Intelligent Investing follows 7 different buy/sell indicators (BSI’s) on different time frames: from daily to weekly to longer term. Two of these are the A.I. (proprietary) on a daily and weekly time frame, and several others are TI, market breadth, and VIX related. By COB on Friday 4 of these 7 BSI’s had produced successive buy-signals following Monday and Tuesday’s carnage; on daily and weekly timeframes. We’re now monitoring the other 4. One of these is, for the longer term, Zweig Breadth. Here I.I. is looking for a possible Zweig Breadth Thrust event (ZBT). “A what?” A ZBT! 🙂 ZB monitors market breadth similarly to the McClellan Oscillator (NYMO, NYMOT), and a Thrust event is when it moves from a level below 40% (indicating an oversold market) to above 61.5% within any 10-day period. The market then gains on average 24.6% in on average 11 months. It occurs rarely (only 3 times since the 2009 low). Con’t below chart
Zweig breadth closed on 8/20, 8/21, 8/24, and 8/25 below 40 (39, 34, 29, 30, respectively) and has since increased to 52% by Friday, a mere 9.5% points below the cut-off value. Note that on Monday it registered the lowest reading since the price low made in March 2009. Namely, the 2nd lowest reading since then was late August 2011 during primary II: 28.15 now vs 28.17 then. Hence, ZB was at an extreme low value. To give some more historical perspective. Since 1987 ZB readings of below 30 with the current one included, have only occurred 10 times, mostly in bull markets: Oct ’87 (bull), Aug ’90 (bull), April ’94 (bull), Aug ’98 (bull), Sept. ’01 (bear), July ’02 (bear), Oct ’08 (bear), Nov ’08 (bear), Aug ’11 (bull), and Aug ’15 (bull).
Anyway, and bottom line, to get a Thrust event ZB needs to close >61.5 latest by the end of Tuesday September 8. So mark your calendars 🙂
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