Trader’s Narrative

As promised in yesterday’s post about the NYSE bullish percent index, here are some notes from the Lowry Research meeting. You can view the accompanying charts by downloading the PDF file from the free trading resource section. The file is in the Reports & Articles folder:

In case you’re not familiar with them, Lowry is one of the most respected technical research firms. Their prestige flows not only from their longevity (they are the oldest continuously published letter on the US markets) but also due to the quality of their analysis. Their principal, Paul Desmond, won the Charles H. Dow award in 2002 for his research into 90-90 days and their role in market bottoms. They have mostly institutional clients with some retail clients paying $1000 a year for regular access to what you’re about to glimpse.

This also has some poignancy today since we have now fallen appx. 55% from the 2007 top as Paul Desmond opined: How brutal can this bear market get? We are now below the S&P 500 2002 bear market level. Is that enough? has the bear extracted its pound of flesh? Read on to find out what Desmond’s firm thinks.

The presentation was given by one of their junior analysts, Tracy Knudson (CMT). First she reviewed what happened at the market top in 2007 and then moved forward to today and Lowry Research’s view on where we are headed from here. Then a brief overview of sectors and the changing role of 90-90 days:

• Lowry is now known for Paul Desmond’s research into 90-90 days but they primarily use proprietary indexes: buying power and selling pressure
• use these two metrics to gauge health of the market and the underlying momentum to measure who has upper hand
• important to look at both components of 90-90 days: total price points gain/lost and total volume of advancers/decliners
• buying power & selling pressure calculated from public information released by NYSE for that exchange
• Lowry is working on beta versions of same for NASDAQ and international markets (still private)
• mid-July 2007 first warning sign that bull market losing strength
• new high on index not confirmed by adv/dec breadth of NYSE (OCO) operating companies only, S&P 500 or NASDAQ
• this was a sign that rally was becoming selective rather than continuing as broad-based

Continue reading ‘Lowry Research On Current Market Conditions’

Lowry’s research into what market internals create bear market bottoms has quickly become common knowledge among technical analyis buffs.

If you haven’t already, follow the link to read the complete article (in the Charles H. Dow Award folder).

I’ve written about 90-90 days quite a bit because it has continued to be an almost uncanny guide for the past few years. Most recently, we had a 90-90 up day last week.

Here’s an interesting article from Schaeffers Research on the rare instances when a 90/90 down day is immediately followed by its opposite (a 10/10 day). This happened on August 17th, the day after that picture perfect hammer printed on almost all indices.

Here’s a graph from Schaeffer’s article (click to enlarge):

But according to Lowry’s itself, things may not be so clearcut. Believe it or not, in the past month, the market has given us 8 90/90 extreme days (either up or down). Lowry’s calls it “the greatest rash of extreme volatility in at least sixty years.”

Their conclusion is a bit more sanguine:

“With the evidence currently available from our measures of Supply and Demand, the probabilities favor a limited recovery rally. The 74 year history of the Lowry Analysis shows that such rallies are usually best used to sell into strength and build defensive positions. However, it is important to recognize that exceptions to the probabilities are always possible.”

Since they are the inventors and keepers of this measure, I’m glad to give them the last word. But I’m afraid their conclusion is as clear as mud.

This is a lasting rally, unless it isn’t.

Um… Thanks.

Credit: Bob Pisani’s Trader Talk Blog