|  DEC 1993

Leading Indices At Bull Market Peaks by Tim Hayes

Leading Indices At Bull Market Peaks by Tim Hayes So which indices do you think most reliably lead the market? To find out, STOCKS & COMMODITIES contributor Tim Hayes, who was also interviewed in the August 1991 issue, examined 14 indicators for their market forecasting ability, beginning early in the 20th century. The indicators that he studied ranged far in variety and included the categories of economics, market breadth and interest rates. Of the 14, two were judged to have performed the best in leading the market within these categories. What were they? Keep reading. Confirmation and divergence. Technical analysts cannot afford to ignore this Dow theory tenet, which holds that the greater the confirmation between the Dow Jones Industrial Average (DJIA) and the DOW Jones Transportation Average (DJTA), the stronger the trend is; and the greater the divergence, the more suspect the trend is. It can be especially useful to keep this tenet in mind when watching indices that tend to peak before the rest of the market does. When such an index diverges, a market top may be forthcoming; when it reaches new highs, higher highs may be ahead. Here, let us compare various leading indices and, in the process, attempt to gauge their reliability.

by Tim Hayes