Jun 30, 2008 - Issue #117
Official Bear Market!
"Official Bear Market!" proclaimed the CNBC guest analysts as the Dow-Jones Industrials passed
20% below the October high. Duh!
Personally, in my judgement, tracking the movement of the individual Dow components as
we do in the weekly statistical compilation below gives plenty of early warning. When
the percentage of Dow stocks first showed over 50% in the declining trend category, the
klaxon horn was sounding (see 'Inside the Dow').
When will the market turn from 'Bear' to 'Bull'? When the number of Dow components in
the rising trend category crosses above 50%, of course. Right now, the percentage of Dow
stocks in that classification is zero. You won't have to wait for the 'average' to rise
20% off it's low for that to happen. It will give plenty of warning. Traders know what
they are looking for. When they see it, they act.
What should we be looking for? IMO, keep shorting on rallies and covering on declines
until that no longer works. As long as the US$ remains weak, as long as stocks are
trading below all the moving averages, as long as oil and gold remain strong, trade the
'short' side of the market (the line of least resistance). It's simply a matter of doing
the opposite of what you would do in a 'bull' market. Remain flexible in your attitude.
The big 'tip off' will come on the day when the candlestick charts show large 'bottoming
tails'. Those are significant days, just as the reverse (topping tails) is true at
significant tops (see Trade Like Jesse Livermore).
Dow score card for the week ending 6/27/08.
DJ-30: 11346.51 -496.18 -4.19%. The Real World (arithmetical) DJ-30: 46.45 -2.03 -4.19%.
UP: 4, Down: 26.
Trends (weekly charts): This is the subjective part.
Rising (Generally Higher Highs/Higher Lows) 0 (n/c) 0%:
Consolidating (Generally Lower Highs/Higher Lows) 5 (-7) 17%:
CVX, +*MRK, MSFT, WMT, +*XOM.
Declining (Generally Lower Highs/Lower Lows) 25 (+7) 83%:
AA, AIG, AXP, -*BA, BAC, C, -*CAT, -*DD, DIS, GE, GM, -*HD, -*HPQ, IBM, -*INTC, JNJ, -*JPM,
KO, -*MCD, MMM, PFE, PG, T, -*UTX, VZ.
+/- denotes change of direction.
* denotes change of category.
Comments? Ideas? Feedback? Let me have it, right between the eyes! I'd love to hear from you. Just reply to this zine and tell me what you think!