DJI Declines of 4.9% or more without a
Peerless Sell
(C) William Schmidt, Ph.D. 8/27/2016
------------------------------------------------------------------------------------------------------------------
Since 1945, about 71 years, there have been only 25 cases
where the DJI
fell 4.9% or more without Peerless having given a timely Sell. This means
a DJI
decline of 5% to 11% occurred about once every 2.86 years without Peerless
giving an automatic warning. In bull markets making new highs, like the
present case, where Peerless was on a Buy, the biggest unheralded DJI declines
tended to be where:
1) From tops where the DJI was more than 5% over the 21-day ma.:
7/24/1939, 11/3/1982, 8/21/1984, 10/28/2011
2) From tops where DJI closes 1.7% or more above the 21-day ma
and the IP21 is negative:
5/15/1975, 10/16/2080, 4/17/1986,
3) From tops where the DJI close 3.5% over the the 21-day ma
and the IP21 is less than .078:
7/24/1939, 8/21/1984, 4/11/2000 and 11/27/2002.
These 3 cases' prerequisites will have to be back-tested again.
But my sense now is that that they are not sufficiently reliable to
use as Sells. (More on this later...)
===> Current case needs to be tested:
- When IP21, V-I, OP21 were negative with DJI 0.7% above 21-dma.
10/18/91 (and 8/15/2016 if DJI were to fall 5% from peak.)
The three biggest such declines in bull markets were:
Pct Decline
at nadir.
11/3/1982 7%
The previous top was 5.9% over 21-dma.
10/18/1991 7.0%
The previous top was 2.3% over 21-dma.
8/6/1997 7.4%
The previous top was 2.5% over 21-dma.
In all but 3 of all 23 cases, the previous top before the decline was
at least 1% over the 21-day ma. Our most recent top on 8/15/2016 was
only 0.7% over the 21-day ma. Only one of 27 of the "uncalled" tops took
place so close to the 21-day ma.
Rising Mkt
11/21/1935 6.5% 1.032
.068
Rising Mkt
7/24/1939 9.0%
1.054
.074
Rising Mkt
7/12/1944 5.0% 1.015
.138
Mini H/S Presidential Election Year
Rising Mkt
3/6/1945 5.9%
1.022 .261 .584
Rising Mkt.
11/27/1950 5.9% 1.027
.127 .276
Rising Mkt
8/11/1952 6.0%
1.008
.144 .539 Micro H/S
Presidential Election Year
Bear Mkt
8/23/1962 9.5% 1.030
.194 .647
Rising Mkt
5/31/1963 5.3%
1.008 -.024 -.096 Mini H/S
Bear Mkt
11/10/1969 11.0% 1.016
.194 .647
Bear Mkt
7/27/1973 9.0% -----
.169 .558
Rising Mkt
5/15/1975 5.0%
1.024 -.034 .264
3rd Year Bullishness
Bear Mkt
11/11/1977 5.0%
1.037 .15
.233
Rising Mkt
9/22/1980 5.1%
1.030 .026
.19 Presidential
Election Year
Rising Mkt
10/16/1980 5.3%
1.004 -.106
.026 Presidential
Election Year
Rising Mkt
11/3/1982 7.0%
1.059 .179 .391
Rising Mkt
10/10/1983 5.6%
1.032 .108
.106
Rising Mkt
8/21/1984 5.0%
1.054 .066
.504
Presidential Election Year
Rising Mkt
11/6/1984 6.7%
1.031 .113 .202
Presidential
Election Year
Rising Mkt
4/17/1986 5.2%
1.025 -.001
.141 big P-I NC of New High.
Basing after Bear Mkt
7/5/1988 7.7%
1.021 .083 .108
H/S
Presidential Election Year
(Rising Mkt
10/18/1991 7.0%
1.023 .027 -.039
V=-3 Already on a Sell.)
Rising Mkt
8/6/1997 7.4%
1.024 .105
.321 up 28% in previous 4 months.
Rising Mkt
5/13/1999 5.8%
1.028 .07 .335
Rising Mkt
4/11/2000 8.5%
1.036 .064
-.065
Presidential Election Year
Bear Mkt
11/27/2002 7.0%
1.039 .077
.269
Rising Mkt
2/18/2011 6.2%
1.023 .238
.519
Basing after
Bear Mkt 10/28/2011
8.0% 1.067
.177 .26
Rising Mkt
5/28/2013 5.0%
1.019 .18
.24
Rising Mkt
12/5/2014 5.0%
1.012 .161
-.20
(Rising Mkt
12/26/2014 4.9%
1.018 -.004
.217)
(Rising Market
8/15/2016 ?%
1.007 .051
-.195 V=-2)