Adapting to Shifts in Market Regimes

July 12, 2008

We all know that the way to make money in a bull market is to buy dips. And, indeed, that made traders and investors quite a bit of money from 2003 to mid-2007. As this three-year chart from the excellent Decision Point site makes clear, however, we have been lurching from one period of extended numbers of stocks making new 52-week lows to another since that time.

The chart shows the Wilshire 5000 Index (a very broad market proxy) versus the number of NYSE, NASDAQ, and AMEX stocks making new annual lows. In the right hand panel, we can see what that distribution has looked like over the past 21 trading days. We have had day after day of high/expanding new lows with nary a bounce in the market index.

Complete Story »