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Something's happening
Advisers note recent rare market phenomena that could be either very bullish or extremely bearish.

Market's at a critical juncture -- really

By Mark Hulbert, CBS.MarketWatch.com
Last Update: 12:04 AM ET April 21, 2004

ANNANDALE, Va. (CBS.MW) - According to some psychologists, each of us has a tendency to conceive the current moment as a critical juncture.

Whether we are considering the span of our individual lives or the grand sweep of human history, we always tell ourselves that our fates lie crucially in the balance of what is happening right now.

A year from now, of course, we'll be saying the same thing about what's happening then, having forgotten what we said today.

So you have every right to be skeptical when I tell you that the stock market appears to be at a particularly crucial juncture right now.

But it nevertheless appears to be true. A number of newsletter editors who are not otherwise known for hyperbole have drawn attention in recent sessions to rare phenomena that could be either very bullish or extremely bearish.

Consider the stock market's advance-decline data for Tuesday, April 13. On that day, there were more than 2,500 more declining stocks on the New York Stock Exchange than there were advancers.

That turns out to be a record, according to the trio of editors at Wall Street Winners (Elliott Gue, Ivan Martchev and Yiannis Mostrous). According to them, there have been only two other occasions in which the plurality of decliners over advancers on the NYSE came anywhere close to April 13's number.

The first was the day before the Oct. 9, 2002, bottom of the 2000-2002 bear market, when there were 2,371 more decliners than advancers.

The second was the day the stock market reopened after the September 11 terrorist attacks, when there were 2,218 more decliners than advancers.

Both of those previous occasions occurred "near-washout lows," and presaged powerful subsequent rallies.

That might suggest that April 13's experience also will be bullish for the stock market. The problem with this analogy, the Wall Street Winners editors argue, is that the stock market is not currently at a washout low. On the contrary, the Dow Jones Industrials Average is within striking distance of its high.

The editors conclude that April 13's huge plurality of decliners over advances therefore must mean one of two things: Either "everyone who wanted to sell sold [on April 13] and the market is home free, or we're at the beginning of a waterfall decline."

You might not be inclined to pay much attention to an analysis that concludes that the market could either go up or down. That's not very helpful, you might say.

But I wouldn't be so quick to dismiss the Wall Street Winners' analysis. If they're right, the one thing that will not happen is that the stock market in coming weeks and months will be dull and trendless.

Something big is about to happen. They just don't know what.