Last Hour Indicator Posts Largest One-Day Advance in Two Years (Again)
By
Rennie on Friday, August 19th, 2011 at 1:00 pm
With this morning’s drop, the Last Hour is currently set to gain a little over 50 points Friday. Any strength in the final hour of trade will send the Last Hour up further. That’s significant given that the indicator spiked over 400 points on Thursday, its largest one-day advance in over two years. If that sounds familiar it’s because the same thing happened exactly one week ago (see 8/11 column).
Any gain of more than 13 points today will send the indicator into new highs for the year. That’s not what you want to see if you’re hoping for a bullish resolution to this downturn. As I mentioned last week, it’s positive in the sense that we’re finally entering the accumulation phase, but it’s negative in the sense that this phase often coincides with the worst part of a bear market. Here’s a long-term view of the Last Hour indicator going back to 1970. Notice that after a major distribution phase like we’ve seen the last couple of years, the accumulation phase often coincides with sharply lower prices. Only when the retracement is complete and the Last Hour has recouped the entire move down from the last two years would it signal a long-term bottom is at hand.
Along with the recent bearish positioning by commodity trading advisors, it’s increasingly difficult to like the market’s long-term prospects.
After Thursday’s 3.7% drop for the Dow Industrials, take note if the Dow closes down in excess of 2% today but less than 3.7%. That would trigger the ‘crash warning’ signal discussed in this column from last June.
Last Hour Indicator Posts Largest One-Day Advance in Two Years (Again)
By Rennie on Friday, August 19th, 2011 at 1:00 pmWith this morning’s drop, the Last Hour is currently set to gain a little over 50 points Friday. Any strength in the final hour of trade will send the Last Hour up further. That’s significant given that the indicator spiked over 400 points on Thursday, its largest one-day advance in over two years. If that sounds familiar it’s because the same thing happened exactly one week ago (see 8/11 column).
Any gain of more than 13 points today will send the indicator into new highs for the year. That’s not what you want to see if you’re hoping for a bullish resolution to this downturn. As I mentioned last week, it’s positive in the sense that we’re finally entering the accumulation phase, but it’s negative in the sense that this phase often coincides with the worst part of a bear market. Here’s a long-term view of the Last Hour indicator going back to 1970. Notice that after a major distribution phase like we’ve seen the last couple of years, the accumulation phase often coincides with sharply lower prices. Only when the retracement is complete and the Last Hour has recouped the entire move down from the last two years would it signal a long-term bottom is at hand.
Along with the recent bearish positioning by commodity trading advisors, it’s increasingly difficult to like the market’s long-term prospects.
After Thursday’s 3.7% drop for the Dow Industrials, take note if the Dow closes down in excess of 2% today but less than 3.7%. That would trigger the ‘crash warning’ signal discussed in this column from last June.