Registered User
Joined: 10/7/2004
Posts: 73
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After a year of two brief fake outs down (may 2006, february 2007)..and a climatic rise to these peak levels...it has been frustrating for the bears.
But...could this finally be the turn down???
It has all the markings of a turn that is can collapse sharply lower.
Third turn down's the charm??
I think so...BIG SELL OFF AHEAD.
<:o)
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Registered User
Joined: 3/21/2006
Posts: 4,308
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This time you might be right. The Nasdaq looks reminiscent of the December, January and February action that led to no good.
I am not sure if catastrophe is ahead but I am considering going to all cash if the Nasdaq crosses below the 90 day SMA.
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Registered User
Joined: 4/18/2005
Posts: 4,090
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I've already gone cash. the only longs i'm interested in are bottoming and im usually out in a day or two .. if not same day for now.
Considering the candle action on the SP-500, which is a reversal pattern of sorts acording to the candle chart book i'm reading I think tomorrow will carry lower and at least for the sp-500 an offical correction will be under way.
Apsll, martha has started reviewing shorting method and techniques. Which I wouldn't imagine she would do unless it were pretty point and shoot. Also talking up the sell short overbought scan.
If you go to their web site they now have daily chart lessons there with her notes. Yesterdays lesson was on the anomaly of Bop on the DJ-30. Basically that becasue of the size of the average it works in reverse on the major averages. All the green BOP marks a considerable over bought state by dumb money. Pluss aparently before summer there is some churning and dumping of underperformers and cashing in on over performers. then in the summer price can slide simply from lack of volume.
I personaly think we'll have a killer fall rally.
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Registered User
Joined: 9/22/2005
Posts: 849
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Scott
Who is this martha you guys keep referring to, and where can I find her?
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Registered User
Joined: 10/7/2004
Posts: 2,126
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I guess Martha had an umpleasant surprise today.
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Registered User
Joined: 10/7/2004
Posts: 2,126
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By the way, today was a nice day for the bulls, but I wouldn't call it spectacular.
Also neither of the 3 indexes Dow, Nasdaq, or SP500 are out of the water just yet in the short term. Not to mention that there are ugly divergences in the 18 and 28 frames of ROC, and althought daily stochs seem to have corrected(currently bouncing back from the oversold), the weekly stochs are still stepping down to cross the overbought levels (seems headed for correction with no confirmation as of yet). Whether the weekly will give or not is another story - as far as I can see except for the Feb eclipse - it has been hanging tough on the overbought territory for months.
But what the heck, the market has been disregarding all kind of signs so don't be so sure we are not in the way to another higher high. Thanks god for the 20 min window.
good luck
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Registered User
Joined: 10/7/2004
Posts: 73
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Its amazing how the market keeps showing last minute "manic fits" to stay alive in the face of negative momentum divergences on virtually every front.
This last minute parabolic peak is reminiscent of the China market mania.
It seems appropriate to have almost a vertical spike to cap off this rally to signal a significant reversal.
<:o)
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Registered User
Joined: 4/18/2005
Posts: 4,090
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"in the face of negative momentum divergences on virtually every front."
that is the problem with divergences... you don't know how long they will last before they have a visible affect on the market... and they can sometimes resolve themselves in other ways. the nasdaq for instance (rather the QQQQ) had a negative TSV divergence lasting from November 06 till Febuary. the one forming now is a baby by comparison. I've come across Moneystream divergences lasting as long as 4 years on weekly charts and TSV weekly divergences lasting almost as long. I don't think they are anything to hang the hat on untill there is some specific action. What that is I don't fully know... I tend to waith till TSV crosses zero in the case of a TSV divergence. MacD makes a serious confirming move ETC ETC. And still biting my nails. I almost prefer no divergence... becasue then I know that the indicators are confirming price and there is less likley to be funny business.
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Registered User
Joined: 10/7/2004
Posts: 73
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Yes that can be a problem with the continuing divergences.
Two types of momentum indicators that are nice to run in tandem are two time frames of MACD. You read them the same way you would read "typical" cross overs.
