Month: October 2008

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.

My indicators remain at low levels.  The Worden T2108 remains at 2%, the lowest reading since at the 1987 crash.  There were 21 new highs and 2,283 new lows in my universe of 4,000 stocks on Wednesday.  This was the largest number of daily new lows since I began this site 3 years ago.  Remember–no one knows a bottom or top  until after it has occurred.  Most bear and bull market labels are assigned months after a turn.  If no one knows a bottom until after it has occurred, then trying to guess a bottom is a fool's game.  We can only discern the current market trend and trade consistent with it.  When the GMI returns to 3 or above, the market will be in an up-trend and it wiill be safe for me t0 own stocks on the long side again. Once the market turned in 2003, my account rose over 50% in a year.  The key to success in the market is to win big during the up-trend and to conserve those profits during the subsequent delcine.