Monday went way below -2 Std Dev, Tuesday was a natural reaction. But it didn't even get back to its mean. We are still trending down !!! If the 9-1 occurs above its mean, I would then believe it is the beginning of a bull run. But then, it will probably happen above +2 Std Dev, which is a blow up just before a bear run. LOL. <img src="http://elitetrader.com/vb/attachment.php?s=&postid=1847681">
When was the last time double 9:1 failed? Did it ever fail? I am sure the low number of 9:1 occurances makes the indicator suspect from the statistical point of view, even more so for the double 9:1. But people pay attention to the indicators like this and it may well become the self-fulfilling profecy.
This is from a post ~2 years ago after that double 9:1 the market gains and the drawdown were as expected by the way. Most recently the double signal occurred in march 2007 and it worked as expected as well! So, we may have +10% to gain with almost no negative incursion in the next 3 month, not too shabby! http://www.tradersnarrative.com/running-with-the-bulls-451.html "This signal is even more meaningful after a significant decline in the market. Jason Goepfert, of SentimenTrader has looked back to 40 years of market history and isolated similar situations. Here are the results: Return_3mo Max Loss Max Gain +12.2 -1.9% +14.4 Even more interesting is that there is almost no negative incursion after the signals. That is to say, almost all occurences show a strong bullish bias with almost no real drawdown. According to Ned Davis Research, returns after a 9 to 1 up day are similarly bullish, showing a 7% rise over 3 months and a 12.6% rise over 6 months"
I have studied this indicator over the years and I found it to be EXTREMELY reliable at signaling bottoms. The last time this happened was October 2002. I could be wrong, but I think in his book he said it was a 10:1 advancers to decliners he was looking for.