Category Archives: downside

Wolverine World Wide

Posted on October 29, 2015 by nlo-admin | Leave a comment

Posted in downside, Edson Gould, speed resistance line, SRL, Wolverine World Wide, WWW

Oil and Gas Stock Index Update

Posted on September 7, 2015 by nlo-admin | Leave a comment

On January 6, 2015, we said the following about the NYSE Oil and Gas Stock Index (XOI):

“The conservative downside target of 1,454.79 has been constructed while the mid-point of 1,015.10 is also indicated. However, we did not include the extreme downside target of 575.41. We did indicate in red the 812.08 level which was the extent of the decline in the period from the 2008 high to the 2009 low.

“Suffice to say that we expect the XOI index could easily fall to 1,015.10 and subsequently to the 812.08. Those interested in the oil sector should start initiating positions at or below the ascending 1,015.10 level. ”

At the time, the NYSE Oil and Gas Stock Index was trading at 1,287.66. The September 4, 2015, XOI close was 1,085.81, down –15.67%. At least from the perspective of the last posting, the SRL achieved the expected downside target.

However, lurking in the background is the extreme downside target of 575.41. Since our experience has been that the extreme downside target is commonly achieved, we hazard to guess what would happen globally to the oil market in order to decline to such a low point.

For now, we’ll resign ourselves to the idea that the 812.08 is the next downside target. If that target is achieved we believe that the 575.41 level is highly achievable. Given our concern for the downside risk, oil sector stocks should be bought in three stages at 958, 812 & 575.

Leave a comment

Posted in downside, Edson Gould, speed resistance line, SRL, XOI

Baidu: Downside Targets

Posted on September 1, 2015 by nlo-admin | Leave a comment

On April 27, 2013, we wrote a short piece on Baidu (BIDU) that concluded with the following remark:

“The conservative downside target of $93.43 has been achieved and we are now sitting at the extreme downside target of $54.79. All indications, based on the SRL, are that Baidu is worth considering in a two stage purchase plan, once at the current level and again at $67 or lower.”

The chart that we included for the above assessment was based on the work of Edson Gould’s Speed Resistance Lines (SRL) and is shown below.

Since that recommendation to buy at $85, Baidu had increased to as high as $251. What was not included at the time was the upside targets based on the work of Edson Gould. At that time, the upside targets were:

$140.16 (conservative target)
$210.23 (mid target)
$280.31 (extreme target)

Baidu was able to achieve two of the three upside targets that were indicated for the stock based on the interpretation of Gould’s work. With the Chinese stock market experiencing significant turmoil, Baidu has declined from the $251 level to the current price of $144 making a review of the technicals useful.

Baidu Downside Targets

Below is the updated Speed Resistance Lines based on the work of Edson Gould:

Continue reading →

Leave a comment

Posted in BIDU, downside, Edson Gould, speed resistance line, SRL, upside target

Chesapeake Energy is on Target

Posted on July 24, 2015 by nlo-admin | Leave a comment

On April 26, 2012, we posted an article titled “A Warning For Chesapeake Energy Stockholders”. In that article we said the following:

“While it appears that Chesapeake Energy (CHK) has seen all the punishment that could possibly lay ahead, we’re concerned that the previous technical pattern in the period from 1993 to 1999 is about to repeat.”

The period from 1993 to 1999 saw (CHK) decline from as high as $27 to under $1.00. The 2012 article was written when CHK was at $18.10 and had already fallen more than –66%. So far, CHK is on track to replicate the decline achieved from 1993-1999. The next downside target for Chesapeake Energy is $4.50.

Leave a comment

Posted in CHK, downside, Edson Gould, speed resistance line, SRL

Scary 1929 Chart Nearly One Year Later

Posted on January 9, 2015 by nlo-admin | Leave a comment

In February of 2014, a widely publicized chart circulated about the similarity between a 1928-1929 stock chart and a 2012-2013 chart. According to Tom McClellan of the McClellan Market Report:

“…between now [February 11, 2014] and May 2014, there is plenty of reason for caution.”

