Peerless Buy B16 Signals.

Buy B16     December 5, 2013 (C) 2013 William Schmidt, Ph.D.

     Big declines to the same very oversold status called the bottoms in 1987, 2001 and 2002.
     When these rules were back-tested, they also called the bottoms in 1946 and 1962.

     The Buy B16s since 1928 averaged a gain of 19.9%. There were no losers in the 26 cases.

                 Size of Gains
     >10%             16
     5%-9.99%    8
     2%-4.99%    1
     0%-1.99%    0
     Losses            0

Buy B16 Signals: 1928-2013

19291112      B16            209.7         .214  Fell to 198.7
     .73   -5.796  -249  -47  -1071  -.175  -2478  -.414  -.405 
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19311006      B16            99.3          .147  no paper loss
     .89   -3.501  -213  26  -1201  -.124  -973  -.393  -.351
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19311211      B16            79.6          .06  fell to 76.5
     .842  -4.016  -210  -7  -1188  -.323  -784  -.572  -.384
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19320602      B16            47.3          .004  no paper loss
     .900  -1.553   -104 13  -736   -.084  -305  .182  -.423
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19320708      B16            41.2          .85   no paper loss
     .902  -1.038   -19   7  -131   -.117  -63   .025  -.381
  The Buy B16 over-rides the Sell S13 the same day.
  Sell S13 cannot be allowed when 65-day up pct change is -.381!
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19321205      B16            56.5          .113   no paper loss
     .920  -.387    -52  17  -365  .009  -98  -.118  -.24
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19330228      B16            51.4          .988   no paper loss
     .904  -2.139   -82   4  -594  -.045 -263 -.065  -.187
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19330731      B16            90.8          .095   no paper loss
     .905  -.722    -28   -20 -202  -.159  -645  .029  .266
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19371119      B16            118.1         .086   fell to 114.2
     .904  -.80      11   -12  49   -.023  128    .119 -.377
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19380331      B16            98.9          .162   no paper loss
     .838  -3.04     -267  -5 -1408 -.373  -438   -.677  -.178
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19380404      B16            105.6         .088   no paper loss
     .912  -2.263    -210  22 -1105 -.321  -.383  -.53   -.127
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19390410      B16            124           .106   no paper loss
     .888  -2.307    -163   2   -750  -.202  -361  -.393  -20
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19400527      B16            116.4         .161   fell to 111.8
     .866  -2.743  -164  38  -819  -.317  -632  -.06  -.211
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19620622      B16            539.2         .083  fell to 537.7
     .919   -1.758   -398  1  -1104  -.233  -2167  -.293  -.248
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X Note that 19400515  S13 and B16 cancel each other out.
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19660831      B16            788.51        .022 no paper loss
     .966  -.643  -257  41  -667  -.189  -13  -.312  -.109
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19700525      B16            641.36        .108 fell to 631.16
     .911  -1.778 -449  -36 -951  -.172  -5   -.478  -.154
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19710809      B16            842.65        .055 fell to 839.59
     .963  -.802  -277  -36 -586  -.159  -4   -.404  -.102
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19711123      B16            797.97        .202 no paper loss
     .966  -.726  -273  -19 -579  -.144  -4   -.205  -.106
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19731205      B16            788.31        .076 no paper loss 
     .917  -1.802 -473   -2 -913  -.224  -6   -.377  -.120
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19740930      B16            607.87        .077 fell to 584.56
     .931  -.89   -173   -3 -173  -.103  -3   -.269  -.244
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19741210      B16            593.87        .456 fell to 586.83
     .961  -1.404 -296   18 -296  -.214  -4   -.328  -.105
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19871019      B16            1738.74       .117 no paper loss
     .698  -3.699 -391  -84 -769  -.223  -69 -.267   -.308
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20010921      B16            8235.81       .228 no paper loss 
     .846  -2.609 -655  -98 -638  -.180  -504 0.534  -.230
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20021009      B16            7286.27       .204 no paper loss
     .923  -1.969 -574  -131 -574 -.181  -516 -.399  -.199
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20081120      B16            7552.29       .185 no paper loss
     .905  -2.314 -842  121  -759 -.071  -464 -.294  -.155
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20090305      B16            6594.44       .277 no paper loss
     .867  -1.314 -638  -28  -575 -.126  -393 -.208  -.339
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                          No. = 26         .199  
 

Presidential Election   5     .263   
PE + 1                  7     .281 
PE + 2                  8     .150   
PE + 3                  6     .115

January          0      ---
February         1     .988 
March            2     .220     
April            2     .097
May              2     .135
June             2     .044
July             2     .047         
August           2     .039
September        2     .153
October          3     .156
November         4     .172
December         4     .176

1-10             9     .201
11-20            6     .173
21-31           11     .210

===================================================================================

       DJI - 1987 .... Two Buy B16s called the bottom after the Crash of 1987

The Peerless Buy B16 is based on the DJI closing more than 14% below the
50-day ma.   (The old Peerless said simply that the DJI must close at least 14.8%
below the 21-day ma.) The DJI must not be falling more than 4% in the current day.

Peerless Buy B16s always had the power to reverse a bear market between 1942 and 2007.
They did so in 7 cases. The two cases in 2008 are still undecided.    However, in the
Depression era bear markets, their record is less satisfactory.   In the 1929-1942 period,
the DJI fell far more than 14% below the 50-day ma on 9 occasions. In 5 cases, buying
then would have been profitable. But in 4 cases, it would have led to losses of between
10% and 25%: 1929, 1931, 1932 and 1937.

