FTSE 100 down again but Dow sails to new high
Dow Theory
Dow Theory is a theory of market behavior formulated in a series of editorials in the Wall Street Journal by its founder and first editor Charles Dow (1851-1920). After Dow's death, W. Peter Hamilton succeed him as editor of the WSJ, and until his death in 1029 he continued writing editorials using the Dow Theory tenets.
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The Dow Theory and its Basic Tenets
Discover how old fashioned technical analysis can contribute to your analysis and trading. We will look to the Dow Jones averages and interpret them accordingly to the Theory.
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ABOUT DOW JONES
DOW JONES or DJIA
The Dow Jones Industrial Average (DJIA), also called “Dow Jones” or “the Dow” is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange (NYSE), approximately two-thirds of which are represented by companies producing industrial and consumer goods. “Price-weighted” means that each company is assigned a weighting based on its stock price. It was invented by Charles Dow in 1896.
If the DJIA rises by 10 points comparing to yesterday, it means that the cost of purchasing the 30 stocks in the index today is $10 higher than purchasing those same 30 stocks yesterday, taking into account stock splits and dividends.
Over time, the DJIA can be used as a benchmark for the economy.
HISTORIC HIGHS AND LOWS FOR DOW JONES
- All-time records: Max: 1.6184 on 21/01/2001 - Min: 0.90059 on 05/11/2007
- Last 12 months (March 2016-March 2017): Max: 1.4689 on 18/01/2016 - Min: 1.24610 on 2/05/2016
- Last 5 years (March 2011-March 2016): Max: 1.4689 on 18/01/2016 - Min: 0.9635 on 10/09/2012
2017 FORECAST FOR DOW JONES
Following Norm Winski’s 2017 Fractal Futures Forecast, “the 2017 DJIA Fractal Forecast is showing a wild roller coaster year which, following big ups and big downs, will likely end the year nearly unchanged”.
ORGANIZATIONS, PEOPLE AND ECONOMIC DATA THAT INFLUENCE THE DOW
Since the Dow Jones is a benchmark of American stocks, what will impact its value is related to all those decisions and figures that affect the results of big companies in the USA. That is, among others:
- economic indicators of inflation (CPI, PPI,...), consumer confidence (as Michigan Consumer Confidence Index), growth (GDP), employment (Non Farm Payrolls) and salaries (Average Hourly Wages)
- interest rates decided by the Federal Reserve (headed by Janet Yellen)
- fiscal policy, trade deals, business laws decided by the US administration (President Trump), but also by the US Treasury Department (Steve Mnuchin) and the US Department of commerce (Penny Pritzker) energy prices (electricity, oil,...), because they have impact on production costs for those companies
ASSETS THAT INFLUENCE THE DOW JONES THE MOST
- Commodities: Oil
- Currencies: USD, EUR and JPY
- Bonds: T-Bond (Treasury bond is a marketable, fixed-interest U.S. government debt security)
- Indices: S&P500 (American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE), NASDAQ (benchmark index for U.S. technology stocks), WTI (West Texas Intermediate is a grade of crude oil used as a benchmark in oil pricing, the underlying commodity of NYMEX's oil futures contracts) and RUSSELL 2000 (the most common benchmark for mutual funds that identify themselves as "small-cap").