| len613 |
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Gold User, Member, TeleChart
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| Sunday, January 16, 2005 |
| Tuesday, December 29, 2009 3:32:35 AM |
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Considering that the stock was $1 three years ago, $3.50 just last year, and was over 50 early this year, you should be very wary of technical chart formations and the implications of high and low volume.
You were obvioously right about the implications of low volume during the recent basing. But, to me, the two-day high-volume jump from 15 to above 20 appears to be either/or manipulation or distribution.
Another important consideration is the market trend. Of course this itself is not easy to determine. Since the market trend has been negative IMHO for several weeks I would avoid going long anything.
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Danky is not even in the data base. Where did you see this?
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Breadth is truly bad but not yet climactic.
Short term, perhaps, it is related to Rita. OTOH, the market rallied for a while after Katrina hit.
IMHO the news follows the trend longer term.
My own breadth incicator (not a cumulative one as presented here)showed breadth hitting its peak momentum on Jun. 17. It then began to slowly weaken, as the market averages continued up, but was still positive on August 2 whan I sold all my funds and got 90 % into cash.
After August 2 the market declined modestly into August 30 but breadth declined sharply. The rally post Katrina was accompanied by positive though dismal breadth and should not have been followed. On the high volume expiration day I bought OEX 570 puts at 6 and they closed today at 12. I am still holding as I do not consider te decline over yet. I would sell the puts on a panic down day but would buy them back on a subsequent technical rally.
This decline has a way to go.
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Hi BB,
I just chanced on this thread and I admire your sagaciousness. You were right on.
I agree with you. DW has come aboard with his notice of the TSV divergence in the major averages. But this was in effect even as the "trend" was upgraded about a week ago. This goes to show that Dow theory trend analysis is irrelevent and is not worth discussing. DW admits this is about past history. But it is featured in the notes and can therefore mislead many who rely on those notes without delving further.
The TSV indicator is far better. Breadth is another adjunct indicator that revealed the weakness to come. I got a breadth sell signal on August 2, right on the first top. By the second top last week breadth was far weaker so this divergence confirmed the TSV divergence.
Friday's humongous volume expiration was another sign of danger. Up to down volume was 2:1 but breadth was only 1.5:1. This was an indication of resistance.
This decline has further to run. The averages are at or near support levels but there is no sign that the decline is over. TSVs are mking new lows on the move.
If you don't mind ancient history, this market reminds me somewhat of the market after the Arab oil embargo of 1973. The Arab-Israel war began on Oct. 8 and the oil boycott was announced on Oct. 17. Yet the market hung in and actually rose till Oct. 24 just as it did after Katrina hit. But one year later the market was 45 percent lower.
Be very careful not to jump back in too soon. These kinds of moves take their time to play themselves out.
Good luck.
Len
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I appreciate the conservatism of a trend-following approach. I used both 30 and 60-day exponential moving averages (EMA) which have and average age of data of 14.5 and 29 days respectively. The NDX crossed the 60-day EMA on 1/4 and never looked back. The 30-day EMA dipped below the 60 two days ago.
The NASDAQ is weaker than the NYSE. In the latter, the NYSI Index had several whipsaws wrt the 60-day EMA and was above it as recently as this past Monday the 18th. The 30-day EMA is still above the 60-Day EMA.
I am including all this to relate it to gasminder's results but I am more sanguine about the immediate outlook based on Big Board breadth, up/down volume and price-change behavior.
As I noted last week, the AD line had been relatively buoyant following the first three days of the year. It bounced on the previous Friday and on Monday of this past week. In the last three days it barely got back to where it had been on Thursday the 13th. In other words, breadth is not following the averages down and is still close to its high for the late 2005 advance. Up/down volume is weaker than breadth. But this is in an oversold condition from where rallies often begin. Overall things appear as they did early last August.
All in all the NYSI index is in position for a rally at least back to the December highs and an upward crossing of the 50 day MA. I am inclined to favor DW's speculation about a poositive outcome from the Iraq election pivot point.
This is not trend following but, rather, trend anticipation and is subject to all the risks involved.
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QUOTE (DW) CURRENT MARKET ACTION: A surprisingly strong day with the major averages all pulling upside breakouts out of a hat. The underlying quality of the action was excellent, with 206 Industry Groups advancing against only 31 declining. Half-point breadth (aka, the "Relevance Index") for the Russell 3000 was an extraordinarily lopsided 787-77. The Leadership Index was 935-280. The SP-500 was an unusually positive 408-80, with the Index itself looking the most bullish of the three, breaking out on distinctly increasing volume. -DW
Who could have foreseen???
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QUOTE when the vix recently hit its 9 year low i knew its time to take profits on some of my long term positions. so far the timing part was perfect but its at its genesis ...lets see if the vix was a good leading indicator that we will have a small sell off.. give it a month and i think the vix will be near the upper teens and the dow will be about 200-300 points lower..
If you look at long-term charts, the last time volatility was this low was in 1995. If you got out then you missed one of the great bull markets in history.
Let the seller beware!
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P.S. I should have added that my discussions of the A/D line and past junctures apply to the Big Board and not to the QQQQ. However, if the senior indices do what I expect, the QQQQ will not be far behind.
At this juncture I am impressed with the long-term charts of most of the tech leaders. While they were weak for most of last year, the weakness was to consolidate the 2003 rise from the basement. The QQQQ is still in the early stages of a retracement of the entire 2000-2002 bear market.
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I heard PW's tape tonight. He stressed that the QQQQ had broken the trendline from August as well as the 50-Day MA. He also noted a trend indicator that turned down for on Jan 3-5, and then was trying to recover since, though unsatisfactorily in his opinion. A more sensitive trend indicator was doing better and he thought this showed signs of possible strentgh but was as yet unconvincing.
IMHO the selloff has cleared an overbought condition. The volume has been high this year but, after the first three days, the market has been holding its own as evidenced by the Advance Decline (A/D) line, as well as PW's trend indicators. The condition is similar to that in October where there was a three-day decline followed by 1 1/2 weeks of stabilization. Here too the A/D line held its ground. We know that the October bottom was followed by the strongest rally of the year.
The early Jan selloff also bears a close resemblance to the Jan 1991 early selloff. This also lasted two weeks. It was followed by a two-day retracement of two weeks of losses. The market moved up fast for three more weeks, and labored up further till late April.
While it is dangerous to project replication of prior configurations, I expect a similar strong bounce here barring calamatous international events. I believe most of the entire 2005 gain will occur in the immediate future.
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