GMI: 0; GMI-R: 0; S&P500 double top or market bottom?

The GMI and GMI-R remain at zero.   There were 21 new highs and 1835 new lows in my universe of 4,000 stocks on Friday.   The number of new lows was down from 2185 on Thursday.  GMI1121

The Worden T2108 Indicator rebounded from 5% to 7%, and is still in what used to be indicative of an imminent bottom.   Friday was the 59th trading day (D-59) since I identified the beginning of the current short term down-trend in the QQQQ.   Since that day (September 2) the QQQQ has declined 41%.   During that time, 99% of the Nasdaq 100 stocks (all but APOL–the proverbial needle in the haystack–sought by those addicted to the bullish side) have declined, and 44% have declined 50% or more. Even if we had missed the initial sell signal and waited until a failed bounce on September 19, still, 99% of the Nasdaq100 component stocks have declined since then, one half by more than 41%.   So you see, one could have missed the first sell signal by about 2 weeks and still have saved a lot of money by going into cash or short. Who knows?   Maybe it is still a good time to go to cash…

I decided to take a look at the monthly chart of the S&P500 stock index.   S&PDOUBLETOP

Low and behold, it looks like a major multi-year double top in that index.   For most of the 70’s the S&P500 and the Dow channeled back and forth until the break-out to new highs in 1982.   That started a major up-trend that ended in 2000.   We then experienced a decline through 2002, and began an up-trend in 2003 that ended in 2007, at about the same level as in 2000.   We could be back to a decade of a flat market like we had in the 70’s.   On the other hand, we could have a huge correction of the 1300%+ advance that began in 1982.   If so, the 40% decline we have had since October, 2007 might be just the beginning……………………

In   future posts, I will examine the major technical characteristics of prior market bottoms.   At the moment, all I can tell you is that the current market shows none of the key signs evident to me in prior bear market bottoms.   Given that no one knows a bottom before it has occurred, it is best for me to remain in cash and a little short until the market tips its hand.

1 thought on “GMI: 0; GMI-R: 0; S&P500 double top or market bottom?”

  1. I should also point out that the two broader major indexes, S&P 500 and Nasdaq Composite, have both sliced through their 200 month moving averages on the downside. This happened a month ago (SPX 200 mma is at 1000). The 200 mma is one of my long term moving averages, so a fall through that moving average without any hesitation is a good indication of how strongly the market spoke. Since its first fall through that level, SPX has made two attempts to break through that but was turned back promptly (with barely one close each of the two attempts) to head to lower lows we endured last week.

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