Tuesday, January 8, 2008

Dow Theory Sell signal confirmed

I know most investors dismissed the Dow Theory sell signal when the market didn't follow through and bounced last month. Today the markets confirmed that sell signal again. Remember the average decline from the point where the signal was given is between 20 to 30%. Of the 30 Dow Theory sell signals in the last 110 years only three have resulted in no or minimal declines in the market. It's pretty hard to argue with an indicator that has been correct 90% of the time. Oh and by the way the COT has shown massive liquidation of longs over the last 3 months. The signs have been there it just depends on if you want to pay attention to them.