Dow’s Lower Low Triggers Dow Theory Sell Signal

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The DJIA of the Dow Jones Industrial Average,
-1.88%
767-point tumble in Friday afternoon trade, to break out below the June 17 close (29,888.78), not only showed the bear market was alive and kicking, it also triggered a sell signal based on the age-old Dow theory of the market analysis. The Dow’s fresh low, coupled with a series of lower closing highs since the Dow’s Jan. 4 record of 36,799.65, confirms the Dow theory’s definition of a downtrend, an ongoing pattern of lower highs and lower lows. And since the Dow Jones Transportation Average DJT,
-2.41%
already closed on Sept. 16 below its June closing low, the Dow Industrials’ new low is completing a “sell” signal. And as MarketWatch contributor and founder of Hulbert Ratings LLC has written, the Dow theory, despite its age, has long beaten the broader stock market.

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