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mortiz

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Reply with quote  #1 
The NYSE market action on Wednesday, August 14, 2007, marked the fourth 90% down volume day over the past 20 trading days, which is a rare event indeed.  If you add a filter requiring the four 90% down volume days to occur within 20 days of six month (or more) new high in the SPX, these events become even more rarefied.

I only have a minute, so will just list the prior events meeting the above criteria and a general summary of price action going forward following these events:

1) 1940: Prices were 8% higher one month later, 10% higher three months later, 21% higher six months later, 7% higher 9 months later, 5% higher 12 months later, and 2% higher 18 months later

2) 1943: Prices were 0% higher one month later, 3% higher three months later, 2% higher six months later, 3% higher 9 months later, 9% higher 12 months later, and 16% higher 18 months later.

3) 1945: Prices were 9% higher one month later, 10% higher three months later, 22% higher six months later, 37% higher 9 months later, 39% higher 12 months later, and 13% higher 18 months later.

4) 1946: Prices were 7% higher one month later, 11% higher three months later, -11% lower six months later, -10% lower 9 months later, -11% lower 12 months later, and -10% lower 18 months later.

The 1940s are not the time frame one likes to make comparisons with, but the four instances in the 40s are the only examples fitting the criteria over the past 67+ years.

A quick perusal of the up-down volume data in the 1940s' events reveal only the 1940 instance did not have an intervening 90% up volume day within the 20 day window... which is the case of the current (2007) qualifying event.

In summary, I would prefer having historical precedents to look at other than those in the 1940s, but at least in our fathers and grandfather's days, selling pressure as we've witnessed over the past 20 trading days were, on-balance, followed by higher prices going forward.

FWIW

Randy
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fib_1618

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Reply with quote  #2 
Quote:
...selling pressure as we've witnessed over the past 20 trading days were, on-balance, followed by higher prices going forward.

Or at least some stabilization.

It's also interesting to note the Elliott pattern during this same 1940's period and it's eventual outcome later on.

Thanks Randy for taking time out of your hectic schedule for the post.

Fib






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kaiser_soze

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Reply with quote  #3 

Hi Randy,

I too have looked at the data going back to 1960.  Here is what I saw :

Getting a cluster of five 90% days (including the one in June) so close to a market top never happened going back to 1960.

A large cluster (four or more days) typically occurred deep into bear markets close to the eventual bottom.

Smaller clusters (one-two days) did occur on occasion close to market-tops.

What was the context of the 90% down-days you've posted ? 

Thx,

KS 
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mortiz

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Reply with quote  #4 
Greeting Kaiser,

The criteria I used for the above observations were meant to find other historical examples similar to the configuration we're currently in:

1) SPX is within 20 trading days of a six month or more high

2) Within the twenty day window outlined in (1) we have four or more days of 90% down volume days

No other filters were used and as you suggest the precedents were few and far between.  The 1940s (and 1930s) were periods where many extremes occurred both in breadth and volume, and I believe that was the nature of the "herd mentality" in those days, of stock prices moving together in lockstep.

Thanks for the verification that my programming was correct for the filtering criteria, as well as your comments.

Randy

PS: Fib, thanks for re-posting the long term EW chart!
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ken29

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Reply with quote  #5 
I think what Kaiser points out is very interesting and logical. 90% down days to me means climatic bottoms or trend reversal from the top. So his findings of a large cluster (four or more days) typically occurred deep into bear markets and smaller clusters (one-two days) did occurred close to market tops makes perfect sense.

Unless the current definition of a bear market is 7-8% correction in 5 weeks, one would assume we are closer to a top than a bear market bottom.

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kaiser_soze

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Reply with quote  #6 

90% upside day today after a string of 90% downside days. Lends credence to a bottom having formed.
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ken29

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Reply with quote  #7 
Are you sure it was a 90% upside day today?
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mortiz

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Reply with quote  #8 
According to the Wall Street Journal (90.66% up volume) and the NYSE's own data one can subscribe to (we do) the up volume was 90.71%, so yes, those two sources agree with Kaiser's data.

The 90% up volume day was the missing piece in the puzzle for the possibility of a bottom.  Most 90% down volume day clusters throughout history included a smattering at worst, a cluster at best, of 90% up volume days when an actual price bottom is in, or close.  So Friday's action on the NYSE adds another prop for the bulls that the worst of the price decay is behind is for awhile.

Now the bulls need to step up to the plate and drive the MCOs appreciably above zero with higher bottoms and higher tops.

Randy

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