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Lowry Research Update: Market Going Lower at Trader’s Narrative




Lowry Research Update: Market Going Lower


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Today’s market strength isn’t surprising as we looked at different breadth measures that suggested that in the short term, the market was approaching oversold.

But today’s strength notwithstanding, looking out further along the time horizon, we are probably going to see lower prices. According to the latest report from Lowry Research, their proprietary Buying Power Index, which measures the demand side of the market, has falling dramatically.

paul desmond cnbc interview

Concomitantly, the Selling Pressure Index - their proprietary measure of supply - is now heading up after meandering for a few months. These two taken together mean that the stock market may even retest or go through the March lows.

The usual script for a new bull market is very shallow retracements and an immediate and aggressive bounce from any oversold condition. We are not really seeing that, at least so far - which leads many to conclude that we are not in a bull market but rather continue to trundle through a brutal bear market.

Although Lowry Research is probably best known for Paul Desmond’s seminal study of the role of 90-90 days in the birth of bull markets, they themselves follow their two proprietary supply and demand indicators for guidance on future market prices. To read more about Lowry’s methodology and charts of Buying Power and Selling Pressure indexes, see this: Lowry Research On Current Market Conditions.

You can also watch Paul Desmond’s recent CNBC interview where he mentions basically the same arguments for a defensive position going forward.

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6 Responses to “Lowry Research Update: Market Going Lower”  

  1. 1 Pej

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    Proprietary research or public simple research lead to expect a major decline of the market.
    the US markets are expensive… very expensive…

    To the point where the PER on the S&P 500 is at the highest since 1936 (since inception!) and has been hovering above the incredible figures of the peak of the tech bubble: Historical PER record value on the S&P 500

    So if you hope for the PER to hit 7-8 with the current earnings… the S&P should be trading 80% lower… scary…

    Conclusion, even if the recovery was here, that earning would indeed raise dramatically, the market would still be extremely expensive…

  2. 2 Jim

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    Pej, historically that’s not the way stocks are valued at the beginning of bull markets. Do you remember what the trailing or forward P/E ratio on the Nasdaq was in October 2002?

  3. 3 PEJ

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    Jim, I’m not talking about methodology, but just plotting the historical quarterly PER values of the S&P from inception to date. I believe there has been other “beginning of bull markets” besides the 2002 bottom. Secular bottoms are usually marked by very low PERs, not extremely high ones :-)

  4. 4 JT

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    Thanks for the update from Lowry’s. Please make more frequent posts to update us on Lowry’s buying power and selling pressure in the current market.

  5. 5 Goldstocktrades.com

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    Be careful failed head and shoulder patterns often lead to major rallies.

  6. 6 Pej

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    Babak, it seems Lowry’s timing was quite inaccurate…

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