Nice article. But how do we make money in today's market without parking all our money into fixed income securites. This is where the DOW Theory falls apart. No two times are ever alike. This time has confounded a lot of people, e.g., Bill Miller and even Warren Buffett. Thus, I propose the COW theory. Never buy a cow at a high price or a midpoint price. Only buy within 5% of the 52 week low. Better yet, buy when a stock is making a new 52-week low. Take your profits when you see a 10% or more rise off the low. I entered SGP near the 5-year low (still holding as of today). I am taking a position in HOLX starting today. I'll accumulate YHOO when it tumbles to $19 again, or what I perceive to be a strong low support price. Have your COW and eat it too. LOL.
Thanks, very useful information, I belive this is what we are seeing, but it is not confirmed yet, we have to see whether the market would go south from here and break the January low.
"Bear Market - Stage 1 - Distribution
While the market declines, there is little belief that a bear market has started and most forecasters remain bullish. After a moderate decline, there is a reaction rally (secondary move) that retraces a portion of the decline. Hamilton noted that reaction rallies during bear markets were quite swift and sharp. As with his analysis of secondary moves in general, Hamilton noted that a large percentage of the losses would be recouped in a matter of days or perhaps weeks. This quick and sudden movement would invigorate the bulls to proclaim the bull market alive and well. However, the reaction high of the secondary move would form and be lower than the previous high. After making a lower high, a break below the previous low would confirm that this was the second stage of a bear market. "