The Peerless Buy B16 is based on the DJI closing more than 14% below the
50-day ma.   (The old Peerless said simply that the DJI must close at least 14.8%
below the 21-day ma.) The DJI must not be falling more than 4% in the current day.

There can be no Buy B16 signals in August or in Septembers until after the 14th of the month.
This allows for the bearishness of September.

Look also at the associated key values:

1) Note that this signal has since 1938 reversed decines that were very steep,
where the Annualize Rate of Change of the 21-day ma was under -1.75
(or under 175%) for a year.

2) In all but one case, the DJI was down between 9% and 14% from its 21-day ma.
These are mostly (6 of 9) October and November Buys.

3) Note also that Accumulation Index is not as negative as might be expected given
how far below the 21-day ma the DJI is. In only 2 cases was the current Accumulation
Index (IP21) below -.18.

                                                            1962 Buy B16

2008 Buy B16

Buy B16 Track Record: 1942-2008

                       Date                    DJI       AnnRoc.    LA/MA    IP21     Gain When Reversed by Next Peerless Sell
                        -------------------------------------------------------------------------------------------------------------------------
                        9/19/1946          165.2    .911 -2.348     -137 -.141 -310 -.471              + .053
                                                Final bottom was at 163 on 11/22
                                                Do not use a continuation Sell S10 just a few days after Buy B19.
                                                (This will be eliminated in a future version of the software.)

                        6/22/1962           539.2    .919 -1.758 -398 -.233 -2167 -.283       + .083
                                                Final bottom was at 535.7 on 6/26

                         5/25/1970          641.36  .911 -1.778 -449     -.172 -5 -.457            + .113
                                                This was final bottom of 1969-1970 bear market.

                        12/5/1973          788.31   .917 -1.802 -473   -.224   -6 .36         + .085
                                                This was bottom for 1973 bear market. It resumed after March 1974 high of 891.66,

                        10/3/1974           587.61   -1.113      .914    -151 -.138 -3 -.34        + .093
                                                This produced a six week rally to 675 and then a re-test of lows.

                        10/20/1987        1841.01 .748    -3.114    .748 -408      -.180    -63 -.076      + .055
                                                More retests of 1800 were needed.

                        12/4/1987          1766.74 .929 -1.112 -193    -.076 -31 -.074        + .10
                                                This was final bottom. A bull market ensued.

                         9/19/2001         8759.13 .882 -1.965 -444 -.158 -409   -.394   + .055
                                                The DJI bottomed a few days later on 8/21 at 8235.81

                         10/8/2008         9250.10 .862 -2.168 -795 -.03 -378 -.168       +.006
                                                   Also Buy B1
                                                  The DJI fell to 8175 on 10/27/2008 before rallying.

                         11/21/2008        8046.42 .927    -.881 0555 -.091 -323 -.169   ????
==========================================================
                           Number of closed out trades = 9 Avg. Gain=      % All were profitable.

There is one significant problem. These signals assume there will be no Depression. If we look
at the period from 1929 to 1938, we see a number of cases when the DJI kept falling even
though it had closed more than 14.8% below the 21-day ma. We should also be wary of using
this signal if there has been a price-breakdown not much above the Buy B16. That point of
breakdown will act as resistance on the next rally. We want to have enough over-head room
to make it worth while buying on a Buy B16. Look at the case between 1839 and 1937 and you
will see examples of what would have been failed Buy B16s.

1. 1929 28% paper loss.

2. 1930 10% paper gain. This was the bottom.

3. 1931 17% paper loss before 8% maximum paper gain.

4. 1932 33% paper loss before a 15% paper gain.

5. 1933 Bottom and new bull market started.

7. 1937 Buy at 126. Rallied 10% to 139 and then fell to 115.

8. 1938 Bottom. Buy at 102. Fell to 99 and started a bull market, rallying 20% quickly.

9. 1940 Bottom. Buy at 121. Fell 8% to 112 and then steadily recovered

10.   1987 Bottom. Waiting for close below 14.8% lower band produced a great Buy.
                          There was no paper loss, except that the opening was at the high of the day on
                          the day after this Buy.

11. 2001 Bottom. Waiting for the close more than 14.8% below the lower band was a
perfect Buy,

Cases of DJI declines 20% below its 50-day ma

In the 1929-1942 period, the DJI fell more than 20% below the
50-day ma on 8 occasions. In 5 cases, buying then would have been profitable.
But in 3 cases, it would have led to losses of between 10% and 25%.
would have proved profitable. This is important because we
would have recently had three such Buy signals.

10/9/2008 - DJI 8579
10/15/2008 DJI 8577.91
10/24/2008 DJI 8379.95
10/24/2008 DJI 7552.29

10/28/1929 DJI    260.60 ... fell to 200 and rebounded back to 280 7 months later.
Declining 50-day ma reached at 250.
6/24/1930 DJI 211.80 ...DJI rose immediately to 240 and declining 50-day ma.
6/1/1931 DJI 122.80 ... DJI rallied to declining 50-day ma at 145.
9/28/1931   DJI    104.40 ... DJI fell to 90 and then rallied to declining 50-day ma. at 113
12/14/1931 DJI     77.20 ... DJI fell 3% more and then rallied to 86-89.
4/13/1932 DJI 61.20    ... DJI fell to 43 before rallying to 80
10/18/1937 DJI    125.70 ... DJI rallied to 138, fell to new lows and hit declining 50 dma at 130.
5/21/1940 ... DJI 114.10    DJI rallied to 138 in 5 months.