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Sol
My prediction for continuation of the "bear market" does not rule out the DOW
from hitting 12,000. I am arguing only for longer term investors that the
technical signals are flashing very serious warning signs of a significant top &
that April constitutes the top for the broad market. The advance decline line is
now divergent for 10 months since the top in April 1998. (Since 1955 there have
been 15 tops or top signals signals. Two were false,1964 & 1988. 1968, 1983, and
1993 there were no divergent signals.) (See http://www.decisionpoint.com for
charts from 1926.) Divergences longer than the current 10 months occurred in
1973 for 19 months and in 1987 16 months. I would describe the current
divergence as catastrophic.
My doubts to the accuracy of my prediction do not relate to the broad market but
to the DOW which represents the most heavily capitalized issues. These are
virtually always the last to start declining in the "bear." Better timing methods
come with Fed tightening, rising interest rates and escalating inflation. We may
see none of this in this bear market. I suspect we will get the bear with Fed
stimulation, declining interest rates and declining rates of inflation. Earl
Adamy from the Realtraders List has cited extreems of specialist short selling.
(Does anyone have a free source for charts on this?) This confirms the extreems
of call buying and observation of extreems of speculation in internet stocks. The
kind of speculation we see now I associate with the 1969 rally after the 1968 top
and the 1962 speculation. In each case serious declines followed. 1962 was not
associated with conventional Fed tightening though interest rates did rise.
BerniceSol@xxxxxxx wrote:
> Dear Stuart,
>
> Perhaps the very fact that the Dow and the A/D are divergent proves that there
> is not one "market" but at least two, and that the conventional measures don't
> apply.
>
> Sol
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