Markets Move Up, Down And Sideways
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Financial and commodities markets move up, down and sideways.
Market historians trace the idea of the sideways trend to the work of Charles Dow in the early 1900s. Mr. Dow is best known for developing the Dow Jones Industrial Average (DJIA) and other indexes. He also developed an explanation of how market action unfolds that became known as the Dow Theory.
Under the Dow Theory, we learned that prices are always trending and there are trends of varying degrees.
The most important is the long-term trend that lasts for years. Shorter term trends lasting weeks or months interrupt the long-term trend and result in what we have dubbed pullbacks or corrections.
But, keen observe that he was, Mr. Dow noticed markets sometimes move sideways for a few months rather than decline in a pullback. He explained the sideways trend served the same purpose as a decline. Both allowed the market to “rest” before continuing higher, what I call a “pause to refresh.”
Since February, prices have moved sideways and Thursday major market indexes broke above their sideways trends. This is Bullish, at least in the short term if the moves hold, the resistance at these marks is ‘fat.”
In the long term, participants should be worried about Greece, the price of Crude Oil, QE, US and world economic Plus….
Have a terrific weekend.
Paul Ebeling
HeffX-LTN
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