Stock Market Lower Lows: An Emotional ‘Button Pusher’
STOCK MARKET LOWER LOWS. IS IT TIME TO PANIC?
It’s been another interesting week full of panic headlines. Stock market prices took up the panic cry and made lower lows on several indexes.
Both you and I know that, eventually, this soaring market will end it’s up-cycle and decline. When it does it will be indicated by lower prices; lower lows and lower highs. Here’s the question though: ‘Are the first lower lows enough of an indicator for us to take action?’
The definitive answer is ‘No’ and this answer is based on empirical facts which the historical S&P 500 chart below will show.
The red horizontal lines on the chart show all the times when lower lows were made over the last 12-months. On 5 (out of 5) occasions lower lows were made which led to, not a collapse, but, HIGHER HIGHS.
We’re now in the 6th occasion of lower lows, and, while any collapse in prices would have to make lower lows, I submit that we don’t have enough other confirmations to change from a super-bull uptrend to a down trend.
There’s a natural ‘respiration’ to markets just as in Human Beings taking a run. Sometimes, one has to ‘catch one’s breath’, recover a little and then press on with the run. It’s the same with the market. As we’ve seen previously 5 times now in the last year, there’s been a pause in the upwards ‘run’ followed by renewed strength and a new surge forward. A pause only rarely signifies quitting the ‘race’, and, there, would be other symptoms that would accompany such as dramatic shift.