You can not have a bottom without a climax selling event. Friday’s action does not constitute a climax selling event. It is close but close does not count when there’s money on the line. It can become very agonizing waiting for a climax selling event because the market never goes straight down and there are usually several head fake rallies along the way. But, as the old Wall Street saying goes, it’s better to be out wishing you were in than to be in wishing you were out.
On Tuesday, April 10th, with the $SPX off by 23pts, we had a climax event. This led to the recent rally during which and on a closing basis $SPX added nearly 50pts. This rally, as we all know, was a struggle and IMHO if it hadn’t been for the AAPL pump job the rally wouldn’t have lasted nearly as long. We now know that AAPL is vulnerable to profit taking but what we don’t know is just how much profit is going to be taken from this tech darling and as long as AAPL remains under pressure then so will the rest of the market.
But I digress.
I just wanted to compare this past Friday’s data with the data from April 10th so that you can see in numbers what a climax selling event looks like. Everything I’m about to show you is stuff I’ve written about in the past so nothing new and the point is that these events are knowable because they occur over and over. I am purposely and intentionally transferring this knowledge to you.
Friday, May 4th Tuesday, April 10th
$NYUPV: 112 (below 80 is the key) 62
$NYDNV: 709 (800-900 is better) 902
$NYADV: 733 (below 500 is key) 449
$NYAD, daily: -1549 (-2000) -2135
$NYUD:$NYUPV: -5.39 (-12 is key) -13.49
$NYSI: -27.97 (-70 to -80 is key) -103.05
$NYMO w/BB’s: +63 ticks above lower BB -10 ticks below BB
Zweig Breadth Thrust: 44. 15 (40 is key) 35.07
4wk New High/Low: 24.38 (below 15 is key) 7.32
90% down day: 84% down day 94% down day
As you can see, April 10th was clearly a climax selling day while this past Friday was not. And it is black and white. It either is or it is not. That doesn’t mean that on some day following a fairly oversold market, like this past Friday, you won’t get a bounce, but it’s just better from a risk/reward stance to wait on the flush out that is climax selling event. It will come. It always does.
Keep your powder dry. The decline that has now clearly begun may not lead to a real market bottom for several months.
Good luck to us, one and all.