The Dow Jones Industrial Average has been lagging the rest of the broader markets. Can it make new all-time highs and join the S&P 500 — or is it a warning?

Even the DOW Transports, which had been under-performing, ran to its old all-time high last week before a small pullback.

There is this theory called “DOW Theory” that says that when the Dow Jones Industrials and the Dow Transport both make new all-time highs, that's the confirmation of a bull market.

While that does make sense, it doesn't mean that it's not possible to make money without that happening.

After we review the charts of the Dow Industrials, I will share with you some of our just opened and recently closed positions.

But let's look at the Dow Jones Industrials from the perspective of the weekly and daily time frames to see what they say.

 

Weekly Dow Jones Industrials Chart

 

Above is the weekly chart of the Dow Jones Industrial Average shown with the ETF symbol DIA.

The ETF tracks the INDU that is quoted in the media and can be traded. The INDU cannot, but we will review its daily chart.

After a climactic run higher into the end of 2017, the Dow fell sharply at the beginning of 2018.

The majority of the year the price action has been what I would call being in a repairing the damage mode or rebuilding certainty.

The last month of price action in the Dow has done a lot to rebuild that certainty.

As Master Traders, we recognize that through what I coined Bar-by-Bar analysis and reaction to prior support and resistance.

I'll explain this as it relates to the Dow Jone Industrials in Multiple Time Frames.

Notice the current price action over the last month when the Dow Jones Industrials came up to the June high.  It fell from after breaking out from the small range below into the February – March high.

Rather than fall back, it has moved sideways. That is what I call “absorbing supply” or, in other words, buyers (demand) are willing to continue buying at resistance (the supply). And they have been doing that after a multiple week move higher into that resistance.

Also, note the big Bottoming Tail (BT) that formed the week before last. That signals buyers bought aggressively on the drop and continued to right into the top of the range.

That's one way to recognize bullish price action!

Now that the Dow has cleared all the recent resistance areas to the left, it has a “Void of resistance” and a clear path to the old high.

 

Daily Dow Jones Industrials Chart

 

Above is the chart of the Dow Jones Industrial Average that we review each week with subscribers to the Master Trader Market Edge Advisory Letter and some of my commentary from that letter on Monday.

The Dow certainly wasn’t the focus last week with the bullish news of many indices hitting new all-time highs.

Actually, while it started off the week bullishly moving higher and able to push above the immediate Major Resistance (MR) area above, it pulled back afterward.

If it wasn’t for Friday’s rally day, the Dow would’ve closed slightly negative on the week. Friday’s rally did save the week and the Dow closed up just over 121 points.

Ideally, the bullish scenario the Dow takes out last week’s high decisively leaving last week’s low as new Major Support (MS) on the daily timeframe.

If a pullback should occur early in the week and the Dow Jones Industrials was to move below last week’s low first, that would not negate the bullish scenario.

However, pulling back as far as 24,400 would certainly put that in question.

Because of the sharp pullback that happened last February, the Dow now has an open Void of resistance above.

Last week’s bullish move to new all-time highs in the indices mentioned earlier continue to support our bullish bias for the markets.

The market internal gauges that we monitor are not at a bearish level yet, so we view this as the “Coast as Being Clear” for the markets to move higher.

What could turn us bearish in the short-term?

The Dow Industrials and the Dow Transportation Index moving to new all-time highs in the “wrong-way” options traders making big bullish bets at the same time.

When and if that happens, we will sound the warning bells. Stay tuned.

The recent open and close trades are below.

Master Trader Market Edge Advisory Letter provides market insights like this and education every week, including videos to review and explain what is happening in the broader markets and a review of positions.

Swing trades and Options trades with management updates through text messages to your phone or desktop, email updates and real-time updates in your Member's Area.  All open and closed trades documented. 

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Our just opened positions

  • IWN – 170/165 Bull Put Credit Spread – Expires this week
  • NOW – 185/180 Bull Put Credit Spread – Expires this week
  • AAPL – 212.5/207.5 Bull Put Credit Spread – Expires this week
  • FDN – 136/130 Bull Put Credit Spread – Expires 9/21
  • MA –  202.5/195 Bull Put Credit Spread – Expires 9/7
  • AAPL – Bought stock at $212.47 – partial profits have taken – current close $216.16

 

Positions Closed Last Week

Swing Trades closed from our Master Trader Advisory Letter:

PAYC – Bought stock at $137.68, closing with an average gain $6.22/share in 9 days.

EMR – Bought stock $75.08, closing with an average gain $1.18/share in 4 days.

 

From our ETF Investment Trader, current open positions all looking great with a large target on the longer time frames:

XPH – Bought at $44.46, 10% open gain and looking great on all time frames.

XLG – Bought at $195.01, $10+ open gain so far with trailing stop to lock in profits.

XLC – Just Bought

XLF – Just Bought

 

In our Master Trader Weekly Options Trader:

TSLA – Shorted Aug (8/24) $275/265 bull put credit spread for $1.03/share, booked 78% Max Profit in 2 days.

SPOT – Shorted Aug (8/24) $197.5/202.5 bear call credit spread for $.75/share, booked 80% Max Gain in 4 days.

ULTA – Shorted Aug (8/24) $232.5/227.5 bull put credit spread for $.45/share, booked 77% Max Gain in 2 days.

PYPL – Shorted Aug (8/24) $88/92 bear call credit spread for $.44/share, booked 58% Max Gain in 1 day.

TRIP – Shorted Aug (8/24) $55/58 bear call credit spread for $.40/share, booked 80% Max Gain in 3 days.

BA – Shorted Aug (8/24) $330/325 bull put credit spread for $.43/share, booked 88% Max Gain in 3 days.

The Weekly Options Trader focuses solely on selling options and credit spreads expiring in 10 days or less around compelling patterns to generate weekly income.  These trades are easy to find, enter and manage.

Master Trader Technical Strategies (MTS) combined with our simplified approach to options investing and trading is an amazing and powerful combination to generate income and wealth!

Our swing and options trades recommended in our Advisory Letter and Weekly Options Trader have been racking up profits.

Our swing trades typically last 2- to 10-days and we'll give you the entry, stop, target and update you every step of the way with email and text alerts

If you trade options or want to learn how to make money using them, we will show you know to without all the complex jargon associated with them.

 

MasterTrader and You Building Your Financial Future Together

Happy trading!  If you have any questions or comments, please e-mail Greg Capra at Greg@mastertrader.com or Dan Gibby at Dan@mastertrader.com

All the best,

Greg Capra
Managing Director of Master Trader
Trading the Pristine Method — Origin and End

Dan Gibby
Chief Options Strategist