Hi GZ:
I am going to wait and see what happens in the first full week of January. Yesterday did not ring true to me so I went back and looked around for a comparable day.
Since 10/27/97 (the day of the 500 point plus drop), there have been 3 days where the Arms index was lower on a closing basis than yesterday. Yesterday's closing Arms index was .55 (all closing Arms data is from WSJ).
On 10/28/97, the closing Arms was .22. On this day, the DJI was up 337 points at 7498. The next day the DJI went to 7506 for an 8 point gain. The very next day, it dropped back to 7381.
On 11/3/97, the closing Arms was .43. On this day, the DJI was up 232 points at 7674. The next day the DJI went to 7689 for a 15 point gain. The very next day, it gained another 3 points to 7692.
On 11/20/97, the closing Arms was .49. On this day, the DJI was up 102 points at 7826. The next day, the DJI went to 7881 for a 55 point gain. The very next day, it dropped back to 7767.
Although this is far from conclusive of anything, it seems that these strong days have very little follow through--at least within the next couple of days. I did not go back and see about the following week etc. Yesterday's market seemed to be flatter to me--that is a good advance/decline ratio with no strong pull from the DJI. This seems to fit in with the SC rally or the January effect. Everything seemed to do a little something good yesterday. So I will wait until January. All of this end of the year stuff will be cleared out of the market by then. |
