GMI: 0; GMI-R: 0; Current financial mess predicted in NYT in 1999; T2108 at extreme low: 6%; My GMI indicators kept me out of this decline–how about you?

On September 30,  1999, the New York Times printed an article about pressure from the Clinton Administration on Fannie Mae to ease their credit requirements on loans to increase home ownership rates among low income consumers.  The article contained this eerily accurate warning from Peter Wallison:

''From

the perspective of many people, including me, this is another thrift

industry growing up around us,'' said Peter Wallison a resident fellow

at the American Enterprise Institute. ''If they fail, the government

will have to step up and bail them out the way it stepped up and bailed

out the thrift industry.''  Check out the original article at: http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&scp=1&sq=&st=nyt or click on his name above.

Could the current mess be the result of good intentions gone wrong? (Thanks to a colleague for alerting me to this article.)

With the Worden T2108 indicator (percentage of NYSE stocks closing above their 40 day average) at an extreme low, the market remains treacherous but may be near a bottom or bounce.  Going back to 1986, market declines reached lower readings only twice; October 1987 at 0.5% and August, 1990 at 5.3%.  All other bottoms occurred at 7% or above.  So Friday's reading of 6% is about as low as it gets, except for the October 1987 decline of the Dow, falling 22.6% in one day.  In comparison to the 1987 debacle, the current decline has been slow and measured.  The 777 point decline last Monday was only 6.98%.  In comparison, on October 28, 1929 the Dow fell 13.5% and on the following day, another 11.7%.  Since the peak of the Dow a year ago, in October, 2007,  the Dow is down a total of about 26%.  So, in the  context of the greatest market declines, the current decline has been relatively slow and small –at least thus far.  I said small, not painless.

The gamblers among us might try to guess the bottom, or at least the bounce.  With the GMI and GMI-R at zero, I prefer to wait on the sideline in cash until the new up-trend has begun. 

On June 8, I wrote:  "Last week I transferred all of my

pension money from mutual funds into money market funds.  When I looked

at how most of the Dow 30 stocks are  doing, I became very concerned of

the future of that index and the general market."  I started this blog three years ago because I was so upset by the way the media pundits encouraged people to buy and hold stocks all through the 2000-2002 decline.  I have successfully avoided all of the major market declines since 1995 and wanted to provide my audience with the tools I use to protect themselves in subsequent declines.  I make no profit or commercial value from this blog.  Again, the media pundits have tried to keep people in stocks all through this decline.  I hope that some of my readers avoided the present decline by exiting the market last June when I did.  My 401-K plan has escaped the current decline and has been in a money market fund since early June. Please let me know if any of you have had similar success.

11 thoughts on “GMI: 0; GMI-R: 0; Current financial mess predicted in NYT in 1999; T2108 at extreme low: 6%; My GMI indicators kept me out of this decline–how about you?”

  1. I have been reading your blog for about a year. You have a great way of reading the market. I have have been managing money for 20 years and I think yours is the best system I have seen. I have been out of the market since June with a few short positions. Your blog helps give me confidence in my own ideas. I look forward to reading it every day. Thanks!

    Doug

  2. I have been reading your blog since July. When you closed your long position on Qs in August you mentioned that the trend was turning negative. Since then I am out and wating for your green light to go long on Qs. Your daily comments kept me out of the market(gambling)and saved me a lot of money.In my opinion, your blog’s psychological value exceeds (or at least equals)it’s technical and statistical value.Thank you for the “GIFT”.

  3. I have been following your blog since July 07, and read it first thing every morning. Excellent work….so simple, but so effective.

  4. Discovered your blog recently from someone who posted a link to you at bill cara’s blog. I wish I had known of your work sooner because I have lost money in this secular bear thinking wrongly that a bottom was at hand. I have since learned to pay closer attention to trends.

    We all owe you a debt of gratitude. bill (in washington, dc)

  5. I have lost some , about 10% on year . Better than most , worse then some – in my 401k , my wifes that I manage has faired better . I have been 100% cash for about 2 months . This site has helped cement my convictions of a dangerous market . Not a normal bear or decline , however different from 1987 drop. Public has not woken up completely yet . They will . No hope in current corrupt markets . Just not the same . Somethings definitely not right . Gov’t playing in game . Good reason to run – thanx Doug

    Bill

  6. I had seen your blog occassionally on “the money blogs”. A few days ago, when someone on Bill Cara’s blog gave it an endorsement, I added it to my daily reading. Unfortunately, too late to help me avoid this slaughter, but I will be following your lead very closely from now on. Thanks for taking the time to share your insight with us. I can’t afford to take another drubbing like the one we’ve just had.

  7. I’ve been reading your blog for a couple of years now. One of my daily reads. I didn’t get out of my mutual funds in June, but did so several weeks ago on your suggestions and a few other blogs I read. I am very calm watching the “show” from the sidelines right now. Only down about 7% for the year. I know many others who are very fearful and unhappy as they continue to hold the investments.

  8. I recently started reading this blog by recommendation of a friend. I transfered all of my 401k into money market in early July and suffered a 9.4% loss. I wish I had known your blog a little earlier! Thanks for all the good work!

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: