Dow Theory

According to Hulbert:

http://www.marketwatch.com/news/story/dow-theory-sell-signal/story.aspx?guid={17ACC4E1-395C-415B-A22F-D381D8997349}&dist=morenews

"Hamilton argued that it is bullish if both the Dow Industrials and the Dow Transports jointly reach significant new highs. Similarly, the market is likely to continue falling if both Averages jointly reach significant new lows. Potential turning points are signaled when only one of the two Averages reaches a new high or a new low--"non-confirmations" in Dow Theory parlance."

According to 曹仁超, at page 104-5 of his first book, Dow Theory says:

- Bear1 occurs when the market drops from high value (eg, 25% or more above its 250 MA) to a low value, (eg 15 to 20% below its 250MA).

- During Bear2, the market usually oscillate between 15% above its 250-MA line to 10% below its 250-MA line. Bear2 is usually long-lasting.

- During Bear3, investors must sell if it is 5% over its 250-MA line, until one day it is trading at 15 to 20% below its 250-MA. Only then is the Bear market over.

In a seminar in 13 January 2007, organized by SFC and OUHK, 曹仁超 says beginning of Bear starts when P/E is above 16 (perhaps as high as 22), while the beginning of Bull may start with single digit P/E.. here's a graph of HSI's P/E starting from 1974 to 2007.




The average from 1974 to 2007 is 14.57 with the median at 14.37, while stdev is 3.627. As of April 2008, it is at 15.5.. Click here for the latest.