DJC technical Analysis

The Dow Jones Composite index is not as popular in the technical analysis as other Dow indexes, because the DJA index covers three different indexes (DJI, DJU and DJT) it could be reasonable to analyze the three indexes independently, yet, in some cases the DJA index technical analysis can give more clear picture about condition of the U.S. stock market.

As an example 2007 stock market crash started from the Dow Jones Utilities crash in May - August 2007. Later at the end of July 2007 the Dow Jones Transport followed into the recession and only in October 2007 the strong recession has started in the DJI sector. From this example a technical analysts may see the point in the applying technical analysis to separate indexes that may help to see the underlying cause of the stock market event. In the example above an analyst may assume that the Utilities sector has affected transportation and then it  pushed the whole market into a recession.

On the other hand the analysis of the Dow Jones Composite index may give clearer picture about U.S. economy in whole. By analyzing the DJA a technical analyst may see that the overall stock market sentiment was not as bad in June 2008 as it would be by analyzing the DJI index only. While Dow Jones Industrials was breaking new 2-year lows by crashing down, the Dow Jones Transportation only a month before (in May 2008) broke its historical highs.

Again, even if the DJA analysis may give the overall picture of the U.S. economy, still, the investors could be more interested in the technical analysis and trading systems of the separate indexes, which may help them in defining profitable stock market sectors.

DJA Trading System

Before building a trading system based on the index technical analysis it is a reasonable to put a question, what could be traded by this system. While there is no confusion with DJI trading system which may give the ability to trade the DAI (DJI tracking stock), mini-sized DOW futures, DIA options as well as stocks from the DJI basket, when it comes to the DJA trading system we hardly can find index derivatives, options or futures tracking this index. At the same time from the examples above we may see that separate DJI, DJT and DJU index technical analysis may deliver better results and it could be logical to use DJI based trading system to trade DJI stocks, DJU trading system to trade utilities companies and DJT trading system to trade stocks from the transportation sector.

Until the Dow Jones Composite derivatives (ETFs, options and futures) are developed there is no high need in the trading systems based on this index.

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