Some info from www.sentimentrader.com: 2/20/09
"A short-term setup we've discussed a few times is that the market tends to rebound when we see 3 consecutive days of very weak breadth on the NYSE. This week has certainly qualified, as the Up Issues Ratio on that exchanges has been under 33% every day.
"The last time we've seen three straight days with less than 1/3 of NYSE issues managing a rise was November 12 of last year. The S&P gapped up the next morning and rose more than 6% during the day.
"But this morning, unless things turn around in a hurry, we're seeing a fairly substantial gap down, with the S&P indicated to open more than 1% below yesterday's close. Looking over the past 25 years of history, there were only six days when the the Up Issues Ratio was under 33% for three days, then the S&P gapped down by more than -0.5% the next morning.
"Those dates were 08/09/82, 04/14/87, 10/19/87, 04/04/94, 07/24/02 and 10/10/08. Each one of those occurrences coincided with at least a short-term bottom that day. The average intraday drawdown (excluding Black Monday in 1987) was around -1%, but (again excluding Black Monday) the market reversed to close higher than the open each time. If you had waited for the close to buy instead of the open, you would have avoided the disastrous drawdown in October 1987 while still being able to participate in further short-term gains.
"...when were the last two "Dow Theory" sell signals, according to when they both closed at a new three-year low on the same day? October 9, 2002 and October 3, 1974. Over the next three months, the maximum drawdown from those two instances averaged -2.1% and the maximum gain averaged +21.2%. Some sell signal, that."
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