The Dow Re-visited

My October 18th post here analyzed DIA, the etf following the Dow Jones Industrial Average.  I fitted the TB-F to the April 21st price pullback.  That indicated that this uptrend was about 84% done w.r.t. cumulative volume, and if average weekly trading volume continues as it has been for the last several months, then we expect this uptrend to end in about two months from now.

Fitting a TB-F curve to a price trend is not always cut-and-dried.  Some up trends leave choices to the discretion of the user, and there are several rules of thumb for this.  One rule is to fit to the largest, most significant pullback, which is what I did in the Oct. 18th post.  However, as I look at this now, I'm having second thoughts about this choice.  There are two other rules, each of which is probably more significant than what I used.  The first of those two says to fit to the latest pullback, in this case Aug 25th.  And the second of these two says that when there are two or more pullbacks which all look significant, we should try to adjust the fitting parameter D so that we get a compromise fit, some pullbacks being above and others below the TB-F curve.  It is this latter rule I'm going to apply now.

Here is the DIA weekly bars chart with D adjusted so that we get a pretty good fit to all three of the pullbacks marked by the purple arrows.  For that, D has to be 825 million shares of cumulative volume...

 

We see that this works quite well, so I now feel this is the right way to do it for DIA.  

Since the current cum vol is 800.5 million shares, this means this uptrend is 97% complete, with the end most likely happening during this coming week.  This means that the Dow's uptrend that started about a year ago is essentially over now.  My usual caveat:  The end of a TB-F does not necessarily signal the beginning of a downtrend. What it does mean is that DIA's behavior from now on will be distinctly different from what it has been for the last 12 months.

In the upper pane of this chart I've included the so-called Money Flow Index (MFI), which is actually the volume weighted RSI oscillator.  As illustrated by the red trend lines, we see that since early August the MFI has been in a strong bearish divergence from the price.  This implies that the internals of the DIA's up trend have significantly weakened, consistent with the TB-F having ended.