Thursday, December 28, 2006

Will The Dow Make It 7 In a Row?

That's 7 UP months in a row? Technical analyst John Murphy at notes that in the last ten years the Dow has on two occasions advanced for six consecutive months, including the six months ended this month... but never seven consecutive months. Sure, 7 is possible, but not probable.I want to throw a few other items into the mix: We are looking as overbought as we did in late 1993 and 2003 which were followed by sharp New Years selloffs. The parallel to '93 is even more significant since at that time volatility sank to near all time lows in similar fashion to what we've witnessed in recent weeks. Notice in late '93 volatility swooned to below 10 then early in Q1 of 94 surged above 22 (chart below) while the Dow was hammered with a sledge hammer (chart above). ...hang on for a bumpy ride in January.

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