Best of the Week
Most Popular
1. Best Cash ISA Savings Account for Soaring UK Inflation - February 2018 - Nadeem_Walayat
2.Gold Price Forecast 2018 - February Update - Nadeem_Walayat
3.Bitcoin Crypto Currencies Crash 2018, Are We Near the Bottom? - Nadeem_Walayat
4.Trump Bubble Bursts, Stock Market Panic Dow 1175 Point Crash Analysis - Nadeem_Walayat
5.Gold Corrects, Bitcoin Markets Crash, Whilst Stocks Plunge - Nadeem_Walayat
6.US Treasury Bonds: Fuse to Light the Bonfire - Jim_Willie_CB
7.Dow Falls 666 Points As Cryptocurrencies Crash And Krugman Emerges From His Van - Jeff_Berwick
8.Stock Market Roller Coaster Crash Ride Down to Dow Forecast 23,000 - Nadeem_Walayat
9.Trading the Shadows - Oil, Dollar, Stocks, Gold Trend Analysis - B.R. Hollister
10.Stock Market Analysis: Baying for Blood - Abalgorithm
Last 7 days
How Inflation Reduces The Real Value Of Social Security Net Of Medicare Premiums - 19th Feb 18
Could Stellar Lumens be a Challenger to Bitcoin for International Payments? - 19th Feb 18
US-China Trade War Escalates As Further Measures Are Taken - 19th Feb 18
How To Trade Gold Stocks with Momentum - 19th Feb 18
Is a New Gold Bull Market on the Horizon? - 19th Feb 18
Stock Market Decision Point! - 19th Feb 18
An Inflation Indicator to Watch, Part 1 - 18th Feb 18
Get on Top Of Debt Before It Gets on Top of You - 18th Feb 18
Will the Stock Market Make a Double Bottom? - 18th Feb 18
5 Reasons Why Commodities Are the Investment Place to be in 2018 - 18th Feb 18
1 Week Later, Stock, Bond Market Risk Remains ‘On’ as 2 of 3 Amigos Ride On - 17th Feb 18
Crude Oil Prices: A Case of Dueling Narratives? - 17th Feb 18
Free 1000 Youtube Subscribers Services - YTpals, Subpals, SubmeNow Test - 17th Feb 18
How to Trade as We Near March Stock Market Top - 16th Feb 18
Bitcoin as Poison - 16th Feb 18
GDX Gold ETF Weathers Stock Market Selloff - 16th Feb 18
Casino Statistics and Demographics - 16th Feb 18
IS Today Thee Stock Market Turn Day? - 16th Feb 18
Huge SMIGGLE Shopping HAUL, Pencil Cases, Drinks Bottles, Back Packs, Toys.... - 16th Feb 18
Tesla Cash Keeps Burning at $320 a Share - 15th Feb 18
Big Conflict Ahead in the Financial Markets - 15th Feb 18
Stocks Extend Rally Off Friday's Low, But Short-Term Exhaustion Near - 15th Feb 18
Stock Market Out on a Limb... - 15th Feb 18
Things Only a True Friend Would Say About Gold - 14th Feb 18
Global Debt Crisis II Cometh - 14th Feb 18
Understanding Crude Oil Behavior - 14th Feb 18
Stock Market is Getting Scary... - 14th Feb 18
Stock Market - This Time is Different. Really?! - 13th Feb 18
Gold and Silver Long-term Buy, Short-term Sell Signal - 13th Feb 18
SPX Futures Are Sliding... - 13th Feb 18
Stock Market Topping Process Begins. The Bubble Finds its Pin - 13th Feb 18
Math Behind the Stock Market Crash and What’s Next – PART2 - 13th Feb 18
Gold Stocks Groundhog Week - 13th Feb 18
Platinum Looks Poised for Surprising Gains This Year - 12th Feb 18
Friday's S&P 500 Stock Market Bounce To Continue, But Selling May Resume - 12th Feb 18
The Inflation Trade and Bond Yields Rising Result in Equities Correction - 12th Feb 18
February 2018 Stock Market Crisis – What Next? - 12th Feb 18
How To Profit From The Bitcoin Bloodbath - 12th Feb 18
The Philippine Economic Dream Could Be Within the Reach  - 12th Feb 18
Is the Stock Market Correction Over? - 12th Feb 18
What Does the Stock Market Decline Mean for Gold - 12th Feb 18
Addicted to SMIGGLE Mega Review, Pencil Cases, Stationary, Back Packs, Drinking Bottles, Toys... - 12th Feb 18
Best Cash ISA Savings Account for Soaring UK Inflation - February 2018 - 11th Feb 18
The Fed’s Impossible Choice, In Three Charts - 11th Feb 18
US Stock Market, Gold, Silver and the Macro Backdrop - 11th Feb 18
After Two weeks of Stock Market Decline, People Are Ssking, “Are We There Yet?” - 11th Feb 18
How to Grow Tomatoes From Seeds, Homegrown Organic Money Saving Gardening - 11th Feb 18
Youtube KILLS ALL Small Channels with New DeMonetization Rules - 11th Feb 18

Market Oracle FREE Newsletter

Urgent Stock Market Message

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

© 2005-2018 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

6 Critical Money Making Rules