This works out much better than to just use a moving average.
The only problem is that you can't do this in TC because each time you add a new indicator in TC it creates its own custom scale.
To plot the two together you would need to have a common scale.
There are five basic methods to interpret longer term MACD indicators:
#1. In relation to the zero line (above is bullish, below bearish).
#2. Determining basic short term trend of the MACD to determine divergences or convergences with price trend.
#3. Relation of the MACD to a moving average of itself. Above = Bullish, Below = Bearish.
#4. Relation of the MACD to a different time scale of MACD. Short Term Above = Bullish, Short Term Below = Bearish.
#5. The spread between the MACD signal and its moving average (or another MACD time frame). Wide historic spread either way = Reversal.
------------------------------------------
Let us compare method #3 vs. method #4
Here is an example of the difference :
We will reference the rally from July 25 2006-Feb 26 2007
Using a MACD with moving average (method #3).
(The buy signal is that the MACD is above the moving average 5 EMA)
vs.
Two MACDs of different periods (method #4).
(The buy signal is that the shorter term MACD is above the longer term MACD)
1. They both pick up a bullish cross over on July 25 (so far the same).
2. They both stay bullish until November 1.
3. On November 1 the MACD vs. moving average (method #3) crosses negative and stays below the MACD through February 26. This becomes a false persistent negative divergence for method #3.
4. However, the Short Term MACD stays above the Long term MACD all the way until February 26. A strong trend continuation for method #4.
So there is a big difference.
Method #4 is superior from many vantage points.
Note:
*There is one small false negative cross on the MACD to MACD comparison (method #4) from 8/9 to 8/15. However, a 2 or 3 period smoothing would eliminate this.
**No amount of smoothing will eliminate the MACD vs moving average (method #3) errors.
***February 27 marked our “market melt down day” so all indicators pretty much crossed negative on that day. On shorter term time frames such as 60 minute and 120 minute method #4 showed exit signals on Feb 26.
****It should also be noted that the melt down that occurred on Feb 27 began with persistent selling throughout the day. The main draw down came within a 15 minute period around 3:00 PM. Anyone with a hint of discipline should have been stopped out long before the 3:00 hour. Internals that horrible should never have been attempted to buy into.
TM <:o)
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Registered User
Joined: 4/18/2005
Posts: 4,090
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Seems like lately BOP on the indexes is telling... but almost in reverse
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Registered User
Joined: 1/28/2005
Posts: 6,049
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"Two types of momentum indicators that are nice to run in tandem are two time frames of MACD. You read them the same way you would read "typical" cross overs.
This works out much better than to just use a moving average.
The only problem is that you can't do this in TC because each time you add a new indicator in TC it creates its own custom scale."
----------------------------------------------------------------------------------
One solution maybe to plot both together as one indicator:
(XAVGC12-XAVGC26)+(XAVGC60-XAVGC130)
(with center zero line checked)
This would represent the daily MACD 12,26 and a
weekly version. (12*5=60 and 26*5=130)
Thanks
diceman
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Registered User
Joined: 4/18/2005
Posts: 4,090
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That is cool... It never occoured to me to do that.
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Registered User
Joined: 10/7/2004
Posts: 73
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These are the parameters I have used in TC Net for "the spread" as I call it:
((xAVGC2 - xAVGC30) - (xAVGC12 - xAVGC26))/C
1. You need to take the difference between the two MACDs if you want to know when they cross.
2. Then divide it by the close to get a relative % change that can be used to compare different stocks.
3. Above the zero line is bullish/ below is bearish.
4. You will also see that with this indicator you can use method #5 to evaluate reversal points. Wide historic spreads = reversal.
5. Putting a moving average on this indicator works pretty decent too...to anticipate moves.
One strength of TC Net is the Dynamic Scale Adjustment, so you can see when the spread is reached historical values on a particular zoom level. This works well with Visual Scans.
When you divide by the close you can also see a percent spread. So a value of 0.05 for example is a pretty significant spread, that is prime for reversal.
This "wide spread" (method #5) can also signal the end of long trends.
