from bronson on longwaves to hays
Don Hays and others have been calling for the end of the bear market
because of the 10-day moving average of the ARMS Index (same as Trin)
exceeding 1.50% I have sent him a question excerpted below, and I
will advise of his answer if appropriate:
I think you've overstated the history of the Arms, or Trin, index, Don.
Dick Arms is the first to point out that advancing and declining volume
statistics weren't even available before the late 1960s, which is when
my partner and I first started our institutional advisory service and
managing money. By way of background, we made money for our
clients during the period from the 1968 high to the 1974 low.
Don't you think you should warn your readers that you really don't know
how extreme the Arms readings were during the previous 40 years before
bear markets made their final lows? We have done some simulations and
are convinced that the 10-day moving average, with which you are giving
so much weight, prematurely triggered repeatedly all the way down in the
1929-32 side, as the most important counter example of its effectiveness.
You know trying to catch failing knives can be very dangerous to one's
wealth, so what's your hurry?
Furthermore, there are many other deflationary similarities today with
that period. We believe jumping back in when new post WWII records
are made in arbitrarily-designed technical indicators is one of the
reasons why this time will prove to be quite different and even partially
why individual investors haven't capitulated yet - everybody is telling
them to hold on because this and that indicator suggest the bottom is
very close at hand: a sharp V-bottom in the recent rapid deterioration
of corporate earnings is just a quarter or two away and the market mind
can see that; you have to buy before the non-recession is even recognized
since it has always worked that way - post WWII; the Fed saves the day
over 85% of the time because the market has gone up 13 out of 15 times
during the year following several rate cuts, etc., etc., etc . Upon
careful examination, every one of those arguments can be shown to be
flawed, and in any case, they are being promoted on TV every day mainly
by those who never had a unambiguous 100% sell signal and/or who don't
manage real money! I think you know what I mean.
Can you explain why insiders have, incredibly, have continuously sold
this decline, and they have not yet even started net buying? We think
we know why, but I would be very interested in your considered opinion.
Thanx in advance for your response.
Bob Bronson |
