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Running With the Bulls at Trader’s Narrative

Running With the Bulls

san fermin bulls 2.pngTomorrow is the start of the famous San Fermin festival in Pamplona, Spain. Bulls will be released into the streets and couragous reckless young men will try to run with them. The trick, I’ve been told, is to not get in their way since when the bulls start, almost nothing can stop their herd mentality to just keep running. Something similar is afoot on Wall Street. But very few people are really paying attention and they may ‘get in the way’ of the bull.

We’ve just had a very rare market occurrence recently. Within a two week span, we’ve seen stocks on the NYSE receive more than ten times as much volume in advancers than in decliners. The first instance of this was on June 15th with an astronomical 22 times multiple and the second on June 29th with 12 times multiple.

This is similar to the Lowry’s 90-90 days, however, it is an older concept developed by Martin Zweig in his book “Winning on Wall Street“. According to Zweig, a stampede by bulls into the stock market has launched every single major bull market and intermediate term rally. But a double occurrence of 10 to 1 advancing volume is especially significant since it happens infrequently.

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:

10 to 1 up volume.png

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 draw down.

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:

Ned Davis 9 to 1 research.png

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6 Responses to “Running With the Bulls”  

  1. 1 Rafitax

    very interesting post…

    This morning first “encierro” of San Fermin 2006…
    Bulls of Marqués de Domecq…


    Un saludo.

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