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This is likely not a major revelation to most readers: the probability of the current bear market’s ultimate low being lower than its current SPX 877 level is high.  There are several methods of concluding lower lows are yet to come, and this study looks at divergences of the NYSE AD McClellan Summation Index (McSum) with prices since 1926 when price declines of 40% or more unfolded, before the final low is established.

The first example is the bear market from the early fall of 1929 to the early summer of 1932 when the SPX posted its bear market low.  The SPX lost 86% of its value during this bear market phase.  However, the NY AD McSum achieved its low in October 1931 at -2915, eight months prior to the June 1932 price low (4.44 for SPX), providing a clear divergence with price.


The next example covers the 55% SPX decline in the March 1937 through March 1938 time window.  The NYSE AD McSum posted its low of -2048 on October 23, 1937, while the SPX bottomed at the end of March, 1938, five months after the AD McSum low.

Also included in this chart, is another SPX price decline of 45% between November 1938 and late April, 1942.  This major SPX decline was not accompanied by a NYSE AD McSum divergence, which is the only SPX-McSum non-divergence during price declines over 40% or more. The tail end of the 1938-1942 decline included the early time frame of active U.S. participation in World War II. 

The 1942 bottom coincided with the U.S. victory in the Battle of Midway which suggested to many Americans that the U.S. would likely eventually prevail in the Pacific theatre.  The lack of the AD McSum divergence with price in 1942 is likely due to the unexpected (by many observers) victory over Japan during this crucial test early in Word War II.


Another example of a 40% or more SPX decline was the decline from the January 1973 SPX high to the October, 1974 low, a decline of 48%.  In the 1970s example, the NYSE AD McSum bottomed in September 1974 (at -2039) while the SPX bottomed three weeks later in early October 1974.


The final chart illustrates two SPX price declines, the first being the price slide from late summer 2000 through October 2002. This decline was 49% on a closing basis, with its price low occurring in early October 2002, while the NYSE AD McSum bottomed July 26, 2002 at -1020.

The second “assumed” incomplete SPX decline from October 2007 is currently at -44%, with the NYSE AD McSum now at -1514, its lowest level since 1987.... with no AD McSum divergence with price yet.


Unless a major, unexpected event occurs in the coming months, similar to 1942, the probability is high our current market will see yet lower price lows in the coming weeks/months that will coincide with a higher low with the NYSE AD McSum.


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