|  JAN 1996

SIDEBAR: Historical Market Turning Points

HISTORICAL MARKET TURNING POINTS The Kinsman smoothed A-D has caught major trend changes in the market well over the past two decades. The most recent of these: 1987 1 Selecting norms for 1987 was one of the more complicated exercises in using this oscillator. The problem was the 1986 market (not shown), with four spikes above +400 and four under -400, plus one at -649 in September. Still, the other highs and lows averaged out to a range of +100 to +300 and -200 to -300. The September spike low barely qualified as a bear alert and no following second spike announced a trend change. 2 January 1987 saw a bull alert at +550 that cancelled the prior bear alert. It was a rare spike in that it was followed by sharply declining highs averaging around +200 with lows below -75, while the S&P soared from 250 to 300, posting a 20% gain by March. This was a dramatic divergence between the smoothed A-D and the S&P, a definite negative for the overall market. Then a -753 spike low was hit in April at S&P 280, a low-risk buy that also formed a bear alert as it cancelled the January bull alert. 3 Despite the messy March-May period, the norms continued to hold around +300 tops and -200 lows until the bear confirmation at -644 in early September around S&P 315.

by Technical Analysis, Inc.