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(10/21/17)
Last weekend I talked about Mutual Fund activity and it's affect
on the market. This weekend I will focus on Advance Decline data which can
be used to time market bottoms as well. When focusing on Advance Decline
data I look for a high ratio between the number of Advancing versus Declining
stocks within a 2 week window. Going back to World War 2, when the number
of Advancing stocks has been much greater than the number of Declining stocks
over a 2 week period, this has been followed by additional strength in the
market. The chart below shows all of the signals going back to
1940.
Meanwhile here are a few additional things I would like to point
out. First notice there no signals from 1985 through 1999 even though the
market had substantial gains. Secondly, since 2009, there have been
"4" signals with the last one in October of 2015. Going back to
1940 there has never been this many signals within a 10 year
period.
Finally here is a table of the actual returns in the S&P 500
over a 6 month, 1 year and 2 year time period. for each signal. Notice
there has never been a negative return for the 6 month or 1 year period and only
"1" negative return in the 2 year period. Furthermore the
Average Return for the 6 month period was 15%, 1 year Period 23% and 2 year
period 37%.
| Signal |
# |
6 Month |
1 Year |
2 Year |
| Date |
|
Return |
Return |
Return |
| 12/8/1943 |
1 |
6.5 |
13.8 |
53.5 |
| 2/3/1945 |
2 |
7.5 |
37.1 |
15.7 |
| 3/8/1949 |
3 |
3.5 |
15.4 |
47.4 |
| 7/21/1950 |
4 |
21.7 |
24.4 |
41.8 |
| 7/11/1962 |
5 |
12.3 |
20.8 |
44.4 |
| 11/5/1962 |
6 |
20.0 |
25.9 |
45.9 |
| 12/3/1971 |
7 |
13.1 |
22.7 |
-3.3 |
| 10/10/1974 |
8 |
20.0 |
26.4 |
47.0 |
| 1/3/1975 |
9 |
33.4 |
28.6 |
51.3 |
| 8/20/1982 |
10 |
31.0 |
45.1 |
45.9 |
| 8/3/1984 |
11 |
10.0 |
17.9 |
44.7 |
| 5/24/2004 |
12 |
7.9 |
9.0 |
14.9 |
| 3/18/2009 |
13 |
34.5 |
46.8 |
61.0 |
| 10/14/2011 |
14 |
11.9 |
19.3 |
39.7 |
| 10/18/2013 |
15 |
6.9 |
8.2 |
16.5 |
| 10/7/2015 |
16 |
2.3 |
7.9 |
27.7 |
|
|
|
|
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| Average |
Return |
15.2 |
23.1 |
37.1 |
As far as the current market environment, the next area of
resistance in the S&P
500 is at the 2600 level. This level corresponds with it's upper Bollinger
Band using both a monthly and quarterly time period.
Amateur Investors
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