Tom Dorsey Q&A Message Board

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Strategies & Market Trends : Tom Dorsey Q&A

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To: Ms. X who wrote ()	2/20/1998 2:25:00 PM
From: Ms. X	of 102

Tom Dorsey Q&A Part 6. Wednesday, Feb 18 Q) What will happen to the oil service and oil stocks if we bomb Iraq? A) Who knows??????? Probably what you least expect. ---- Q) Jan again, I'd like to propose a question: Can you please describe what happened to the market in October. We were going along fine and then, Bam! Everything went to hell in a handbasket. I know the answer can be simple or long. Maybe we can give these folks a medium version of what happened. Also, you saved your clients in '87 before the crash. Can you tell us how you did that. Thanks. A) October set up just like all other tops. We saw the NYSE Bullish Percent rise to 76%. High by anyone's standards. It reversed down and that suggested we lost the ball. The sector bell curve was the highest reading we have ever had suggesting high risk. When you get that picture again, take it to the bank that the risk is too high to buy stocks. There can be a multiplicity of reasons on a fundamental basis to cause the indicators to set up like that but finding the exact sequence of events that caused it is a futile attempt. The indicators guide us. It's OK to be wrong in the market but not OK to stay wrong. 1987 set up in the same fashion. The first sign of trouble came in April with the reversal in the utility index bullish percent. It crashed form 70% down to below 30% in a heart beat, and the NYSE Bullish Percent reversed down also from 76%. Major sign of what was to come for rates. By August the NYSE BP reversed up again only rising to 68% when the Dow Jones went to a new High. Early in Sep. the NYSE BP reversed down for the second time that year going back to Bear Confirmed and that was the sign we all get out. We have a situation where the Dow Jones has made new highs now with the NYSE BP much lower than the last high in October. Will it play out the same way again? I don't know, we don't predict. We follow the indicators which takes much of the emotion of investing out of the equation.

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