Take this example:
BRCM got in a strong down trend 3/1 to 7/26/07.
This "spread indicator" helped to pick the bottom.
Plot the indicator and look at BRCM at Zoom 3 ending on 7/20/06. This deep into the down trend and was the day before earnings. The next day the stock gapped down and the "spread indicator" hit a new low for that time frame of about -.22 or -22%. This marked the bottom and the end of the down trend.
The longer the zoom range to better for determining historic lows.
Take another example with a zoom of 1
Look at the QQQQ for May 30, 2006 the next day marks a historic low of about -5% for "the spread" and resulted in "the bottom" of the QQQQ to the exact day (by measure of the close).
Its not always this accurate but its also not a bad indicator at all.
TM <:o)
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Registered User
Joined: 1/28/2005
Posts: 6,049
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It should be noted for anyone attempting to use this
technique.
Using the sum of the MACD's or difference of the
MACD's creates different results. Based on the
order of the variables or positive/negative values.
------------------------------------------------------------------
Using the form:
MACD1-MACD2
(negative values are in parenthesis)
1-2= (1)
2-1= 1
(1)-1= (2)
(1)-(2)=1
(2)-(2)=0
---------------------------------------------------
Using the form:
MACD1+MACD2
(negative values are in parenthesis)
1+2=3
2+1=3
(1)+1=0
(1)+(2)=(3)
(2)+(2)=(4)
------------------------------------------------
Even though I have not used this indicator. I would think
as both MACD's went more negative or both went
more positive. the overall indicator should head in that
direction.
So my guess would be summing the two would be superior.
Probably in percent form. Which would result in:
((XAVGC12/XAVGC26*100)-100)+((XAVGC60/XAVGC130*100)-100)
Thanks
diceman
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Registered User
Joined: 10/7/2004
Posts: 73
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A spread is the difference between two indicators not the sum.
If you want to know where two indicators cross you need to take the difference.
So the sum can never be superior for determining crosses or spreads because it simply does not work...by definition. The formula is wrong.
However, the sum of the indicators might be useful in some other way. Just not for crosses or spreads.
TM <:o)
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Registered User
Joined: 1/28/2005
Posts: 6,049
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Truemaster
I don't think you realize what you are looking at.
Plot the BRCM example you supplied.
In the same window with center zero line checked on each.
Plot:
(XAVGC12-XAVGC26)+(XAVGC60-XAVGC130)
(XAVGC12-XAVGC26)-(XAVGC60-XAVGC130)
This is my first MACD settings as a sum and as a difference.
You will notice the sum follows price.
The difference bottoms at the early 06 high
and rallies to a peak after the bottom.
On March 29 2006
12-26= -.35
60-130= 4.52
This would indicate the long term trend is up and
there is short-term weakness.
However when you subtract these
you flip it negative:
-.35-4.52= -4.87
when we add the positive long-term number
dominates:
-.35+4.52= 4.17
As I stated in my post above. Taking the difference makes it sensitive to order
and pos/neg values.
If you look at the zero crossings of the difference
it is clear you are not measuring what you think you are.
Since the spirit of MACD is rising is positive and
falling is negative. I would only use the sum.
I think if you want to determine spread crossings
you should consider a percent true indicator.
Thanks
diceman
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Registered User
Joined: 10/7/2004
Posts: 73
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I do realize what I am looking at. The original discussion that I began was about spreads...Cross overs between these spreads (position above or below) and historically wide gaps between these spreads.
Spreads are a difference not a sum.
In the BRCM example you should really use the formula I provided:
((xAVGC2 - xAVGC30) - (xAVGC12 - xAVGC26))/C
The reference was to method #5 (historical extreme)
The period between 7/22-7/26 does mark a historical low for ZOOM level 3, using this indicator.
Again you should take the time to read the posts...
I'm sure your indicator is fine, but it is simply not a spread.
Take care.
TM <:o)
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Registered User
Joined: 1/28/2005
Posts: 6,049
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Remember truemaster
The original start of the discussion was divergences.