Since February 11, 2014, the Dow Jones Industrial Average has increased +11.06%. In the period from February 11th to May 31st the index gained +4.52%. So far, the scary 1929 chart has not held up to the lofty claim of presaging a bear market or a even a –10% decline. We offered up our own interpretation regarding the chart and said the following:

“We love a declining stock market as much as the next value investor. However, implying that an -89% decline is in the works because the pattern appears similar to 1929 is ignoring the path to far more achievable downside targets.”

Our preliminary downside targets seemed reasonable at the time but were never achieved. One downside target that we thought was important was the ascending trendline from the 2009 low.

We still think that investors should watch the ascending line in the chart above, which currently sits at the 15,780 level. An additional downside target is the Dow Theory 50% Principle level of 12,286.68.

Leave a comment

Posted in 3PDh, 50% principle, Dow Theory, downside

Oil and Gas Stock Index Downside Targets

Posted on January 6, 2015 by nlo-admin | Leave a comment

In the period from 2002 to 2009, the NYSE Oil and Gas Stock Index (XOI) presents us with a possible template for what to expect in the current decline in the same index. Below is Gould’s Speed Resistance Lines (SRL) for 2002 to 2009 of the XOI Index.

The above chart shows the conservative downside target of 1,326.48 and the extreme downside target of 543.36. The mid-point of the downside targets is 934.92. In the case of the XOI index, it managed to achieved the conservative and mid range for the index. However, the extreme downside target was not achieved. The full extent of the decline is indicated in red at the 761.30 level.

Our guess is that the XOI index will accomplish a similar pattern of “performance” on the downside in the current run as was the case in the 2002 to 2009 period. We’ve charted the progress of the XOI Index in the period from 2008 to the present with Gould’s SRL.

The conservative downside target of 1,454.79 has been constructed while the mid-point of 1,015.10 is also indicated. However, we did not include the extreme downside target of 575.41. We did indicate in red the 812.08 level which was the extent of the decline in the period from the 2008 high to the 2009 low.

Suffice to say that we expect the XOI index could easily fall to 1,015.10 and subsequently to the 812.08. Those interested in the oil sector should start initiating positions at or below the ascending 1,015.10 level. Two funds that trade in line with the XOI index are PowerShares DB Oil ETF (DBO) and Direxion Daily Energy Bull 3x (ERX). One ETF that trades the opposite of the XOI index is the Direxion Daily Energy Bear 3x (ERY).

Leave a comment

Posted in downside, Edson Gould, speed resistance line, SRL, XOI

Gold: Reassessing the Risks

Posted on April 8, 2014 by nlo-admin | Leave a comment

On March 3, 2013, we said the following about the downside prospects for gold (article and chart found here):

“The prevailing controversy, among gold bugs, is whether or not gold stocks have bottomed. As our Gold Stock Indicator has indicated, so far, gold stocks have a long way to go before reaching lows similar to what occurred in 2008, on a relative basis. This debate about gold stocks only arise out of the fact that they have fallen so much while the price of gold has been ‘stable.’

“However, when the price of gold is viewed from the perspective of Edson Gould’s Speed Resistance Lines (SRL), we see that there is a lot room for gold to move to the downside.

“We can’t be certain that the price of gold has any further to fall. However, our experience with the work of Edson Gould cannot be ignored. We’ll have to assume that if gold breaks below $1,531 then it would be wise to build $1,179.25 into our expectations.”

The above commentary was based on the March 1, 2013 price of gold. Since that time, gold has declined from $1,582.25 to slightly above Edson Gould’s ascending conservative downside target at $1,195.25 on December 20, 2013. This was within 1.35% of the estimated target. Additionally, gold stocks as represented by the XAU Index declined –37.72%. Below is our updated review on the price of gold.

Continue reading →

Leave a comment

Posted in downside, Edson Gould, gold, speed resistance line, SRL

Tagged members

“Scary” 1929 Chart Says Little About the Future

Posted on February 13, 2014 by nlo-admin | 3 comments

On February 11, 2014, Mark Hulbert of MarketWatch.com posted an article titled “Scary 1929 Market Chart Gains Traction (found here)”. In the article, Hulbert suggests that the critics of the chart, which shows a parallel between the current market action since July 2012 and 1928-1929, are running out of explanations as to why the chart doesn’t have merit.

