Confirmation

Dow Theory for the 21st Century treats the S&P 500 as the preeminent index. If one index keeps making higher highs while the other declines, the move is not a confirmed secondary reaction. The required breakdown for the fourth sell signal must occur in all three indexes. The fourth sell signal exists only when all three confirmations occur. Classical Dow Theory ignores a breakout or breakdown unless the other Dow index confirms it. The fourth buy signal requires triple confirmation. The fourth buy signal becomes valid only when all three indexes break above their relevant rally highs. The breakout above prior rally highs must occur in the S&P 500, Dow Jones Industrial Average, and Dow Jones Transportation Average. The fourth sell signal requires triple confirmation because the article describes the signal as exceptional. A classical sell signal requires both indexes to break below secondary reaction lows. A classical buy signal requires both indexes to break above secondary reaction highs. Confirmation generally requires signals to appear in both indexes for validity. Dow Theory treats confirmation by both indexes as central to important market movement analysis. Ordinary confirma…