I want to make sure its clear to those who use this
technique. That there is a big difference between
summing and difference.
Unless your intent is to look for divergences in an
indicator that can go down (and most likely will) in rallies
and up in sell-offs.
Thanks
diceman
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Registered User
Joined: 10/7/2004
Posts: 73
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Remember diceman your response was to my "spread" indicator.
It was mentioned to point out the short comings of divergences that go on "forever" before confirming a reversal. If you read my original post I spoke of the false divergence of using MACD vs its moving average (method #3), and how (method #4) did not create this false divergence in relation to its cross over. It confirmed the entire rally from July to the end of Feb.
The discussion was turned to method #5 to point out how wide historical spreads can signal tops or bottoms.
I have seen other people use the "summing" method you speak for moving averages of different time periods. Some people feel it is more sensitive to turns, etc.
There is nothing wrong with it, but it is not a spread.
Your method probably relates to what I called method #2..and it probably works fine.
TM <:o)
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Registered User
Joined: 1/28/2005
Posts: 6,049
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""Two types of momentum indicators that are nice to run in tandem are two time frames of MACD. You read them the same way you would read "typical" cross overs.
This works out much better than to just use a moving average.
The only problem is that you can't do this in TC because each time you add a new indicator in TC it creates its own custom scale."
----------------------------------------------------------------------------------
One solution maybe to plot both together as one indicator:
(XAVGC12-XAVGC26)+(XAVGC60-XAVGC130)
(with center zero line checked)
This would represent the daily MACD 12,26 and a
weekly version. (12*5=60 and 26*5=130)"
----------------------------------------------------------------------------------------------------
This was my response to your problem.
(or anyone with a similar problem)
At this point in time (from my standpoint) you had no spread indicator.
This:
((xAVGC2 - xAVGC30) - (xAVGC12 - xAVGC26))/C
Was supplied after my post.
Notice my response:
"It should be noted for anyone attempting to use this
technique.
Using the sum of the MACD's or difference of the
MACD's creates different results. Based on the
order of the variables or positive/negative values.
------------------------------------------------------------------"
Only highlights the differences between summing and
differences. Your "spread" is not mentioned.
Your response:
"The formula is wrong."
Implies that summing should never be done. When it is
the only method to retain the integrity of the MACD
concept. Namely above or below zero important and
rising falling important.
So the difference is you are only speaking about
your indicator and how it relates to your trading.
I am not.
I am speaking in broad terms and trying to highlight
that summing and differences should not be viewed
as the same.
Realize that its not really clear to me exactly what you
are doing with these indicators. Since you have mentioned
both divergences, and spreads, and crossings. that is all
somewhat vague unless put into context.
Realize that in traditional MACD divergence summing would
probably be appropriate and in "spreads and crossings"
differences would probably be appropriate.
So I think the issue here is when "spreads
and crossings" are the issue. We lose
divergence information.
When divergence is the issue we lose
"spread and crossing" information.
Right or wrong all depends on what one is trying
to determine.
Thanks
diceman
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Registered User
Joined: 9/22/2005
Posts: 849
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Diceman,
I have a problem with the above discussion.
I plot
((xavgc2-xavgc30) - (xavgc12-xavgc26))/c *100 in the middle window and
((xavgc2-xavgc30) + (xavgc12-xavgc26))/c *100 in the bottom window.
Both with center line zero.
Note the different signs.
I checked the daily charts since 03/06 and the weekly charts since 03/03 for COMPQX, DJ-30, SP-500, AAPL, AMZN, MODT, NVAX, HOTJ, and ADSX.
In all cases the indicators were almost mirror images with zero crossing points (both up and down) within one bar.
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Registered User
Joined: 10/7/2004
Posts: 73
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Don't take things out of context...
Look at the quote:
"So the sum can never be superior for determining crosses or spreads because it simply does not work...by definition. The formula is wrong."
The sum cannot determine crosses or spreads because the spread is the difference between two indicators. It is wrong by definition. When two indicators cross the difference is zero. The sum will never work.
MACD itself is a spread...a difference between two moving averages.
