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"Drought" Surrounding Last Stock Market High Is "Something To Worry About"

Tyler Durden's picture




 

Via Dana Lyons' Tumblr,.

50-day “droughts” before and after a 52-week high in the Dow Jones Industrial Average have marked several major tops.

It has now been 64 days since the last 52-week high in the Dow Jones Industrial Average (DJIA) on May 19. While that may seem like an eternity in the context of the past 2.5 years, it’s not at all unusual in the grand scheme of things. However, what did have us thinking “hmmm” is the fact that there was also an extended period of time – 53 days to be exact – prior to the DJIA’s high on May 18 when the index was unable to score a new high. As it turns out, such droughts prior to and subsequent to a DJIA 52-week high have been unusual. And, as it turns out, such occurrences have often come at inauspicious times in the market cycle.

Specifically, we looked at times when the Dow Jones Industrial Average made 1 or more new 52-week highs within a 7-day span – but no other 52-week highs during the 50 days preceding or following that 7-day span. As it turns out, the current instance is one of 11 unique examples going back to 1960.

 

image

 

A glance at the dates (dots) on the chart tell you that several of the occurrences came near tops in the DJIA of some significance, including the last 2 cyclical tops. These are the months encompassing all unique signals since 1960:

  • January 1960: Intermediate-term top, held for 14 months
  • May 1967
  • August 1972: Preceded cyclical top by 4 months, which held for 10 years
  • July 1976: See next line
  • September 1976: Cyclical top, held for 5 years
  • February 1980
  • October 1988
  • January 1990: Intermediate-term top, temporarily surpassed during the summer but otherwise held for 13 months
  • May 2001: Cyclical top, held for 5 years
  • October 2007: Cyclical top, held for 5.5 years
  • May 2015: ?

As you can see, while the record is not unanimously bad, it certainly does not present a favorable risk/reward proposition. In total, here is the performance of the DJIA following all occurrences. You can see the negative manifestation of the timing of these events the further out you go on the return table. FYI, the return figures are calculated as of 50 days following the last 52-week high (in our present situation, that would be from July 30, i.e., 50 days after May 19).

image

Is this development – a 50-day drought before and after the DJIA’s last 52-week high – something to worry about? According to many of the prior occurrences, the answer is “yes”, particularly on a longer-term time frame. As there are only 10 other occurrences over the past 55 years with which to judge, some may argue the historical proximity of many of the occurrences near significant tops is random, statistically speaking. That may be the case. However, one can come to their own conclusion regarding the study. In our view, in combination with many other concerns out there, this is another red flag for the longer-term prospects of the equity market.

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More from Dana Lyons, JLFMI and My401kPro.

 

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Thu, 08/20/2015 - 09:27 | 6446773 JustObserving
JustObserving's picture

a 50-day drought before and after the DJIA’s last 52-week high – something to worry about?

Technical analysis on a total manipulated, corrupt market is worthless - more worthless than a 3 dollar bill with Putin's portrait on it. Or a 100 trillion banknote from Zimbabwe.

Thu, 08/20/2015 - 09:27 | 6446780 BobPaulson
BobPaulson's picture

Exactly. It's like the long lost days of buying stocks based on the company balance sheet and revenues. No longer valid.

Thu, 08/20/2015 - 19:06 | 6449398 rex-lacrymarum
rex-lacrymarum's picture

It never was. 

Thu, 08/20/2015 - 09:30 | 6446790 BandGap
BandGap's picture

Worrying is worthless. Just accept the inevitable.

Thu, 08/20/2015 - 09:44 | 6446830 sgorem
sgorem's picture

as a very famous philosopher once said, " What, Me Worry!"..................................

Thu, 08/20/2015 - 11:06 | 6447157 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

more worthless than a 3 dollar bill with Putin's portrait on it.

This kind of bill is entertaining and will be worth more than several FRNs.

Thu, 08/20/2015 - 09:26 | 6446776 ebworthen
ebworthen's picture

Look at that ridiculous ramp up since 1985!

DOW 4,000 would be optimistic!

Thu, 08/20/2015 - 11:45 | 6447345 tarsubil
tarsubil's picture

There is strong support at 8,000 or at 5,000. Let's not be ridiculous. Haha.

Thu, 08/20/2015 - 09:34 | 6446782 nope-1004
nope-1004's picture

The man claiming these markets are free, Martin Armstrong, said this today:

 

China was consuming almost 50% of all commodities so the contraction there is pushing the emerging markets off the cliff where we have $9 trillion worth of new debt created since 2007 in dollars. They assumed the trend would never end and then borrowed in dollars since rate were artificially low.

 

How can all markets be free, yet at the same time have "artificially" low rates?

 

ar·ti·fi·cial  adjective 

artificial:

  1. made or produced by human beings rather than occurring naturally, typically as a copy of something natural.

 

Armstrong, you are a fraud.  You also aren't very intelligent because you yourself have used words and phrases in your own writings that show your deception and lies.  But since revenue depends on fooling people and writing about the past and how your predictions on the past came true (lmao), anyone with a discerning eye will see it over time.  So keep writing.


Thu, 08/20/2015 - 09:32 | 6446793 Brazen Heist
Brazen Heist's picture

Does the stock market not look like a top to anyone? Its looks ridiculously inflated. The crash will be spectacular, or the Fed could try a PBOC, that would be even funnier. You have been warned. Sell now before they ban selling.

Thu, 08/20/2015 - 09:35 | 6446805 ejmoosa
ejmoosa's picture

Why are you guys looking for all of these obscure "proofs" that there's an issue?

Be patient.  The shit is going to hit the fan for the simplest of all reasons.

The profits earned by these companies are falling and not rising. Who pays more for lower earnings?

Thu, 08/20/2015 - 09:40 | 6446815 Brazen Heist
Brazen Heist's picture

Idiots who dwell in a world that's upside down.

Thu, 08/20/2015 - 09:46 | 6446837 sgorem
sgorem's picture

the fucking goverment through zirp!

Thu, 08/20/2015 - 09:42 | 6446824 Mike Honcho
Mike Honcho's picture

Thought this was an article on California.

Thu, 08/20/2015 - 09:46 | 6446838 buzzsaw99
buzzsaw99's picture

mr. yellentine has set the price

Thu, 08/20/2015 - 09:58 | 6446881 Smiddywesson
Smiddywesson's picture

nm

Thu, 08/20/2015 - 10:24 | 6446986 fowlerja
fowlerja's picture

Is it time to buy the dip now?

Thu, 08/20/2015 - 11:28 | 6447254 Tortuga
Tortuga's picture

So.

The 40 days and nights of no rain in E TX  surrendered to thunder, lightening, and rain today. August is so busted.

Yeehaw.

and

http://theconservativetreehouse.com/2015/08/20/how-all-the-candidates-fi...

I knew this, viscerraly, but couldn't put it so succintly. The scum have rallied their eunuchs against America.

I didn't know that about my man Cruz. Very vile, not as vile as Perry hiring the barbour scum.

Cruz can repent by his un equiviqual support of the the Donald and Palin.

God Bless America

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