THERE ARE SEVERAL POINTS TO CONSIDER WHEN COMAPRING THE MARKET AVERAGES.
NOTE THAT THE BROADLY BASED VALUE LINE INDEX APPEARS TO HAVE A DOUBLE BOTTOM DURING THE OCTOBER AND DECEMBER LOWS. SINCE THE THERE HAS BEEN A STEADY UPWARD CLIMB. THE DOW CHART, WHICH DUE TO THE HEAVY TRADING ON THE DAY OF RTHE CRASH DOES NOT SHOW THE ACTUAL BOTTOM, BUT MERELY THE CLOSE. THIS CHART STILL SHOWS A STEADY BUT LESS DISTINCT ADVANCE. THE KEY DIFFERENCE SEEMS TO BE THAT THE VALUE LINE (AND THE S&P 500) HAVE SOLIDLY MOVED INTO POST CRASH HIGH TERRITORY, BUT THE DOW INDEX, SHOWING THE ACTION OF BLUE CHIP TYPE FIRMS, HAS BEEN UNABLE TO MAKE ANY SERIOUS BEACHHEAD ABOVE THE 2060/2100 LEVEL. TRADITIONAL THEORY SAYS THE DOW OUGHT TO, EVEN IN A DECLINING BEAR MARKET, BE ABBLE TO REGAIN HALF OF ITS CRASH LOSS. THIS WOULD PUT IT AT 2300 OR SO. IT LOST ALMOST EXACTLY 1000 POINTS IN THE OCTOBER CRASH. THERE WOULD SEEM TO BE 200 DOW POINTS LEFT TO REGAIN BEFORE WE GET TO THE MOST LOGICAL POINT FOR ANOTHER DECLINE TO BEGIN. BEFORE THAT BECOMES THE MAJOR ISSUE HOWEVER THE DOW MUST GET ABOVE AND STAY OBOVE 2100.
IN THE VALUE LINE AND S&P 500 THE THING TO WATCH IS WHETHER THIS SHARP ADVANCE FROM DECEMBER LOWS WILL BE BROKEN. THESE INDEXS HAVE OR ALMOST HAVE RECOVERED 50% FROM THEIR LOWS AND A RALLY FAILURE IS ALWAYS POSSIBLE.
GOLD HAS HAD ITS OWN CRASH AS YOU CAN SEE FROM THE CHART OF LONDN GOLD (P.M. FIX). FROM LOW TO HIGH OF ALMOST 75 DOLLARS, ABOUT 15 % OR SO OF ITS CASH VALUE, AS COMPARED WITH THE DOW CRASH FROM 2700 TO 1700 OF ABOUT 37 %. THE QUESTION AT HAND IS WHETHER WE HAVE REACHED THE BOTTOM. AN AGGRESSIVE INVESTOR MIGHT HAVE CONSIDERED ENTERING THE GOLD MARKET AT ABOUT THE TIME IT CROSSED THE 26 DAY MOVING AVERAGE. MORE CATIOUS INVESTORS WILL PROBABLY WAIT AND SEE IF THE 60 OR 120 DAY AVERAGE CAN BE BROKEN TO THE UPSIDE.
LOOKING AT THE BOND INDEX IS INTERESTING SINCE IT HAS ADVANCED SOLIDLY SINCE THE OCTOBER CRASH. THIS CHART IS FOR THE VANGUARD MUTUAL FUND THAT IS BASED ON A BOND INDEX AS THE NAME IMPLIES. HERE WE SEE THE INDEX HAS BROKEN THE 26 DAY MOVING AVERAGE WHICH ALERTS US TO PREPARE FOR A POSSIBLE DECLINE.
SINCE BONDS AND THE MUTUAL FUNDS WHICH TRACK THEM HAVE INCOME, MANY INVESTORS FEEL THAY CAN BE FOLLOWED MORE CONSERVATIVELY, AND THE 120 DAY AVERAGE IS PROBABLY A GOOD INDICATOR OF BEING IN OR OUT OF THE FUNDS.
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