Month: February 2009

Don’t fight the trend; QQQQ in 7th day of short term down-trend; bear market bottoms are marked by huge up volume

@ 12:06 am
GMI0/6
GMI-R0/10
T210815%

With the GMI and GMI-R at zero, I think it is not the time to fight this down-trend.   The major indexes look terrible and the QQQQ completed the 7th day of its short term daily down-trend within a longer weekly down-trend.

The key to survival in the market is to lose as little as possible during the worst times.   Conserve money so as to be ready for the inevitable turn.   I have studied all of the prior bear market bottoms and a common characteristic is huge weekly up volume.   We have not had anything like that.     We need to sit tight and wait for several days of   large volume rises. I remain short and mainly in cash.

Take the poll to the right and let’s see if it is a useful contrary indicator.

Inroducing new T2108 pendulum; T2108 recovers from oversold 9.5% on Tuesday

@ 10:13 am
GMI0/6
GMI-R0/10
T210814%

My son and webmaster, Mike, has added a new visual representation of the Worden T2108 Indicator.   This indicator acts as a pendulum   of the market technicals, going from extreme readings of oversold, around 15% or below, and overbought, above 75%.   It seems to me to work better with oversold readings.     After an extreme oversold reading the market tends to rally quickly, as yesterday.

On the other end, especially in bull markets, it can remain above 75% for months.   On January 6, it topped out at 89%, and the present decline began right away.   At its low in October, it bottomed out around 1%.   Only at the 1987 crash, did it register a reading below 1%.   This bear market has resulted in very low readings, hitting 4.9% on November 2nd.

The indicator is charted daily in TC2007 back to October, 1986.   T2108 measures the percentage of all NYSE stocks that closed above their simple 40 day moving average.   The way I should use it during a bear market, is to not initiate new shorts when T2108 is oversold, and to watch for   retracements in my short stocks.   Another way would be to buy the Index ETF’s or options   when T2108 is very oversold.   Note, however, that if I do not post on a specific day, the pendulum will show its value as of the date and time of the last post.   Good luck using T2108!

Comparison of Current Bear to Bear Markets of 1929, 1973-74, 1987 suggests Dow 3,500 possible

@ 12:01 am
GMI0/6
GMI-R0/10
T210813%

I am getting tired of listening to all of the pundits saying that the current decline resembles the 1974 bear or the 1987 bear markets.   How about looking at some data!   So, I used my TC2007 market price history database to compute how much the Dow Jones Industrial average declined in prior bear markets after the market’s peak.

The results, presented in the table below, are quite revealing and unsettling if one is looking for a near term bottom.   I would be interested to learn if you agree with my analysis.

Twenty days after the Dow had peaked, the Dow   was down 7-10% in each of these beginning bear markets. By 40 days post Dow peak, the 1987 decline had already bottomed out (-41% by day 39) and rebounded to -26%.   The ferocity of the 1929 bear was evident early on, showing a 40% decline by day 40.   In comparison, the 1973 and 2007 bears appear puny, registering only 4% to 8% declines by day 40.   The 1973 and 2007 bears tracked each other quite closely until 260 days post the Dow peak.   By day 260, the 2007 bear was actually showing a greater than the decline that started in 1929 (-40% vs. -38%) and was more than twice the decline shown in the 1973 bear market (-17%). Since day 260,   the current bear market has resembled the 1929 bear market closely, with declines being about 14 percentage points smaller.   I would conclude then, that the current bear market is tracking much closer to the one that began in 1929 than to the 1973 and 1987 bears.

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