Only 12 more points on a closing basis (9053.64) and there will be no doubts about a Dow Theory buy signal according to the leading Dow Theorists. Richard Moroney, editor of Dow Theory Forecasts, had the Dow confirmation level at 8931.68, the November high, so that level was surpassed yesterday. Moroney told us in an email today, “In our view, yesterday’s close above 8931.68 in the Dow Industrials represented a bull-market confirmation. Both the Industrials and Transports have now closed above their post-October highs, meaning both averages are charting patterns of higher highs. The bull-market confirmation suggests that October 2002 will go down in history as the end of the bear market. While we would not be surprised by a 5% to 10% dip in the averages, we are advising subscribers to take advantage of pullbacks in quality stocks.” Martin Pring, whose study of Dow Theory we cited yesterday, told us he agrees with Moroney that the Dow Theory signal has been confirmed. Dow Theory Letters editor Richard Russell is holding out for a close above 9053.64, the August high. Our view? We think a cyclical bull market lasting another year or so is possible, with another cyclical bear likely late next year or in 2005. 8969-9000 and 8800 are support levels to watch (see first chart below). The S&P (second chart) has support at 978, 960-965 and 945-950, and resistance at 1000, 1020-1030 and 1056. The Nasdaq (third chart) has support at 1614-1620, 1600, 1548-1552 and 1540, and resistance at 1666-1719. A pullback that tests the recent Nasdaq and S&P breakouts (1540 and 945) would do much to refresh sentiment, and with deteriorating internals on the Nasdaq and a 14-day RSI reading of 70 on the Dow, that pullback could begin soon. The Dow had a six-day correction under similar circumstances in March.
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