Indicators

Traditional Dow Theory

     TheDowTheory.com has remained true to Charles Dow's original theory and has continued to interpret it as we think Mr. Dow would have done, keeping it up to date into the 21st Century.  The record over the last 115 years has been outstanding.  The Dow Jones Industrial and Transportation continue to work in sync with each other as a barometer of business conditions.

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Dow Theory for the 21st Century

     Robert Rhea wrote in The Dow Theory over 8o years ago that “the usefulness of the Dow Theory improves with age.  Certainly a more comprehensive study of the subject is possible with a ... (longer-term) record ... while those who use it ... years from now will have a greater advantage than we now enjoy.”  And indeed we do have a great advantage, and here's how the advancements to the Dow Theory for the 21st Century have evolved...

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Capitulation Indicator

     This Indicator has a better record at identifying bear market lows than any of the seven well-known indicators studied; in fact, we've yet to find a better one!  There have been 15 times since my database began in 1953 that this indicator has signaled capitulation. It has averaged within 4.6% and 12 days before the bear market lows;  4 were on the actual low day, 3 were 1 day early and 1 was 2 days before the lows . (Only 5 times of the 15 capitulations was the low over 4% lower).

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Schannep Timing Indicator

     Over the years, I have observed that while no two Bull or Bear markets are ever exactly alike, there are certain ingredients that must be present for them to formA combination of factors must come together at the same time to form either a Bull or Bear market.  First, a momentum must begin upward in the case of a Bull market, or downward in the case of a Bear.  Whether that movement is "just a jiggle" or is of adequate strength to build into a genuine Bull or Bear market is the critical factor.  Variation away from an existing trend can be measured, and when it reaches a certain threshold, can be judged to be likely to continue.  In addition to momentum, the second ingredient is a monetary atmosphere conducive to fueling a Bull Market, or to contributing to a Bear market.  Fortunately, that also can be determined to be favorable or unfavorable, adding to or detracting from the likelihood of the momentum developing further into a Bull or Bear market.

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Composite Timing Indicator

     I have believed for many years that the Dow Theory and my Schannep Timing Indicator are the two premier stock market major trend timing indicators with documented and verified long term records which set the standard for market timing. At the same time I have been concerned that both are sometimes slow in determining a change in the market’s trend. Obviously, no indicator can pick market tops and bottoms precisely, and none have come closer on a consistent basis than these two, yet, there is always room for improvement.  By combining the two plus adding some other tried and true indicators, I believe that real synergism has been attained. Synergy: "The interaction of two or more agents or forces so that their combined effect is greater than the sum of their individual effects".

     We have a vast historical record of gains and losses for each indicator in our Results section of the website and invite you to take a look for yourself and see why we are the premier market timing newsletter.

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Latest News

Mark Hulbert of Marketwatch: The Transports have been the stronger of the two benchmarks, and it is widely considered to be a leading economic indicator.  Read the article HERE.

There has been renewed interest in the Dow Theory since Jack Schannep presented his research to the Market Technicians Association that showed Dow Theory produced an excess return of 1.5% per year (from 1953 thru 2011) versus a buy and hold strategy.  His presentation attracted a whole new generation of Dow Theory enthusiasts.   Read the article HERE.

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