25
SP500	10/31/2007	0.00	-2.64	-2.56	-3.05
SP500	10/30/2007	1.00	1.20	-1.47	-1.40
SP500	10/29/2007	2.00	-0.65	0.55	-2.11
SP500	10/26/2007	1.00	0.37	-0.28	0.92
SP500	10/25/2007	1.00	1.38	1.76	1.10
SP500	10/19/2007	1.00	0.38	1.26	1.02
SP500	10/18/2007	0.00	-2.56	-2.19	-1.33
SP500	9/28/2007	1.00	1.33	1.30	0.84
SP500	9/25/2007	1.00	0.54	0.93	0.63
SP500	9/21/2007	0.00	-0.53	-0.56	-0.02
SP500	9/20/2007	1.00	0.46	-0.07	-0.10
SP500	9/12/2007	1.00	0.84	0.86	0.35
SP500	9/11/2007	1.00	0.00	0.85	0.87
SP500	9/10/2007	1.00	1.36	1.37	2.22
SP500	9/7/2007	2.00	-0.13	1.23	1.24
SP500	7/24/2007	1.00	0.47	-1.88	-3.45
SP500	7/20/2007	1.00	0.49	-1.50	-1.04
SP500	7/18/2007	1.00	0.45	-0.78	-0.30
SP500	7/16/2007	3.00	-0.01	-0.22	0.23
SP500	7/11/2007	1.00	1.91	2.22	2.03
SP500	7/10/2007	1.00	0.57	2.49	2.81
SP500	7/2/2007	1.00	0.36	0.39	0.72
SP500	4/30/2007	1.00	0.27	0.91	1.35
SP500	4/24/2007	1.00	1.01	0.93	0.92
SP500	4/19/2007	1.00	0.93	0.69	0.66
SP500	4/13/2007	1.00	1.07	1.28	1.35
SP500	4/12/2007	1.00	0.35	1.42	1.64
SP500	4/11/2007	1.00	0.62	0.97	2.05
SP500	4/5/2007	1.00	0.06	0.32	-0.34
SP500	3/21/2007	2.00	-0.03	0.07	0.17
SP500	3/20/2007	1.00	1.71	1.67	1.78
SP500	3/16/2007	1.00	1.09	1.73	3.47
SP500	2/27/2007	1.00	0.56	0.30	-0.85

Using Immediate DJT Confirmation of New Dow Highs as a Short Term Buy

There are two interesting observations related to Dow new highs that are immediately followed by Dow Jones Transportation Index new highs. One pertains to the longer term new high (1 year), and the other more interesting observation is using a shorter period new high.

Yesterday the Dow made a 1 year closing high. Today, while the Dow Jones Transportation Index did not make it's one year high as yet, it did make a 200 day high (241 to be exact). Since 1929, this pattern has occurred only 20 times, with the Dow trading up 19 times within 3 days (18 of those occurred within 2 days).

Relaxing the critierias a little, we find that looking for DJT confirmation over a short period provides similarly impressive odds. When the Dow has made a new 40 day high, followed immediately the next day by the DJT printing a new 40 day high as well, it has often led to a higher high in the Dow within the next 1 to 3 days. There have been 46 similar occurrences since 1929. In 42 cases (or 91.3%), the Dow was trading higher within 3 days. In 38 cases (or 82.6% of the time) the Dow was trading higher within 2 days.

Ticker	Date/Time	Close	3Day+	%Chg N1	%Chg N2	%Chg N3
DJI	10/20/2009	10,041.48	0.00	0.00	0.00	0.00
DJI	4/30/2009	8,168.12	1.00	0.54	3.17	2.97
DJI	5/31/2007	13,627.64	1.00	0.30	0.36	-0.24
DJI	5/3/2006	11,400.28	1.00	0.34	1.56	1.62
DJI	4/24/2006	11,336.32	2.00	-0.47	0.16	0.41
DJI	4/3/1998	8,983.41	1.00	0.55	-0.30	-1.02
DJI	11/18/1996	6,346.91	1.00	0.80	1.31	1.13
DJI	10/15/1996	6,004.78	1.00	0.27	0.91	1.49
DJI	11/6/1995	4,814.01	2.00	-0.35	0.80	1.04
DJI	1/6/1992	3,200.13	1.00	0.15	0.12	0.29
DJI	9/5/1989	2,744.68	0.00	-0.91	-1.38	-1.28
DJI	7/28/1989	2,635.24	1.00	0.96	0.22	0.84
DJI	7/24/1989	2,584.98	2.00	-0.07	1.09	1.95
DJI	8/14/1987	2,685.43	1.00	0.56	-1.15	-0.73
DJI	8/7/1987	2,592.00	1.00	1.69	3.41	2.98
DJI	11/29/1985	1,472.13	3.00	-0.97	-0.89	0.83
DJI	1/11/1980	858.53	1.00	0.59	1.17	0.78
DJI	3/23/1979	859.75	2.00	-0.57	1.35	0.76
DJI	11/6/1974	669.12	1.00	0.42	-0.29	0.53
DJI	3/2/1972	933.77	1.00	0.93	1.76	1.40
DJI	1/10/1966	985.41	1.00	0.15	-0.15	0.03
DJI	9/21/1965	926.52	1.00	0.55	0.10	0.33
DJI	6/10/1960	654.88	1.00	0.15	0.00	-0.83
DJI	1/4/1960	679.06	1.00	0.94	0.52	-0.21
DJI	7/8/1958	480.00	3.00	-0.50	-0.21	0.59
DJI	6/5/1958	468.55	1.00	0.22	0.19	-0.08
DJI	4/25/1957	492.29	2.00	-0.16	0.34	0.42
DJI	4/4/1957	477.43	1.00	0.04	0.34	1.10
DJI	7/23/1956	513.61	2.00	-0.09	0.10	0.44
DJI	9/7/1955	475.20	3.00	-0.03	-0.13	0.28
DJI	7/7/1954	340.34	2.00	-0.16	0.27	0.17
DJI	5/19/1954	323.21	1.00	0.21	0.89	0.89
DJI	11/6/1953	278.83	0.00	-0.20	-1.05	-0.93
DJI	11/10/1952	273.47	0.00	-0.55	-0.34	-0.07
DJI	9/6/1951	272.28	1.00	0.59	1.09	0.59
DJI	10/17/1947	183.52	1.00	0.96	0.86	0.46
DJI	12/4/1945	193.06	1.00	0.01	0.40	0.53
DJI	10/9/1945	185.43	1.00	0.33	0.16	0.04
DJI	7/6/1944	149.07	1.00	0.19	0.96	0.74
DJI	9/29/1942	109.24	2.00	-0.12	0.38	1.46
DJI	7/14/1941	127.89	1.00	0.23	-0.05	-0.59
DJI	10/6/1938	148.10	1.00	0.21	0.98	0.88
DJI	1/19/1937	184.02	1.00	1.05	1.57	1.36
DJI	4/23/1935	110.06	2.00	-0.55	0.37	0.28
DJI	4/21/1933	69.78	1.00	5.60	3.83	4.10
DJI	2/14/1930	271.52	0.00	-0.36	-0.29	-1.13
DJI	8/26/1929	374.46	3.00	-0.18	-0.64	0.46