Sep

5

The following quote was sent to me by a caring sharing type. Originally written by one Robert McHugh. It sounds like he has done a study; can you debunk it? I do not have as much data as you …

The probability of a decline — often significant — is high whenever the percent of Dow Industrials stocks above their 30 day moving average rises above 80.00 percent. We show every instance this happened over the past two years. There were 8 occasions when this occurred and 11 prior occasions if you include three that got close to 80.00 readings. All but one generated declines of several hundred points shortly thereafter. The one that did not resulted in a smaller decline, yet still a decline, and 60 days later we got a sharp decline. We sit Friday, September 1st, 2006 at 83.33, a twelfth occasion. So, if history is any lesson, we have a 91 percent chance of a sharp decline occurring over the next several weeks…It takes being a cock-eyed optimist, or having full faith in government intervention, to see a long-term Bull market rally continuing from where we stand today.

I am an optimist because it works — however cockeyed I may be sometimes!

Vic replies:

This is totally ad hoc. The period chosen is selective and probabilities are given rather than expectations. Many other factors besides moving averages of that length can be given. It is biased and helping a position along.

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