from dwa
NYSE Percent of 30 (30NYSE) Falls Below 60%:
Dan Sullivan of “the Chartist” found that when the Percent of 30 goes above 80% and then falls below 60% it will see 40% before it sees 80% again. Sometimes it falls much below 40%, into the teens. The 30 Week Moving Average is synonymous with the 150 day moving average. If more stocks are likely to fall below their 150 day moving averages than go above them, that is another warning sign that one should expect lower prices, or at least an upside struggle, from the market. The 80-60-40 move by the 30NYSE has happened twelve times since 1970, this is the thirteenth time and only the first since 1997. Each of the last twelve times the 80%-60%-40% rule was “activated,” so to speak, it has worked out. So there is a strong case to be made that we haven’t seen the end of consolidation from the market thus far.
One note here is that you don’t buy simply when the 30NYSE goes below 40%, it isn’t necessarily the end of a correction and can certainly go lower. So you will want to wait for a reversal up, which can come from much lower levels than 40%. Notice also that the last time the 30NYSE got above 80% was in July 1997, fell below 60% in December 1997 and finally moved below 40% in July 1998. The market decline in 1997 and then 1998 was the result of the Asian crisis (in retrospect), another topic of increasingly hot debate these days. Could we see another international crisis that pushes the market lower? It’s just something to think about, but the larger issue here is that we have seen the 80-60-40 trigger activated, which suggests further weakness to come. |
