Friday, August 24, 2007

Summation index

The Summation index has now turned back up. There have only been a few times where this index has gotten more oversold in the last 10 years. One was 98. While there could be another drop the odds are against it and if it does happen the data would suggest it won't drop significantly below last Thursday before a rally ensues. As I've mentioned before these declines that come at the very end of a long multi year rallies tend to be very swift and very scary. Does anyone think that's an accurate description of what we just went through? These kind of corrections historically recover very quickly. The declines that do the real damage are the ones that start early in the cycle and just slowly hemorrhage for months or years. Remember 2000-2003 or for some of the older investors 1973-74. I have a feeling the next cycle is going to be one of those nasty ones.