Had gone to downtown MV last evening and happened to come across John Rothchild's "The Bear Book- Survive and Profit in Ferocious Markets" in the used bookstore. Seems interesting, picked it up and started reading it on the way back in the light rail. From it :

* Lynch sell signal:
When the yield on the thirty-year government bond exceeds the yield on the stocks in the
S&P 500 by more than six percentage points, sell stocks and buy bonds.

* Dow Theory
Not really a theory. Based on some editorials written by this WilliamHamilton- a disciple of Charles Dow. He tried to separate the momentary advance or retreat from a long march that carried stock prices in one direction for a meaningful stretch. A long march, he believed could only occur if the averages were heading in the same direction together and therefore confirmed each other's ups and downs. If the Industrials reached a new high while the Trasports faltered, it put the future progress of both indexes in doubt.
Soon after writing the obituary for the bull market on Oct 25, 1929, he died.
Robert Rhea, George Schaefer, Richard Russell are followers of this. Richard Russell's Dow Theory newsletter has a huge following. These three folks had correctly predicted oncoming bear and bull markets.


* Sell small cap if :

T Rowe New Horizons P/E
----------------------------
s&p 500 P/E

much greater than 1. Varies between 0.4-2+. Lower numbers are better times for small caps.
Called New Horizons small-cap gauge.

* Inverted yield curve
Problem may be present if short term interest rates higher than long term interest rates.
Colonel Ayres observed that stocks declined whenever the short-term interest rates rose higher than long-term rates-the "inverted yield curve" sell signal, which he issued in January 1929.

* Zweig's 3 key characteristics of a bear market : bear markets share atleast one of these three :

1. Extreme Deflation Things are getting cheaper, and the CPI is falling fast. Whenever consumer prices have dropped 10% over six months, bear market alert
2. Extravagant Multiples If Dow or S&P is selling for 20 times earnings, setback likely. Only applies in a perky economy when earnings are robust. In a recession when earnings are sub-par, high p/e's may not be a cause for concern.
3. Inverted yield curve Temporary is ok but if lingers, then stocks will disappoint. Only one bear market had all three strikes (1929-1932). Every bear since 1929 had atleast 1 strike.