Dow Theory Meets DeMark

In my last few posts I've been noting that all the major indexes have completed TD-Sequential sell signals, minus the Dow Jones Industrial Index. As of yesterday's close however, the index has met the requirements for a sell signal under Tom DeMark's Sequential indicator. Furthermore there is an interesting Dow Theory non-confirmation forming between the Industrial index and the Transportation index.

Chart 1: $DJI with DeMark Sequential

 The setup looks remarkably similar to the setup back in late April before the flash crash, with sentiment extremes, overbought diverging momentum, and a completed TD-Sequential sell signal. Another interesting development is that the higher beta indexes appear to be falling ahead of the Dow, creating a Dow theory non-confirmation.

Chart 2: Dow Theory Non-Confirmation, Dow vs Transports vs Nasdaq vs Russell

We can see here by this side by side comparison, that while the Dow continues to chug higher, the higher beta and wider breadth indexes appear to be disagreeing for now. While these can always reverse, it's another piece of technical evidence that must be added to the already quite full bearish side of the ledger.