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THE DOW REPORT
Retailers Lagging

In October I told my subscribers that we should expect the 10-week and possibly even the 22-week cycle lows in late October. As it turned out, the October lows marked both the 10 and 22-week cycle lows. As of this writing, these cycles are still positive. But, there are signs that this advance may not be quite as healthy as some believe.

One such sign is the non-confirmation between the Industrials and the Retail Holders. Understand that such divergences or non-confirmations are not timing tools. For that, we use the Cycle Turn Indicator. However, these non-confirmations are important to monitor as they do provide important clues. The first non-confirmation shown in this chart occurred in February/March 2004. Again, this is not a timing tool, but it was telling us to be careful. It was when the Cycle Turn Indicator turned in conjunction with this non-confirmation that ultimately produced a signal. Next we had the short-term non-confirmation in June 2004, and it too was followed by a sell off. Then, between November 2004 and March 2005 an intermediate term non-confirmation developed between these two indexes. In this case the decline into the April lows followed.

Now we have another non-confirmation in the making. With the advance out of the October intermediate term lows, the Industrials have managed to better their summer highs. However, the Retail Holders Index is lagging and has thus far not been able to follow suit. This has in turn created another intermediate-term non-confirmation that is once again telling us, “be careful.” Should my intermediate-term Cycle Turn Indicator turn down with this non-confirmation in place, then lower prices should follow for both indexes.

In the chart below we have the Industrials in the upper window and the Dow Jones Retailers in the lower window. Here, too, the same non-confirmations exist.

Tim W. Wood

My December newsletter was released last weekend. In it I give updated statistical projections based on the advance out of the October intermediate term lows. Cycles News & Views provides very detailed market analysis, time and price targets and both short and intermediate term market turns based on the proprietary Cycle Turn Indicator. For more information, please visit www.cyclesman.com.

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