On January 28, 2014, Barry Rithholtz came out with a piece about Lowry’s 90/90 Day indication. The article suggested that more downside days were likely as 90% downside days were not quickly resolved to the upside.
On January 31, 2014, we reviewed the available data on Lowry’s 90/90 Day indicator. Our concluding commentary at the time was as follows:
“The result of our narrow interpretation of the data indicates that the average decline of the market, by the time of the first 90% Downside Day, was -48% of the total expected decline.”
“What does this analysis suggest for the January 24, 2014 90% Downside Day? On the conservative side the Dow Industrials could bottom at 15,144.16. On the extreme the slide in the market could end at 14,076.66.”
Below is the illustration of where the January 24, 2014 decline stood relative to the peak at 16,576.66 and the bottom at 15,372.80 and the subsequent rise that followed.
A distinction that needs to be made is Rithholtz’s assertion that the 90% Downside Day was reflective of an impending decline of at least –10% in the market. However, our limited review of the data has suggested that the very first 90% Downside Day had typically come when almost half of the down move had passed.
More data is needed so drop us a line if you see any reference to the next 90% Downside Day and we’ll run the numbers again to see what the market might do.
