Professor’s Comments 3/23/20

Posted by OMS  at March 23rd, 2020

Most of you know I’m not a big fan of the ADX for identifying trends. But like every indicator, it does have a few redeeming characteristics. One of them is when the ADX reaches an extreme level, like it is now.

Looking back, whenever the ADX on the Dow had a reading above 40, it identified a bottom of significance. The current reading for the ADX is 53.95! EXTREME readings in the high 40’s usually led to a significant bounce within 2-4 days. I didn’t measure the bounce in terms of percentage, but if the rally turns out to be the start of Wave 2 or Wave ‘B” up, it could take the Dow back to the 23,000-24,000 level. All this assumes that the Dow doesn’t completely collapse today and holds above the 18,000+ level. If it trades below 18,000, all bets are off.

Here’s a list of the EXTREME ADX readings I found since 1998:

9/98 – 42.56

2/00 – 47.4

9/01 – 49.16

4/05 – 49.59

6/06 – 41.79

1/08 – 43.52

Not sure of the terminology we use? Check out these articles

The Hockey Stick Pattern
The Creation of Waves and Trends
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