This could be the Dow’s secret indicator

This could be the Dow's secret indicator

There is an indicator that could help predict where the Dow Jones Industrial Average is headed next, says one well-respected analyst.

John Kosar, president and market technician at Asbury Research, says the world's largest retailer, Wal-Mart, is signaling the Dow's next direction.

Wal-Mart makes up 3.17% of the Dow; until recent changes, it was 3.75%. It may be a small part of that index, but it's a key player in the economy. Wal-Mart is the world's largest retailer and employer, as well as the planet's second largest corporation.

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The relationship between the Dow and Wal-Mart has been particularly strong since the start of this decade. Kosar has calculated a correlation coefficient of 0.88 between the Dow and Wal-Mart since the beginning of 2010. From the beginning of 2012, it has been 0.71 and since the start of this year, it's 0.80. The closer a correlation coefficient is to 1.0, the stronger the relationship between the two variables being measured.

But, here's where it gets interesting: The Dow is currently sitting near its 200-day moving average. However, Wal-Mart decisively broke below its 200-day moving average at the end of last month.

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Will Wal-Mart continue to head down or is do the charts show some support? And what can we expect from the Dow given Wal-Mart's charts?

Watch the interview with John Kosar to see his analysis of the charts for both Wal-Mart and the Dow and hear what he thinks is next for both.

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