To have a trend reversal from up to down, the –DMI must actively and decisively take away dominance form the +DMI. The DMI Dominance Rule is consistent with the trend principle that a trend is more likely to continue than reverse. The weekly SPY chart shows three –DMI crosses. The first cross (1) and the second cross (2) were both failure crosses, they failed to take away dominance from the +DMI. But look at the manner of the third cross (3). It made a cross and hold, and then a new high, establishing the –DMI as the new dominant hand. Now the +DMI will take a shot at dominance again; but if it fails, we are in the beginning of a long-term downtrend until proven otherwise. Note also, the lower high and the lower low, both minimum requirements to begin a downtrend. Quite a tell; but is the market bluffing? Don’t gamble on it.

This was a January 2008 Journal lesson from Dr. Schaap ADXplaining ADX DMI for the best profits.  Now (click me) SPY ETF with Buy and Sell Alerts  from Feb 6 Journal of Lessons.

Contact Candy Schaap TraderDoc5050@yahoo.com  Books and CD can be purchased from www.stockmarketstore.com or Amazon.com    Sign up for the Journal for Excellence in Trading right here.