Jerry,
Per the following research I did on the NEW HIGH/NEW LOWs, it is strongly imply that if the NEW HIGHS stays below 100 we should start pulling back once we top off. My short-term technicals are now in the mid-range still, so mathematically the DOW could move up 200-300 points still. So if Greenspan cuts rates the DOW could move up to around 9100 where there is a very strong resistance. If the rates are cut and the market still moves up but the NEW HIGHS stay below 100, I believe that the short-term top will arrive very soon, and then a pullback of about 5% or more. If we get to 9100 before TUE, the market could still move up some but it will be limited.
My strategy is that if rates are cut I will hold off until 9100 range to short, and based on the NEW HIGHs not exceeding 100. If there is no rate cut I will immediately initiate DEC/JAN PUTs upon the announcement. Alot of it depends on where we are at the announcement, so if the DOW is around 8700-8800 I will probably go long if rates are cut - the closer we are to 8100 the less likely I will go long.
INDEX UPDATE
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I just finished going thru 28 years of data, starting with 1970. Here's my conclusion.
CRITERA - NEW HIGHS under 100 & NEW LOWs between 10-50 for 1 month,
and such occuring after a significant runup of greater than 5%.
I lost count, but such patterns noticed since 1970 was near 25, so I will conclude that
such is statistically suitable.
After the month of sufficing the above criteria, the NYSE pulled back approximately 5%
or more. Prior to the big corrections in 1973, 1987, and this year, the above criterium
occured as early a 1-2 months prior to the big decline.
I lost track of the exact probability since my daughter used the paper I wrote the data
on to pick up something the dog left on the floor - I wont go into anymore detail
ggggggggggggggg. However, to the best of my recollection it was very close to the 90%
level of accuracy.
This study does not conclude or infer that a crash is coming, but only that after such
criterium occurs there is a significant pullback of approximately 5% or more within the
following month.
So, as long as the criterium is met, we should see a pullback within 4 weeks. Lets say
that the rates are cut next TUE, but the NEW highs do not get above 100 after the rate
cut - then we should see a pullback of about 5% or greater.
seeya
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