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An interesting question arrived privately which I hope might generate some.
I'm attaching the earliest history I have for this series beginning in 1970
to which I've added a pair of heavier lines outside the "normal" range
lines. A couple of items stand out:
1) the extreme low pivots have generally indicated market bottoms and have
been followed by a strong rise in the indicator. In the most recent case, we
had a much more extreme low without a significant rise followed by another
decline.
2) the sharp rises of around 800 points from the bottoms have generally
signaled the beginning of a strong advance. In the most recent case, we did
have a nearly 800 point rise off the extreme low, however that rise did not
come close to taking out the prior pivot high or rising into the green
overbought zone.
A couple of explanations come to mind:
a) A larger number of NYSE listed issues would generate more extreme values.
b) We could be completing a major bull market top, however weekly historical
data is not available for comparison with the previous bull market top in
1968.
c) The deeply oversold level is indicative of a bottom and we are merely
retracing some of the nearly 800 point rise which will be followed by a
breakout above the previous pivot high. This hypothesis appears to be
unsupported by comparison with previous major lows.
Comparing these bottoms to the S&P Earnings Yield/TBill Ratio chart I post
here frequently, I do note that the ratio has been in the .5-.6 range with
each of the significant market bottoms while the most recent bottom was
accompanied by an extremely high reading of 1.1 which left little room for
ratio expansion and the ratio recently hit a record (since 1941) value of
1.549 . We have no irrefutable proof, but the combination would suggest that
the probabilities lie with the bull market top hypothesis.
Earl
-----Original Message-----
>Thank you for your work.
>Why do you suppose the amplitude of your OB/OS indicator has increased so
>dramatically since mid '97?
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