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Doing a little digging


As you all know by now, I like to use some historical data when looking at the financial markets. Usually I find the best things when I am trying to prove my thesis wrong versus looking for evidence to support it. Today was no different as it struck me that NYSE advancing volume beat declining volume by a ratio of 15-to-1 yesterday. That would suggest a tremendous amount of buying interest and throughout the history of the markets it has been at times a signal for a bottom. Again, I was looking to find if I would be wrong because that is the most independent way of evaluating my own opinion.

There have been 5 prior readings above 8-to-1 in this bear market and the best-case scenario was two follow through days and then sideways action. That was the most recent on 10/11/02. The prior four had pretty results over the following two sessions, but were all followed by more meaningful declines.

According to one of my guru's who has forgot more than I know about technical analysis (you will be meeting him soon ;-))points out that such a strong ratio is only relevant after a "washout" takes place. That isn't the case here because we grinded lower and are still overbought on intermediate-term work.

Again, opinion remains unchanged - retest of early December levels followed by a best case scenario of trading range and worst case of retesting (and potentially breaking) the October low. I will keep trying to prove myself wrong though. It certainly wouldn't be the first time THAT happened.
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Good thing I still have this hat on because more snow a comin'
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