www.tigersoft.com    
PEERLESS STOCK MARKET TIMING: 1915-2010                      5/23/2010  
(C) 2010  William Schmidt, Ph.D.

                             THE FIRST 9%-12% DECLINE
                FOLLOWING A BIG DJI ADVANCE.

After a big DJI advance, more than 20%, the stock market often has a decline that ranges
between 8.5% and 12.0%.  There were, at least 20 cases between 1933 and 2010.
A decline deeper than 13% is dangerous.  But when the NYSE A/D Line breaks its downtrend
after the DJI has fallen more than 9%, a brerak in the NYSE A/D Line downtrend usually
presents a good and safe buying opportunity, so long as the DJI is not above the 21-day ma. 
The charts for 20 cases from 1933 to 2010 are shown below:  I have circled in red
the break in the A/D Line downtrend.

The DJI most often makes a new high in the next three months.  There are some exceptions:
1937, 1957, 1976, 1994 and 2007.   Therefore, it usually best not to take a Peerless Sell
signal ) especially an S2) unless the P-Indicator is negative or it is year-end.   When the 65-day
is clearly rising, avoid using a Peerless Sell in the aftermath of the rebound from the first
10% correction after a big DJI advance.           

  

 

9%-12% Declines from Peaks after a Big Advance Are Common
                 20 Cases - 1933-2010
                  This does not include declines after rallies of less than 20%.
                  Most of rallies are much more substantial.
                  (ES = earlier Sell...  LB  = later Buy)
                                                                                                                            
Decline after Advance     Percentage Down            Sell              Buy             Previous DJI   Rally
                                                                                                                                 with 8% decline until this.
---------------------------------        ---------------------------        -------------  -------------         ----------------------------------
July 1933                                20%                               Sell S12   Buy B19       52 to 108

   March-April 1936                  12%                                 Sell S12   Buy B2          98 to 148
   Held at 150 4x and then broke through.
   Important - the DJI quickly goes to a new high.  Sell signals before the a new closing
   high was made all failed.  In each of these 3 cases, the P-Indicator was positive.
   This suggests we should not take a Sell in these cases unless the P-Indicator
   was negative.  This condition would have cancelled the three May-June Sells.
DATA3536.BMP (1077654 bytes)

        March-June 1937                 15%                                 Sell S9     Buy B8            143 to 193
        Waiting for A/D Line downtrend to end, Buying and then selling on the next
        Peerless Sell with the P-Indicator in negative territory worked well here.
        There was no nominal new high.
DATA1937.BMP (1082454 bytes)

      July 1938                                10%                                Sell S12   Buy B19        100 to 145
      Classic - Buy on A/D Line downtrendbreak after 9% decline. New high made subsequently.
DATA1938.BMP (1046454 bytes)

    July - Nov 1943                     11%                                none          Buy B1             93 to 145
    Classic - Buy on A/D Line downtrendbreak after 9% decline. New high made subsequently.

DATA1943.BMP (1051254 bytes)
   Jan -Feb 1946                       10%                                Sell S8     Buy B19         130 to 205
   Classic Buy using A/D Line worked well.  The policy of not using a subsequent Sell
   if the P-Indicator is positive would have helped us avoid bad Sell S9s.   Not that
   65-dma was rising.
DATA4546.BMP (1082454 bytes)
       June - July 1950                   15%                             ES9             LB4                   162 to 228
       Classic - Buy on A/D Line downtrendbreak after 9% decline. New high made subsequently.

DATA50.BMP (1039254 bytes)
     Sept - Oct 1955                     10%                               none           Buy B5             255 to 488
     Classic - Buy on A/D Line downtrendbreak after 9% decline. New high made subsequently.
DATA55.BMP (1072854 bytes)

  July - Sept 1959                      9%                              Sell S4      Buy B17           440 to 678
  Classic - Buy on A/D Line downtrendbreak after 9% decline. New high made subsequently.
wpe5BF9.jpg (66829 bytes)
  
   April - June 1965                  11%                              Sell S8      LB10                 560 to 940
   Classic - Buy on A/D Line downtrendbreak after 9% decline. New high made subsequently.

DATA65.BMP (1072854 bytes)


   Sept - Nov 1967                    10%                              Sell S12   Buy B17          740 to 940
   Classic - Buy on A/D Line downtrend-break after 9% decline. New high was not
   made on next rally.  The 65-day ma never turned up.  That allowed Sell S12
   to work, even though P-Indicator was positive.

DATA67.BMP (1051254 bytes)

June - Sept 1975                  11%                              Sell S8      Buy B17            577 to 876
Classic - Buy on A/D Line downtrendbreak after 9% decline.
DATA75.BMP (1082454 bytes)

Sept - Nov. 1976                    9%                               Sell S2      Buy B2              777 to 1018
       Classic - Buy on A/D Line downtrendbreak after 9% decline.
DATA76.BMP (981654 bytes)
wpe5BFA.jpg (12602 bytes)

   Nov - Dec 1980                      9%                               Sell S9     Buy B17             775 to 1000
   Classic - Buy on A/D Line downtrendbreak after 9% decline. New high was made.

wpe5BFB.jpg (70372 bytes)
  
    Two cases:
    May - July 1986                     9%                               ES2             Buy B17  
    Aug - Sept 1986                     9%                               ES9            Buy B17             1090 to 1900
    Classic - Buy on A/D Line downtrendbreak after 9% decline. Later new highs made.
wpe5BFC.jpg (70442 bytes)

  Oct - Oct 1989                        10%                             Sell S9     Buy B17             1740 to 2800
  Classic - Buy on A/D Line downtrendbreak after 9% decline. Later new highs made.
DATA89.BMP (1077654 bytes)

   Jan - Mar 1994                       11%                             Sell S4     Buy B19             2490 to 3990
   Classic - Buy on A/D Line downtrendbreak after 9% decline. Later new highs were
   delayed.  Selling on next Sell S9 with P-Indicator negative would have worked well.
DATA9394.BMP (1065654 bytes)

   May - July 1996                      10%                            Sell S1     Buy B17             3700  to 5800

      Classic - Buy on A/D Line downtrendbreak after 9% decline. New high made subsequently.
      S2 should not have been trusted because P-Indicator was positive and 65-dma was rising.

DATA96.BMP (1072854 bytes)


July - Oct 1997                       15%                            LS S12    Buy B17/B19    6400  to 8299 
wpe5C57.jpg (67706 bytes)

  July - Oct 1998                       20%                           ESell S9/S12 Buy B9        7200  to 9300
wpe5C58.jpg (69518 bytes)   

  Aug - Oct 1999                       12%                           Sell S12    Buy B17             7200   to 11250

  Feb - Oct 2004                        9%                             Sell S9      Buy B2/B9       7500     to 10750 
wpe5C59.jpg (72022 bytes)

  Feb - April 2005                     8.5%                          Sell S15    Buy B19             9800   to 11000
wpe5C5A.jpg (65480 bytes)
  Two 2006 cases.
  July - Aug 2007                     10%                           Sell S9      EBuy B14        12000 to 14000
  Sept - Nov 2007                     10%                          Sell S4     Buy B19              cycle 2 of previous drop.
DATA07.BMP (1077654 bytes)
  April - April 2010                    12%                          H&S           Buy B17/B19    6450 to 11000
wpe5C5B.jpg (57199 bytes)