Well, the bounce finally occurred! The bleeding has stopped. New lows went from 2,832 to 68 in just one trading session. There were no new highs. The GMI-R even advanced to 1 (of 10). This is still a market to watch from the sidelines. The market remains in a down-trend. It remains to be seen whether the indexes can climb enough to change the trend. The Worden T2108 indicator is still oversold and in extreme bottom territory at 3%. Monday was the 30th day of the current QQQQ short term down-trend.
GMI: 0; GMI-R: 0; 2,832 new lows on Friday; T2108: 1%; Our embarassing failure to educate youth about the market
The GMI and GMI-R remain at zero. On Friday, there were 23 new highs and 2,832 new lows in my universe of 4,000 stocks. This is the largest number of daily new lows since I started this blog three years ago. The Worden T2108 indicator remains at 1%, about as low as it gets. This is the time to be on the sidelines in cash. No one knows when this down-trend will end. Friday was the 29th day of the current short term down-trend in the QQQQ…
It is amazing how Jim Cramer is now claiming to have been urging people to be in cash. The truth is that he and the other market pundits have been urging people to buy stocks all the way down. At no time did any of them say to go mainly to cash. Cramer has repeatedly ridiculed the use of charts. But it is the chart patterns that warned me to get out of this market recently, and in 2000. I started this blog to give the little guy (and gal) a chance to learn how to discern the market's trend. When the trend is down one should not be looking for stocks to buy. One goes to cash or goes short. There will be plenty of time to ride the next up-trend once it has proven itself….
It is a crime that we do not teach people how to think for themselves when they invest their hard earned money. High schools and universities should require students to attend classes in financial planning and investments. I teach an honors course at the university and my students have a thirst for knowledge about the market. They often report that my class on technical analysis is the most practical course they have attended and that it should be required for all students. Why do we fail to educate our youth about such an important topic? Think how many of our ageing baby boomers are now looking at greatly reduced assets for retirement. It is painful to me to consider the ramifications of this colossal failure to educate our citizens about how to manage their stock market investments.
GMI: 0; GMI-R: 0; T2108: 1%; 1929 crash was only a small hint of the subsequent larger muti-year decline.
The GMI and GMI-R remain at zero. The Worden T2108 indicator is now at 1%, just above the area (0.5%) reached at the depths of the crash in October, 1987. As tempting as it may seem to jump into a long position in the hopes of a rapid bounce in the market, it is now long past the time to step aside and get out of the way of this speeding freight train. We WILL get a huge bounce at sometime, but that bounce will have to prove itself and retest the bottom. I will return to the market only after a successful test of a new bottom. The GMI and GMI-R will help me to time an entry….
Pundits are throwing about the term, "depression." I thought it would be useful to show you how the market acted during the Great Depression. The 1929 crash receives all of the media attention.
However, note that the crash was dwarfed by the subsequent down-turn in the market during the following 3 years. The 1929 crash bottomed in November with the Dow at 195.40, then rallied through April, 1930 to 297.30, and began a decline that ended in July, 1932 at 40.60. If we are to experience a similar economic depression, then the current decline might be followed by a significant rally and a subsequent multi-year decline. I do not suggest that this will happen. I am only trying to illustrate the folly of trying to predict what the future holds for us. The key is to respect the current down-trend and to step aside.