The Seven-Year 'Glitch'

A different market? Yes, something seems to have changed in just a week. It is not just that the averages have taken a big hit -- which is to be expected from time to time and was obviously overdue -- but the selling pressure seems to be more persistent this time. After losing more than 600 points in the Dow Jones Industrial Average, a normal partial retracement would be expected, perhaps half the drop. But in recent sessions, each rally has failed very quickly. In addition, one would have expected big Arms Index numbers on the rapid decline, thereby creating an oversold condition, but even the shorter-term moving averages remain neutral to overbought so far.

Readers may recall that I have said that markets have a very long-term pattern with major tops every seven years. The up leg of each cycle lasts about five years, followed by a couple of years of bear market. I call it the Seven-Year Glitch. Now, five years after the last high, one has to wonder if the "glitch" down leg has started. A week is little evidence, but the market action suggests this could be it. I am inclined to sell rallies, not buy dips, but right now the rallies seem so muted as to be an additional warning....231 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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