150+ S&P points later, we got a retest.
Bulls need bears.
NOTE: The chart below is not the one referred to above is his recent letter, but it does contain his March quote.August 30, 2007:
This chart, from February 2007, shows the weekly S&P and NH-NL on the left and daily on the right. The technical signals in both timeframes are similar, confirming each other's messages.
You can see a false breakout to a new high, above the dashed yellow line, with no follow-through (Camp graduates often call this 'a David Weis line' in honor of an instructor who popularized them). While the market is struggling near the top, the NH-NL Index shows bearish divergences in both timeframes. They tell you that the rally is poorly led and likely to collapse. You can see a bit more of the history on the weekly chart, which shows you that previous divergences also marked tradeable tops.
Turning to this summer, we see a very similar picture: a false upside breakout across a 'David Weis line' accompanied by even more severe bearish divergences. This chart was shouting to sell and sell short prior to the summer's break. History repeats itself – just not exactly bar for bar in the markets.
Turning to the right edge of the chart, the question arises – have we seen the bottom of this decline? Not according to NH-NL. Its recent record new lows, with no sign yet of any bullish divergence, promise more profits for the bears and more trouble for the bulls.
http://stockcharts.com/c-sc/sc?s=$SPX&p=D&yr=1&mn=3&dy=0&i=p58867347694&a=100344124&r=8184.png
Edited by Rogerdodger, 31 August 2007 - 08:14 AM.