Secular Bull Market? Sounds Good to Me

Well the Alabama Indicator came through other pundits believe there was a different indicator that was hit on January 2nd and 5th.

To wit, last Monday we experienced a 90% Upside Volume Day that was followed by another 90% Upside Volume Day on Wednesday.  Ninety percent Upside Volume Days are when 90% of total volume traded, both “up” and “down” volume, comes in on the upside.  Such back-to-back sessions are pretty rare, especially at the beginning of a New Year.  In fact, my notes show that the last time we saw such an occurrence was on January 2, 1987 (Friday), and again on January 5, 1987 (Monday), setting the stage for a rally that would peak on April 7, 1987 after a 24.5% “run.” 

Sounds good so far.

The history of back-to-back 90% Upside Volume Days was highlighted in our technical analyst Art Huprich’s comments Thursday afternoon, noting that according to the Sentimentrader, back-to-back 90% Upside Days tend to lead to a gain of 6.1% (median) one month later 83% of the time; and gains of 12.8% (median) three months later 100% of the time.  (For more information, see Art’s report here.)

I like the idea of a 100% chance of 12.8% gains in three months. The only bad part is one of those back to back 90% upside days that Minyanville talks about occurred in 1987 when we had Black Monday. The Dow peaked in August of that year at 2722 after opening the year at 1895. In other words "Sell in May and Go Away" might be worth considering if you believe in these sorts of omens.