Yes, CNBS. And it isn't a bad show. In fact, it has improved. (Rukeyser: Pls. compensate me for that.)
TW is apparently looking at the advance/declines, as he was when he was identifying the top of the bull market. It would be very interesting to look back to see how the adv./declines have behaved during other bear markets. If it's true that the blue-chips are generally the last to fall in bear markets, how would that affect the advance/declines in the later stages of bear markets? Is it possible that in the later stages the advance/declines would be somewhat misleading, as a smaller group of big caps (such as IBM?) finally plunged, while other stocks were bumping around after having touched bottom (and maybe not the final bottom), making an effort to advance? So the small-caps would have made a good attempt at a rally, for example, but the big caps would be preparing to give way.
It would be interesting to see past adv./dec. data during previous bear markets. And if the adv./declines have been predictive, it'd be interesting to know how early the signals were, and whether there have been many false signals before the bottom. The advance/decline signals with the market top were apparently a couple of years early, tilting to the downside in '98, before the ultimate end of the bull market. Would any reversal signals now be a couple of years early?
As you know, Decision Point says the GAAP S&P P/E is greater than 40, and that historically, the overbought level has been 20 and the oversold level 10. How will accounting shenanigans factor into this bear market, when the GAAP P/E is apparently so high? Even the pro forma P/E cited recently by Decision Point was 27.7. Why would that be unimportant? The market remains overpriced.
Another thing is the adv./decl. vol. That might support the view that the heavily traded big caps are caving in now, that there's heavy distribution going on. So while the adv./declines might have their good days, the adv./decl. vol. hasn't confirmed the strength. It may be telling another story.
The goal of TA is to pinpoint tops and bottoms, but the time frame depends on the traders' time frame. In time, any decision or analysis can seem right or wrong. |
