A Warning From the DOW and Institutional Indexes???
Which index will be right ... the Dow Jones Industrials or the Institutional index with their "core holdings"?
Chart 1 is a 2003-2008 graph of the Dow Jones Industrial Average. Note how it has had a 5 year up channel. The channel broke to the downside ... but then the DOW moved back into the channel.
More than that, it also just broke above a resistance line while inside the channel. This suggests that the DOW is okay again and will now trend up higher. See the next chart ...
This is the same 2003-2008 period, EXCEPT this chart shows the action of the "core holdings" owned by Institutional investors.
Like the DOW, it had a 5 year rising channel ... and broke through it to the downside. That is where the similarity ends.
Note that like the DOW, the Institutional Index did rise after falling below its lower channel's support.
However ... a major difference exists with the Institutional chart. The index Never did move back into the rising channel ... instead, it rose up to its lower channel's resistance and pulled back. This failure to move back into the channel is a serious divergence from the DOW's behavior.
Since Institutions account for over 50% of the market's volume, this is something to pay attention to.