weekend Nov 27 2021
Bov Farrell's Rule #8
8. Bear markets have three stages – sharp down, reflexive rebound, and a drawn-out fundamental downtrend.
Translation: Bear markets often start with a sharp and swift decline. After this decline, there is an oversold bounce that retraces a portion of that decline. The decline then continues, but at a slower and more grinding pace as the fundamentals deteriorate. Dow Theory suggests that bear markets consist of three down legs with reflexive rebounds in between.
This rule perfectly describes what happened Friday. Richard Russell referred to such days as 90% day where 90% of stocks closed down on the day. Such days are often followed by a bounce. Indeed the last two hours Friday suggest the bounce may have begun.
The -1,000 registered at 34,749 might have been the end of Wave Three.
January 22 Crude has fallen $14 in two weeks a remarkable reversal. The White House is getting the lower prices it wanted. But the message is quite negative in terms of future demand.
Natural gas actually rose 36 cents or 7% to $5.47. 1/22 gasoline fell 28 cents or 12.57%. That makes sense with crude falling.
We have pointed out that the NASD internal strength peaked way back in February and has been falling since.
Here is the percent over 50 day MA now at 30%, quite a drop from Nov 8 near 60%.
Our most reliable indicator the NYSE advance decline line is in retreat. This rarely happens so it is significant.
The summation index made a lower high on Nov 8 bt has now resumed its downtrend.
The volatility index soared yesterday.
We mentioned the NASD new lows made a new high earlier this week, that was a clue that a big correction was in store.
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