Jack Schannep is editor of TheDowTheory.com and author of “Dow Theory for the 21st Century: Technical Indicators for Improving Your Investment Results” (John Wiley & Sons, 2008).


Discussion

Jim Braun from CA posted over 2 years ago:

The excessive headline driven volatility that investors have endured over the last 3 years has diminished the predictive power of the Dow Theory in my view.

I do agree though, that buy and hold has not worked for several years.


Dave Kent from CO posted over 2 years ago:

Great discussion. Thanks.


Werner Emmerich from PA posted over 2 years ago:

If the Dow Theory is properly applied, even with such simple means as appropriate moving averages, it can greatly exceed a Buy & Hold approach.


Philip Faccenda from NJ posted over 2 years ago:

The corruption that nearly collapsed the world financial markets in 2008 has still not been called to account. The system within which any purported predictive theory operates will always be manipulated by that dark hand; thus, no prognosticating will ever be accurate...or reliable.


David Disick from NY posted over 2 years ago:

Have followed Richard Russell for years. Bought gold but still have not been able to benefit from stock market based on th Dow Thoery. Cashand Gold have been the bes position as Russell has said.


David Heffelfinger from PA posted over 2 years ago:

In the sophisticated computer driven market of today's world volatility reigns supreme. Too Big to Fail investment firms with computerized algorithms can cause market disruptions and massive moves that destroy the basis for any theory, but this is a good lesson in how the market should work if an equal playing field existed (and it may work well - but for small & micro cap stocks if such a tracking system exists for them) Since transportation stocks are less likely to be manipulated, they might be more important to follow than the industrial's. And , in today's world, the service & tech sectors play a much bigger role in our economy than in the past. Their relationships to the Dow must also be taken into consideration when investing wisely. It is a much more complicated environment today than in the 1900s when manufacturing ruled the marketplace alone.


Fernando Robles from FL posted over 2 years ago:

Are 19% and -16% the buy and sell signals, respectively?


Jack Schannep from AZ posted over 2 years ago:

I use +19% and -16% attained by both the DJIA and S&P500 as the minimum levels to qualify as a Bull or Bear market for a number of reasons. In the article I mentioned they are reciprocal numbers, unlike the +/-20% traditionally used. In addition, when markets rise +19% they have gone on 93% of the time to at lease a +29% gain (one-half have risen over +80%). Conversely, when markets lose -16% they have gone on 81% of the time to at least a -24% drop and been followed 77% of the time by recessions. Therefore, IF a Dow Theory signal has not been completed by the time these levels are reached, I use that as a 'stop-point' to complete the signal. This is explained more fully in the free area of my website www.thedowtheory.com
Best to All,
Jack Schannep


Edward Mueller from IL posted over 2 years ago:

Does anyone know what we are in now? Is the Dow theory saying buy, or sell?


Charles Rotblut from IL posted over 2 years ago:

Edward,

In Jack's latest newsletter, he still has a buy signal.

-Charles


John from IL posted over 2 years ago:

I was a little disappointed the article didn't discuss the interaction between the Dow Industrial and Dow Transport indexes, and what it means when they are converging and diverging. Anyone know of another article in AAII that might cover that? I've seen other authors mention that the interaction between the 2 indexes is a key market indicator.


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