Sunday, February 10, 2008

Getting Close to a Bottom?

Here we see weekly new highs minus lows as a percentage of issues traded on the NYSE going back to 1981. What we can see is that a large number of bear markets ended with spikes in the proportion of issues making fresh 52-week lows. Specifically, we've seen 20% or more of stocks making new lows during the following periods:

* October, 1981
* May and July, 1984
* October, 1987
* August and September, 1990
* April, 1994
* September, 1998
* October and December, 1999
* September, 2001
* July and October, 2002
* May, 2004
* August, 2007
* January, 2008

Not all of these, of course, represented long-term bottoms. Nor did the market make an exact price bottom when the proportion of new lows peaked. For instance, we didn't see a price bottom in 1998 until October. The great majority of occasions, however, did represent bottoming processes of at least intermediate-term significance.


When New Lows Expand

Falling Markets and New Lows