Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
How to Capitalise on the Robots - 20th June 24
Bitcoin, Gold, and Copper Paint a Coherent Picture - 20th June 24
Why a Dow Stock Market Peak Will Boost Silver - 20th June 24
QI Group: Leading With Integrity and Impactful Initiatives - 20th June 24
Tesla Robo Taxis are Coming THIS YEAR! - 16th June 24
Will NVDA Crash the Market? - 16th June 24
Inflation Is Dead! Or Is It? - 16th June 24
Investors Are Forever Blowing Bubbles - 16th June 24
Stock Market Investor Sentiment - 8th June 24
S&P 494 Stocks Then & Now - 8th June 24
As Stocks Bears Begin To Hibernate, It's Now Time To Worry About A Bear Market - 8th June 24
Gold, Silver and Crypto | How Charts Look Before US Dollar Meltdown - 8th June 24
Gold & Silver Get Slammed on Positive Economic Reports - 8th June 24
Gold Summer Doldrums - 8th June 24
S&P USD Correction - 7th June 24
Israel's Smoke and Mirrors Fake War on Gaza - 7th June 24
US Banking Crisis 2024 That No One Is Paying Attention To - 7th June 24
The Fed Leads and the Market Follows? It's a Big Fat MYTH - 7th June 24
How Much Gold Is There In the World? - 7th June 24
Is There a Financial Crisis Bubbling Under the Surface? - 7th June 24
Bitcoin Trend Forecast, Crypto's Exit Strategy - 31st May 24
Zimbabwe Officials Already Looking to Inflate New Gold-Backed Currency - 31st May 24
India Silver Imports Have Already Topped 2023 Total - 31st May 24
Gold Has Done Its Job – Isn’t That Enough? - 31st May 24
Gold Stocks Catching Up - 31st May 24
Time to take the RED Pill - 28th May 24
US Economy Slowing Slipping into Recession, But Not There Yet - 28th May 24
Gold vs. Silver – Very Important Medium-term Signal - 28th May 24
Is Gold Price Heading to $2,275 - 2,280? - 28th May 24
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Bottom? Follow the Money

Stock-Markets / Stock Index Trading Mar 28, 2009 - 09:05 AM GMT

By: Dr_Janice_Dorn

Stock-Markets

Best Financial Markets Analysis ArticleIn my Trading Wisdom blog for subscribers on March 9, 2009, I wrote:  “We are now close to the cycle turn dates in the market mentioned in the March 3, 2009 Trading Wisdom “Complex Bottoms And Stress.” Is this a bottom or the bottom?

I have no idea, and will defer to those who insist on finding bottoms in this Jennifer Lopez market.  I am not wise enough or idiotic enough to do that.  When it comes, it is likely to be tradeable, and not out of the realm of possibility that it could go 15-20% to the upside into beginning of April.” 


The following day, March 10, 2009, global equity markets experienced a strong rise after reaching new lows for the bear market. Coming into today, the $INDU is up some 20% in the past 13 days.  What next?

.The markets have had strong moves before, only to turn back down and decline to previous lows or even new lows.  Is it different this time?  That is a dangerous question, but we are not ones to shy away from danger—so let's see what the money is telling us.

 We have never seen a market bottom on good news.  Because markets are forward-looking, it is prudent to watch the reaction to news rather than the news itself. When selling is exhausted, stock prices rise even though negative news continues.  One of the best ways to measure the strength of an uptrend is to examine the ratio of advancing issues to declining issues ( A/D) on the NYSE Composite Index ( $NYA).

My colleague Dave Harder examined every US stock market advance since 1970.  Dave found that market bottoms were reached and strong uptrends followed when there were more than twice as many advancers  vs. decliners for ten consecutive trading days (A/D10). This research does not tell us what analysts think should happen.  It tells us what the money is doing.  Dave's A/D10 shows that money has been flowing into equities in a strong, unequivocal manner.

 The A/D 10 occurred 6 times in the last 39 years—most recently on March 23, 2009.  It also happened   several weeks after the low in the 1973-1974 bear market and two weeks after the bottom in the 1982 bear market.  The previous A/D 10 dates were: January 14, 1987; January 23, 1985; August 23, 1982; January 7, 1976; January 13, 1975; and  December 7, 1970.

The first arrow on the chart below shows the A/D10 signal on January 23, 1985. Stocks advanced strongly for two years after that signal.   The second arrow on the chart marks the A/D10 on January 14, 1987 that occurred after a six month consolidation.   After this, the $INDU  launched a 40% advance that ended eight months later in the Crash of 1987.

From early 1973 to mid 1974 oil prices rose from $3.41 a barrel to $13.40-- an increase of 295%.  Rising inflation, wage and price controls, the Nixon impeachment and a retreat from the war in Vietnam all contributed to a severe economic decline and a decline in stock prices very similar to the current one.  As shown in the chart below, the A/D10 signal on January 13, 1975 marked the end of the bear market and the beginning of an advance that would bring the $INDU within 5% of the record high set in January 1973. Another A/D10 signal was triggered on January 7, 1976 when a strong advance started after a five month consolidation.

History may not repeat, but it often rhymes.  Dave's  work on the A/D10 coupled with the Big Rollover cycle we have been discussing since 2005 plus the updates on our  Tuesday Inner Circle conference call update  indicate that we may be poised for a strong rise over the next few months with a high probability that the lows for this particular cycle have been seen.  There will be fits ( some may “feel” scary) and starts along the way since nothing goes straight up, but these are likely to be “healthy” consolidation phases rather than new lows.

We will take it one day at time and always let the markets show us their intention, rather than imposing our analysis on them. If you want to know what is going on, watch what markets do—not what people say they will do or are doing.  To find a profitable trading edge, follow the money and take your lead from what it does.

Until Next Time,
Good Trading and Brain On!

By Dr. Janice Dorn, MD, PhD
Prescriptions for Profits
www.thetradingdoctor.com

Signup for your risk-free subscription to the Trading Doctor Newsletter. If you are not completely satisfied that our newsletter is for you just let us know, via email, within 7 days of your subscription date and we'll immediatly refund your money.

© Copyright 2006-09 -- Janice Dorn, M.D., Ph.D. -- Ocean Ivory LLC

Dr. Janice Dorn is a graduate of the Albert Einstein College of Medicine, where she received her Ph.D. in Neuroanatomy. She did her postdoctoral work in Neurophysiology at the New York Medical College. She received her M.D. from La Universidad Autonoma de Ciudad Juarez, did one year of clinical clerkships in Phoenix, Arizona. and then completed a Neurology Internship at The University of New Mexico in Albuquerque. For the past twelve years, Dr. Dorn has focused her attention on trading, mentoring and commentary in the financial markets, with emphasis on Behavioral NeuroFinance, Mass NeuroPsychology, Trading NeuroPsychology, Futurism and Life Extension. A graduate of Coach University, she is a full time futures trader and trading coach.  Dr. Dorn is the author of over 300 publications, relating to Trading and Investing Neurouropsychology, Market Mass Neuropsychology, Behavioral Neurofinance, and Holistic Wellness and Longevity. 

Dr. Janice Dorn Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

TraderJoe
28 Mar 09, 09:07
Covering Your Back

What your saying is that if this does turn out to be the bottom, then you did call the bottom, on the other hand if it does not turn out to be the bottom then you did not call it a market bottom, what a joke !


stock market today
22 Apr 09, 04:01
market bottom

This is fantastic! I love it! We have never seen a market bottom on good news.  Because markets are forward-looking, it is prudent to watch the reaction to news rather than the news itself. When selling is exhausted, stock prices rise even though negative news continues.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in