Chart courtesy of StockCharts.com
One of my most reliable primary market trend indicators remains BULLISH.
Understanding the relationship between the 12-month (long-term) moving average and the 3-month (intermediate-term) moving average is essential to correctly determine the character of the market’s prevailing trend.
When the 3-month is above the 12-month, a BULL market is in force.
When the 3-month is above the 12-month, a BULL market is in force.
When the 3-month is below the 12-month, a BEAR market is in force.
At this time the 3-month moving averages of all the major indices are above their respective 12-month moving averages.
In my opinion, it’s vital to keep a watchful eye the Dow Jones World Index ($DJW) because it gives us a reliable perspective on the health of the global economy, which is becoming increasingly vital to the prosperity of the U.S. economy.
The 3-month average of the Dow Jones World Index has remained above the 12-month average in a bull-market relationship since a August 31, 2009, when the $DJW closed at 208. Since then the World Index is up +13.0%.
On Friday, April 30, the $DJW closed at 235.
(The chart shows just the 3-month and 12-month moving averages of the Dow Jones World Index, not the prices of the index itself.)
Until the 3-month (229) falls below the 12-month (217), we will, by definition, remain in a bull market. The 3-month was
-5.2% below the 12-month at the end of April.
As long as this relationships persist, market rewards will outweigh the risks; capital appreciation will take precedence over capital preservation, and we’ll maintain a defensive posture.
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