
Both the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) have broken their last secondary lows. This officially puts Dow Theory in a bear market by my count. So, what does this mean for trading and investing? First, what it doesn’t mean. It doesn’t mean you move all your money from long to short. Or from long to cash. The reason for this is that Dow Theory changes of long term trend often happen just as the market is ready to make its first counter move of the new trend. In this case, it means we’re likely due for a counter trend rally. Now, on to how I use Dow Theory as a part of my investing strategy. I use it as a part of the timing when rebalancing any hedges. Since we’re now in a bear market, I’m more likely to let the profits from the hedge run a little more than my “about 15%” rule. If we were in a confirmed Dow Theory bull market I’d be
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