In a reversal of fortunes, August saw monthly gains ranging from up 535 points or +3.2% in the Dow, up 73 points or +3.7% in the S&P 500 and up 211 points or +4.8% in the Nasdaq Composite and up 190 points the Nas 100, also +4.8%. Dow Theory
continues to see both Averages in sync as, in Dow terms, the primary
bull Market continues.
I've found over most of the market cycles I've observed that a close look at weekly charts at the end of the week is usually enough to assess the intermediate trend and at the end of the month, sufficient to assess the long-term (investment-oriented) trend. Even though I'm mostly a short-term trader, I do hold stock for the longer-term.
More than that, I tend to have fewer reversal type surprises in my shorter-term options trading IF I'm aware of when weekly or monthly charts show some early trend reversal signs or just a slowing of longer-term trends. It's useful to have a short, intermediate and long-term perspective, almost even if you're going home flat as a day-trader.
For example, the Dow 30 (INDU) has been simply hugging the LOW end of its broad monthly uptrend channel (at its up trendline) for nearly 2 years now, while the S&P 500 (SPX) has been trending up toward or along the UPPER end of its broad uptrend price channel for about 14 months now. On pullbacks, which one am I going to look at buying calls? Between INDU and the S&P, which Index will I favor for put purchases at suspected tops such as in mid-July? Assuming I want to play in both Markets. As far as buying pullbacks, heavy bets are being made in the Nasdaq, for good reason. But, I like to have some participation in both Markets.
Here's the respective SPX and INDU monthly charts with their broad uptrend channels projected out a year from now.
In SPX, IF the Index were to continue to trend higher over the next 12 months following its upper trend channel line, SPX would end up close to 2200. Versus pulling back to the low end of its multiyear uptrend channel around 1830. Just speculating here! A lot of IFS ahead of course!!
You can make the same kind of low-end/high-end projections for INDU, assuming the Average continues to stay within its current major uptrend channel at all. Here you see my aforementioned point that the Dow has been just maintaining a rate of gain that has been keeping INDU at or above its up trendline for a couple of years now; this versus moving up into the middle to upper reaches of its uptrend price channel like SPX has done.
Of course, the Average is still moving higher and has maintained its up trendline, but it's a matter of degree when compared to the S&P 500's more buoyant uptrend.
MONTHLY DOW INDUSTRIALS (INDU) VERSUS THE DOW TRANSPORTS (TRAN) AND DOW THEORY PRIMARY TREND 'CONFIRMATIONS'
THE NASDAQ 100 MONTHLY CHART AND ITS PROJECTED UPTREND CHANNEL
GOOD TRADING SUCCESS!