The Black Box

[Dick Weigel]

Was that a denial? At least you could have said no or "that's (or will be) my cousin."

Ok, on the market: Lowrey's agrees with you in case you missed it
from Aaron Task's column tonight at thestreet.com

"But when markets don't respond to negative news -- at least not very dramatically -- you have to consider the (bullish) alternatives.

"Today started decisively down but worked itself back to the plus side" before fading again in the final hour, said Paul Desmond, president of Lowry's Reports. "That's saying it didn't develop any real power on the downside, so buyers come back in and drove the market higher. That's what I think we'll see from here."

90-90 Vision: Sharpening the Focus

March 17 "represented the start of a worthwhile market advance," Desmond declared. "Not a new bull market, but a significant advance."

That date is significant because March 17 was a "90% upside day" in Lowry's nomenclature and, more critically, it was preceded by 90% downside days on March 10 and Jan. 27.

Desmond's works focuses on sessions in which both volume and price action are skewed 90% in either direction. In terms of price, he refers to the actual point moves for every stock on the exchange, not breadth. March 13, for example, was a 90% upside volume day but didn't qualify on price.

"The pattern we look for are signs of investor panic -- people dumping stocks without regard for quality" as reflected in the 90% down days, he said. "Then we watch for signs buyers come rushing back in to complete the cycle" as measured by the 90% up days.

From the perspective of that cycle, Monday's 90% downside day (Desmond confirmed it was) is largely immaterial.

"We pointed out to clients that we had seen similar patterns in the past after major market bottoms," Desmond said, citing 1974 and 1987 as examples. "Those days represent continuing investor nervousness, but each time the internal condition of the market was improving and that's what we've seen here."

Lowry's buying power index -- a measure of demand for stocks -- was 22 points off its recent bottom on Monday, he noted. Conversely, its selling pressure index was 20 points off its high. "Investors got panicky [on Monday] but it was isolated," Desmond said. "The real trend is toward accumulation."

Accumulation means "purchasing a large number of stocks in a controlled way so as to avoid driving the price up," according to Barron's Dictionary of Finance and Investment Terms. It's also trader-speak for a bullish environment, which is what Desmond is expecting.

Recently, Richard Dickson of Lowry's was quoted here as saying the firm believed major averages could retest their post-October highs of around Dow 9000, S&P 954 and Comp 1521.

On Thursday, Desmond agreed "that's the first target" but said "we could go considerably higher," noting Lowry's selling pressure index was substantially lower at the March lows than it was at the October bottom or last July's selloff. During "every selloff, fewer investors are interested in dumping stocks," he explained. "If they're not dumping, that opens the door for higher prices."

http://www.thestreet.com/markets/aarontaskfree/10076982.html