My General Market Indicators (GMI, GMI-R) remain at zero. There were only 23 new highs and 2185 new lows in my universe of 4,000 stocks on Thursday. On October 10, there were 2832 new lows, so this decline has not eclipsed the number of new lows set at the October low. The Worden Indicator is back to 5%, a level where prior bottoms occurred. On October 10, it was at 1%. Since 1986, the level was lower only once, in October, 1987, when it hit 0.5%. The T2108 indicator measures the percentage of NYSE stocks above their simple 40 day moving average. It used to be a reliable indicator of when the market reaches tops (above 70%) and bottoms (below 20%).
When we take a step back from the current hysteria and look at the Dow Index each year in perspective, an amazing fact comes out.
As this yearly chart shows (it tracks each year back from the current day and does not correspond exactly with a January to December calendar) the current decline in the Dow appears minuscule when compared to the one in 1929-1932. The 1987 decline does not register much and the 1974 decline just touches the 30 year moving average trend line (red line). In fact, the current decline is well above that trend line. So, we may not be near a bottom today or this year……….. The great temptation that we all face is to buy the bargains and look for a bottom. If I have learned anything from studying the great traders of the past (Livermore, Baruch, Darvas, O’Neil) it is that one cannot predict the market, only ride the current trend until it ends. Thursday was the 58th day since I labeled the beginning of the current QQQQ short term down-trend on September 2nd. For me, the trend is still down, so I remain in cash with a few short positions.
Thank you, Beth, for the vote of confidence. I also want to acknowledge that Beth independently made similar comments about the Dow’s history on her email to the members of her local trader’s meetup.