The Dow Jones Industrial Average fell below its November 20 closing low today and hitting a level it has not seen since October 2002. At the same time the Dow Jones Transportation Average also hit its lowest level since 2003. The significance of this concurrence, will put more downward pressure on the markets in the days ahead.
Dow Theory, which is one of the oldest technical market timing systems, dictates that this coincidence is a selling trigger. While the technicians that follow the theory do not always agree on how to interpret the charts, there are some general principles that have occurred.
- Both the Industrials and Transports have undergone a significant fall from their respective highs
- In the rallies after the November lows, neither index has been able to break through pre-rally highs
- Both indices have hit new lows