Best of the Week
Most Popular
1.How U.S. Dollar Destruction Threatens the Global Economy - Steve Forbes
2.Why UK House Prices Will Continue Rising - 'It's Immigration Stupid' - Nadeem_Walayat
3. Bitcoin Price at Beginning of a Move up? - Mike_McAra
4.Gold Price to Plunge, Visiting Fort Knox - David_Hague
5.Silver Price Forecast - Metal to Gain Ground in August on These Factors - Jim Bach
6.Gold And Silver Will Rise With US Dollar Demise, Just Not Soon - Michael_Noonan
7.Bitcoin Price Strong Move Possible - Mike_McAra
8.Israel Gaza War Crimes - Soldier's Ordered to Shoot Civilians Including Children - C4News - C4News
9.UK House Prices Crash Warning - Daily Mail Cognitive Dissonance - Nadeem_Walayat
10.UK House Prices Boom - Top Quick Cheap Tips to Help Sell Your Home - Nadeem_Walayat
Last 5 days
Why Emotional Discipline is Key to Trading Success - 21st Aug 14
Getting the Most Value from Your “Geriatric Cruiser” - 21st Aug 14
Mafia Boss Claims Stocks A Bubble, Buy Physical Gold and Silver - 21st Aug 14
Outrage! On The Beheading of Our Media Brother James Foley - 21st Aug 14
Stock Market Crash a Historical Pattern? - 21st Aug 14
The Black Box Economy - 21st Aug 14
The Bond Market is taking Advantage of Janet Yellen`s Dovishness - 21st Aug 14
Meet Your Investment Manager - 21st Aug 14
Gold and Silver Trading Alert as U.S. Dollar Soars to New Highs - 21st Aug 14
President Obama Strongest Statement Yet on Israel Gaza War - 20th Aug 14
Peak Gold? Russia To Surpass Australia As World No 2 Gold Producer - 20th Aug 14
AI, Robotics, and the Future of Jobs - 20th Aug 14
Stock Market Investors What's Your Exit? - 20th Aug 14
The Gold War - Thinker, Trader, Holder, Why? - 20th Aug 14
Ukraine Interest Rates Soars to 17.5% As External Debt Cannot be Repaid - 20th Aug 14
Rising Interest Rates and The End of Stimuland - 20th Aug 14
Inflation Watch: $245,000 to Raise a Child in United States - 20th Aug 14
Inside the Stunning Deal That Put Apple and IBM on the Same Side - 20th Aug 14
The US Gold in Fort Knox is Secure, Gone, or Irrelevant? - 19th Aug 14
Bitcoin Price On The Brink of a Possible Reversal - 19th Aug 14
Why Tesla Stock Price Will Double in the Next 12 Months - 19th Aug 14
Europe's Economic Malaise: The New Normal? - 19th Aug 14
The Coming U.S. Economic Collapse Will Trigger a Revolution - 19th Aug 14
Market Bubbles, Bubbles Everywhere - 19th Aug 14
This is Your Economic Recovery With and Without Drugs - 19th Aug 14
Stock Market Strong Start to Jackson Hole Week - 19th Aug 14
Iraq, Ukraine - Oh, What A Tangled Mess We Weave - 19th Aug 14
How to Apply Moving Averages as a Trading Tool - Video - 18th Aug 14
Why Short Stock Traders Are Losing Money This Week - 18th Aug 14
Stock Market Rally May be Complete - 18th Aug 14
Why Chinese Citizens Invest In Gold - 18th Aug 14
Palladium Reaches 13-Year High Over $900 oz as Gold Trading Volumes Surge 66% - 18th Aug 14
Understand and Profit from Surging European Volatility - 18th Aug 14
No Escape from The Dollar as The Currency Standard - 18th Aug 14
Stock Market New Highs Less Certain - 18th Aug 14
German Stock Market DAX About To Drop - 18th Aug 14
Stay on Board - Stock Market Big Picture - 18th Aug 14
Europe Economy Is Tanking, QE Is Coming - 18th Aug 14
Are You Ready for The Greatest Technology Revolution Yet? - 17th Aug 14
Why King Coal is Bigger than Oil or Gas - 17th Aug 14
U.S. Empire of Death and Lies - 17th Aug 14
Ukraine - Whose Spin Are We Caught Up In Here? - 17th Aug 14
Time Decay And No Escape For Abenomics - 17th Aug 14
India BSE SENSEX The Party Is Over In Bombay - 17th Aug 14
Stock Market Uptrend Looks Underway - 17th Aug 14
The Key Role Of Conspiracy Theory In Dumbing Down Society - 17th Aug 14
The Federal Reserve in Denial Mode - Bond Market Explained - 17th Aug 14
Stock Market Ukraine-Triggered Volatility, But a Flat Finish - 16th Aug 14
Stock Market Investors Conditioned To Catch The Falling Knife - 16th Aug 14
Decline And Fall Of The CO2 Crisis - 16th Aug 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Biggest lie in Stock Market History Revealed

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

© 2005-2014 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

Free Report - Financial Markets 2014