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Strategies & Market Trends : Tech Stock Options
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To: James Strauss who wrote (56500)10/27/1998 7:44:00 PM
From: donald sew  Read Replies (1) of 58727
 
Jim,

I have been watching the NEW HIGH/NEW LOWs very carefully and is an important part of my analysis.

I have found examples where the NEW LOWS were close to "0" for a whole month only to have the rebound end then produce lower lows. I have also found many cases where that rule of staying below 40 works. It also appears from my research that such rule works well in a BULL/uptrending market. On the other hand, I have noticed that such rule fails in a BEAR/downtrending market.

In the following chart, you can see 4 failures of that rule, during the 73-74 bear market (DEC 72, OCT 73, FEB 74, NOV 74):
decisionpoint.com

If you check throughout the 1970's there are many examples of such rule failing. Once the bull market started in the 1980's, that rule basicly worked all the time.

It becomes a question of what comes first: the chicken or the egg. Just not sure if that rule is a good leading indicator. If we are back in a bull market then that rule will work. I do believe that you will get the 4 days in a row, but I just have doubts that that rule is that conclusive. Back in the 1970's there was a whole month of less than 40 on the new lows, and we all know what happened in the 70's.

As I indicated in an earlier note, maybe add another variable like the new lows staying below 40 with the new highs above______(whatever).

Seeya
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