Best of the Week
Most Popular
1.Stock Market Crash and Recession Indicator Warning: Extreme Danger Ahead - Harry_Dent
2. Is This How World War III Begins, In Almost Complete Silence? - Jeff_Berwick
3.Trump Wins 2nd Presidential Debate, Betfair Betting Markets Odds Bounce - Nadeem_Walayat
4.Why Krugman, Roubini, Rogoff And Buffett Dislike Gold - GoldCore
5.End of SPX Stock Market Correction Nears - Tony_Caldaro
6.Get Ready for the Future - Exponential Machine Intelligence Mega-trend towards Singularity - Nadeem_Walayat
7.US Housing Market Bubble II – It’s Happening Again! - Andy_Sutton
8.FTSE BrExit Stock Market Panic Crash Resolves towards New All Time Highs - Nadeem_Walayat
9.Can Trump Still Win Despite Opinion Polls, Bookmakers and Pundits all Saying Hillary has Won? - Nadeem_Walayat
10.Gold’s, Miners’ Stops Run - Zeal_LLC
Last 7 days
Stock Market Investment Success Through the “Investment Rule of 72” - 21st Oct 16
The Final Bottom in Gold - WHEN - 21st Oct 16
Gold Green Lights Upleg - 21st Oct 16
Demand for US Mints Silver Eagles has ‘Returned with a Vengeance’ - 21st Oct 16
Central Bankers Can't Stop The Death Blow Of The Post US Election Recession - 21st Oct 16
The Fortune at the Bottom of the Pyramid: Golden Opportunity for Frontier Asia - 21st Oct 16
Have You Taken These 4 Simple Steps to Improve Your Trading? - 21st Oct 16
The Stock Market is an Accident Waiting to Happen - 20th Oct 16
It's Rally Time for Gold and Silver Equities - 20th Oct 16
Cashless Society – Risks Posed By The War On Cash - 20th Oct 16
China's Insanely Leveraged Housing Market Will Enter Its Secular Bull Market In 2017 - 20th Oct 16
Donald Trump Bounces Going into 3rd and Final US Presidential Election Debate - 20th Oct 16
Attention Please: Phase Two of the Gold and Silver Train Now leaving the Station. All Aboard? - 19th Oct 16
How to Successfully Trade a Stock Market Crash - Black Monday October 19th 1987 - 19th Oct 16
Tesla, Apple and Uber Push Lithium Prices Even Higher - 18th Oct 16
Silver, Debt, and Deficits – From an Election Year Perspective - 18th Oct 16
UK Property Market: Slow Growth Does Not Equate To Decline - 18th Oct 16
Trump Election Victory is in Your Power - 18th Oct 16
Stock Market More to Come! - 18th Oct 16
This Past Week in Gold and Silver - 17th Oct 16
A Falling Stock Market Cannot Be Allowed - Financial Repression Is Now “In-Play”! - 17th Oct 16
Commodities, Forex and Stock Market Trend Forecasts - 17th Oct 16
Stock Market Crash..or No Crash? - 17th Oct 16
A perspective on risk rally – Risks abound but Stock Market is Confident - 17th Oct 16
Bank of England Blames Brexit for Sterling Drop Inflation, Masks QE Money Printing Cause - 17th Oct 16
From Piety to Pride to Pity, America's Racial Divide - 17th Oct 16
Is Obama Juicing US Government Spending To Get Hillary Clinton Elected? - 16th Oct 16
Seek Your Independence: Anything Else Will Destroy You - 16th Oct 16
SNL - US Presidential Debates, 1st, 2nd, VP - Like You've Never Seen them Before! - 16th Oct 16
End of Economic Growth Sparks Wide Discontent - 16th Oct 16
Donald Trump on Life Support, May Abandon Election Campaign and War on Republican Party - 15th Oct 16
The Gold Manipulators Not Only Will Be Punished, They Have Been Punished - 15th Oct 16
Black Votes Matter - Is the US on the Verge of Mass Race Riots? - 15th Oct 16
Gold Stocks Screaming Buy - 14th Oct 16
Brace Yourself for the Quadrillion-Dollar Reckoning - 14th Oct 16
The Next Recession Will Blow Out the Budget - 14th Oct 16
John Mauldin: My Infrastructure Plan to Save the US Economy - 14th Oct 16
World War III On The Brink: War Will Continue Until It Triggers Economic Collapse - 14th Oct 16
US T-Bill Rejection At Ports In Progress - 14th Oct 16
These 2 Debt Instruments Pose Peril to Millions of Investors - 14th Oct 16
China’s Rocketing Housing Market Real Estate Bubble - 14th Oct 16
DIY Winter Home Maintenance Money Saving 22 Point Checklist to Get Ready for Winter/Fall - 14th Oct 16
US Stock Market, Big Picture View - 13th Oct 16
Stock Buybacks Main Force Driving Bull Market; Rewards Investors and Starves Innovation - 13th Oct 16
SPX Gapping Down... - 13th Oct 16
Syria - Obama Stepped Back From Brink, Will Hillary? - 13th Oct 16
The Structure and Future of Gold in the Investment and Monetary World - 13th Oct 16
Can Trump Still Win Despite Opinion Polls, Bookmakers and Pundits all Saying Hillary has Won? - 12th Oct 16
Gold and Crude Oil - General Stock Market Links - 12th Oct 16
Samsung's Galaxy Battery Just The Tip Of The Iceberg - 12th Oct 16
Hillary: Deceit, Debt, Delusions (Part Two) - 12th Oct 16
Gold and Silver Metals Show Strength Relative to the USD Index - 12th Oct 16
Announcing Trader Education Week -- a Free Event to Help You Learn to Spot Trading Opportunities - 12th Oct 16
Confirmed Stock Market Sell Signals - 11th Oct 16
Hillary Deceit, Debt, Delusions - 11th Oct 16
Trump Support Crashes to New Low of 6.4 on Betfair Odds Betting Market - 11th Oct 16
The World Is Turning Dangerously Insular - 11th Oct 16
An American Tragedy: Trump Won Big - 11th Oct 16

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

LEARN to Trade

Stock Market Bottom? Follow the Money

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

By: Dr_Janice_Dorn


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

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

© 2005-2016 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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

Catching a Falling Financial Knife