I guess you can't or simply won't read the posts.
This seems to be a reoccuring theme with you.
You just like to argue and stir up the pot.
TM <:o)
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Registered User
Joined: 1/28/2005
Posts: 6,049
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bcraig73450
Did you look at BRCM with:
(XAVGC12-XAVGC26)+(XAVGC60-XAVGC130)
(XAVGC12-XAVGC26)-(XAVGC60-XAVGC130)
Thanks
diceman
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Registered User
Joined: 1/28/2005
Posts: 6,049
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Truemaster
I guess you define any opinion other
than your own as an argument.
It is a strange concept. That I could supply
you with what I thought you didn't have and that
is arguing.
Thanks
diceman
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Registered User
Joined: 10/7/2004
Posts: 73
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Diceman,
You have issues.
Happy trading. <:o)
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Registered User
Joined: 1/28/2005
Posts: 6,049
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"Diceman,
You have issues. "
------------------------------------------------------
I couldn't have said it better Truemaster.
Tobydad has been called "crazy" on these boards.
I think he would like to know he has company.
Thanks
diceman
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Registered User
Joined: 10/7/2004
Posts: 2,181
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Diceman;
Welcome to the looney bin!
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Registered User
Joined: 10/7/2004
Posts: 2,181
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By the way, Diceman, if you have issues then I'm very concerned for the rest of us!
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 Gold Customer
Joined: 11/11/2006
Posts: 359
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Once we had issues. We had many and varied issues that had been in the family for generations. We took great pride in them and we were the envy of all our neighbors. It was widely thought that our issues were the best! We had issues Greatgranddaddy Mammon brought from St. Louie in a covered wagon in the spring of '47.
But, alas, no longer. Granddaddy Mammon lost all our issues in the crash of '29 and strive tho we may, we have never reclaimed our former glory.
I am pleased to see that there are issues here. Perhaps, through time and effort, I could get some.....
Mammon
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Registered User
Joined: 1/28/2005
Posts: 6,049
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I think Sigmund Freud would have had a field day. If he has studied traders.
I wonder if my issues are "new issues" or IPO's?
Thanks
diceman
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Registered User
Joined: 9/22/2005
Posts: 849
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Diceman
Yes, I checked BRCM just now with the
results similar those I reported previously
for other stocks.
On the weekly chart(zoom 4)I found
crossovers aS follows
Price
UP DOWN Difference
05/06/O5 05/04/06 20,2O
11/07/06 01/23/07 -0.89
On the daily chart with the same zoom, there
were several relatively minor crossovers.
In all cases both indicators matched in direction and position within one bar.
There wrer other, minor, crossovers wobbling back and forth across the zero line
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Registered User
Joined: 1/28/2005
Posts: 6,049
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You looked at BRCM with these indicators ? :
(XAVGC12-XAVGC26)+(XAVGC60-XAVGC130)
(XAVGC12-XAVGC26)-(XAVGC60-XAVGC130)
See my comments:
"On March 29 2006
12-26= -.35
60-130= 4.52
This would indicate the long term trend is up and
there is short-term weakness.
However when you subtract these
you flip it negative:
-.35-4.52= -4.87
when we add the positive long-term number
dominates:
-.35+4.52= 4.17"
Thanks
diceman
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Registered User
Joined: 9/22/2005
Posts: 849
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My apologies to all.
Thanks Diceman, for calling my attention to my error.
It was a case wherein I didn't read correctly and put my mouth in gear while my brain went fishing.
I don't know where I got
((xavgc2-xavgc30) - (xavgc12-xavgc26))/c*100
when I should have had
(XAVGC12-XAVGC26)-(XAVGC60-XAVGC130)/c*100
in the middle window
and
(XAVGC12-XAVGC26)+(XAVGC60-XAVGC130)/c *100
in the bottom window.
With the proper equatins, the chart is very differebt.
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Registered User
Joined: 10/7/2004
Posts: 2,181
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Well Diceman, I can only say that any time you have something to offer to the public, initial or otherwise, I'm interested.
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