(snip)"The Titanic Syndrome is a term coined by Bill Ohama in 1965 and as far as I can tell was first written about in Stocks & Commodities in Nov. 1988.
The Titanic Syndrome is deceptively simple and is a very reliable indicator of important market tops.
Ohama first recognized the Titanic Syndrome retrospectively in the Fall of 1965 - it had correctly identified the very important May 1965 market top. Since then it has been consistency itself, it called the top before the Oct. 87 crash. The smallest correction following a Titanic Syndrome top was 9.6% in 1994, the largest was after the Jan. 1973 top, a whopping 45%, the average since May 1965 has been 25.7%. The August 25, 1987 top to the intraday low Oct. 20, was 40%. So you see one should have imprinted on the inside of ones skull the criteria of the Titanic Syndrome so that a mere rolling of the eyes will remind us of such a potent market top indicator.
You are aboard the Titanic when:-
1. The DJIA hits a new high for the year, or
2. rallies 400 points or more, and
3. within seven days, before or after this high,
4. the number of NYSE new 52 week lows exceeds the number of 52 new highs.
That's it.
After the above criteria have been identified the DJIA may test or even marginally exceed the high. However, the averages, particularly the Dow Utilities will not make new highs. These negative divergences are another call to cover.
There is no equivalent at market bottoms, there is no Poseidon Syndrome so to speak.
Who says they don't ring a bell at market tops and bottoms.
Other Ringing Bells.
Divergences:
Divergences that persistently call market tops and bottoms are observable even as they are occurring and they are when:
The price of my two related markets, e.g. popular market averages or indices or spot cash and future prices of contracts related to these averages or indices diverge then reversal in the direction of cash is afoot.
Examples of Divergence at Market Tops:
When one or more market indices fail to make a new high as other similar indices do, then this divergence, a negative divergence, and is a tip off that the index that failed to make a new high is due to reverse and it is time to sell that index with a Stop loss placed above the previous high of this index.
Example of Divergence at Market Bottoms:
Similar if one related index fails to make new lows as the others do then the index to fail to make a new low has created a positive divergence and is a sign to buy the index that failed to make a new low with a Stop loss at the previous low.
Notably successful divergences appear at market tops and bottoms between the broad Value Line index and the narrow DJIA. Similarly the Dow Utilities usually lead changes in the DJIA, sometimes the divergence has a long lead time between the Dow Utilities and the DJIA. The divergence between Dow Transports and DJIA is the necessary non confirmation at the core of Dow Theory.
In debt markets divergence at tops and bottoms becomes established between T.Bills and T.Bonds.
In commodities the divergence appears between cash and futures, the reversal invariably follows the cash.
Occasionally divergences do not occur at market bottoms. It seems that market bottoms are more difficult to identify. Once a market drops 10% one should be looking for signs of a bottom. With or without divergences there are price and market patterns that alert one that a reversal is imminent, top or bottom. These are observations of NYSE activity which give the tip off.
These NYSE reversal patterns involve the number of advances and declines, NYSE new highs and lows, closing prices and 'outside day' price patterns or engulfing patterns in Japanese Candlestick parlance. Confirmation of a top or bottom occurs with different combinations involving these criteria.
Confirming NYSE Signals.
Market Tops:
1. NYSE Advance/Decline. At least two consecutive days when the down volume is >1000 and one of those days has a A/D of 1:4 or worse, or even more bearish, four days out of seven when declines exceed 1000.
2. Closing Prices. At least one market average makes 5 consecutive lower closes. The decline will not end until the market has 5 consecutive higher closes.
3. New Highs/New Lows. A total of 5 days in which the number of new yearly lows exceeds the number of new highs or more bearish but late, the number of new yearly highs drops to 10 or less on one or more days.
4. Outside Day - Bear Engulfing Pattern. An outside day or engulfing index price pattern after the appearance of the Titanic Syndrome and the close of the outside day is lower than the close of the day before. An outside day - the intra day high and low is higher and lower than the prior day. If the open was higher than yesterday's high and close was lower than yesterday's low it is also a classical reversal day particularly if achieved on excessive volume.
Market Bottoms:
1. NYSE Advance/Decline. At least 2 consecutive days when up volume exceeds 1000 and A/D of >4:1 on at least one of those days, or, four of seven days with number of advancing stocks exceeds 1000, or, an A/D of at least 9:1, or, a selling climax with an A/D of at least 1:9 particularly if associated with a reversal day price pattern.
2. Closing Prices. One market average makes 5 consecutive higher closes.
3. New Highs/New Lows. The number of yearly new highs drops below 3 after a 10% or more market decline, or, 5 consecutive days when the number of new yearly highs exceeds the number of new yearly lows, or, the number of new yearly lows drop below 10.
4. An Outside Day or Bull Engulfing Pattern. After a positive divergence and the outside day close is higher than the close of the prior day. "(snip)



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