One aspect missing from the Hulbert article is what it takes to get from the most recent high of 16,588 to the 1,658 level on the Dow Jones Industrial Average. In order to lose -89% in value, the Dow would need to decline first to 15k, 14k, 13k etc. Leaving out these important hurdles on the downside ignores a wide swath of goings-on that needs to occur in between now and the doomsday low. To fill the void that is unexamined by the Hulbert article, we’re going to review the various ways that the Dow Jones Industrial Average could decline to new lows.

Before offering our downside take on the market, we’d like to refer you to some basic issues that are mandatory to understanding how the stock market decline from 1929 was an anomaly, at best. In previous work on the topic, we’ve addressed reasons why the 1929 stock market decline of -89% had more to do with reshuffling of the index by replacing stocks that had fallen significantly with new stocks that had appeared strong but were on the cusp of major declines. Once the new stocks were added to the index they crashed hard while the stocks that were dropped from the index were at the beginning stages of recovery (2009 article found here).

In another piece, we outlined the fact that the decline of 1929 was followed by a recovery that was much faster than most investors know. Our theory is that the multiple changes to the index artificially suppress the index on the way down and on the way up. This resulted in the Dow taking 25 years to achieve breakeven status with 1929. However, stocks that were not part of the index can be seen to achieve breakeven status on average by 1937. One of our favorite examples is found in the chart of Monsanto Corp. below (2010 article found here).

Continue reading →

3 Comments

Posted in 1929, 3PDh, Dow Theory, downside, Ed Carlson, George Lindsay, MON, Monsanto

Review: Lowry’s 90% Downside Days

Posted on January 31, 2014 by nlo-admin | 2 comments

On January 28, 2014, Barry Ritholtz did a Bloomberg piece titled “Friday was a 90/90 Day and What It Means (found here)”. In that article, Ritholtz explains the “90/90” as follows:

“When markets experience a bout of intense selling -- those trading sessions when 90 percent of the volume is down, and nine out of 10 stocks close lower -- it can mark a short-term reversal in a bull run. Typically, it signifies a shift in psychology among larger institutions.”

“Looking at the past examples of deep 90/90 sell offs, we have seen only modest rebounds followed by more selling after days such as Friday.”

In general, Ritholtz gives a vague idea on the concept however a detailed explanation is found in the 2002 article by Paul Desmond of Lowry’s Reports titled “Identifying Bear Market Bottoms and New Bull Markets (found here).” In the Desmond article, there are some key concepts that are outlined. Foremost is the idea that “…Important market bottoms are preceded by, and result from, important market declines…(page 3)” and “…if an investor had a method for identifying and measuring panic selling, at least half the job of spotting major market bottoms would be at hand...(page 3)”.

In the pursuit of identifying and measuring panic selling, Desmond’s research found that “…almost all periods of significant market decline in the past 69 years have contained at least one, and usually more than one, day of panic selling in which Downside Volume equaled 90.0% or more of the total of Upside Volume plus Downside Volume, and Points Lost equaled 90.0% or more of the total of Points Gained plus Points Lost…(page 4)”. Desmond’s work on the topic covers the period from 1960 to 2002 with every date that the Dow Jones Industrial Average experiences 90% Upside or Downside days.

Continue reading →

2 Comments

Posted in downside, Lowry's, Paul Desmond

Category Archives: downside

CNA Financial

Qualcomm Inc.

Everest Re Group

The Jean Coutu Group

Carlisle Companies

Transaction Alert

Wolverine World Wide

Oil and Gas Stock Index Update

Baidu: Downside Targets

Chesapeake Energy is on Target

Scary 1929 Chart Nearly One Year Later

Oil and Gas Stock Index Downside Targets

Gold: Reassessing the Risks

“Scary” 1929 Chart Says Little About the Future

Review: Lowry’s 90% Downside Days

Members

Topics

Archives

Recent Posts

Investor Education

"Guaranteed" Rates

Historical Data

Interesting Read