Just recently, the three Dow Jones Averages (Industrial, Transport, Utility) did something they haven't done since October 2008. All three dropped to new 52-week lows almost at the same time (Aug. 24 for the Industrials and Transports, Sept. 4 for the Utilities).
That's a pretty rare event. In fact, it has happened only four times in the past 25 years.
The chart below marks all unanimous new 52-week lows with a thin blue-dashed line. The dates were September 2001, October 2002, October 2008 and September 2015."
Please note that all sell signals occurred in either September or October (more about that later).
October 2008 was not the most opportune time to buy, although buying worked out better for buy-and hold investors than selling. The September 2001 and October 2002 sell signals were just plain wrong. They occurred within days of fairly significant lows.
According to data from SentimenTrader, there were 14 similar sell signals from 1930-1990. Six months later, the Dow Jones Industrials traded higher nine of 14 times.
If you come across a research piece highlighting the validity of the recent Dow Theory sell signal, you may be better off ignoring it than exploring it. Now may not be the time to rely on the “bell bottom” of market guides.
Perhaps the most important message of the above chart is that some of the best buying opportunities occurred in September or October.
Could this September/October be the same, or will this year be more like 2007?
'via Blog this'
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