The Same Patterns Remain Even When the Market Index Changes
When the Dow was careening toward 5200 not too many weeks ago, a reporter from the Wall Street Journal called and asked what I thought. I replied that the Dow had simply retraced one-third of its prior advance, which is well within the confines of a secondary correction within a bull market. As it was, the low of the day was the end of the decline and the market promptly rebounded.
Apparently, though, the reporter was not impressed with my geometry that day, so he declined to use my information. However, the Dow Theory 1/3-2/3 concept, which I explained at some length just this past January in the AAII Journal, proved out once again.
The concept also played out with other averages, such as the Nasdaq composite. While the Dow may be perceived as stodgy and the Nasdaq as the up-and-comer, both markets move in trends, and similar trend analysis is applicable.
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