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I use the following method to determine where the market is heading.
Short term: I take a 17 day moving average for the day, the 30 previous days, the 60 previous days, and the 90 previous days. I then do an easy scan on all of the market sectors. There are 239 total sectors.
For intermediate term I do the same as above with a 50 day moving average.
For Long term I do the same thing for 150 day moving averages.
I pick 150,50,and 17 because each is 1/3 of the previous average. Nothing scientific about that, just my preference.
At the close of today, thee averages were as follows
215 market sectors over there 150 day ma (90%)
209 over the 50 day
195 over 17 day
THESE NUMBERS ARE EXTREMELY HIGH, AND THEY WERE HIGHER THAN THIS 3 DAYS AGO!!! As an example, at the top of the 2000 bull market there were only 201 stocks above the 50 day moving average. At the bottom there were 15 sectors above their 50 day moving averages. The market has to knock down these numbers to keep growing.
Put your stops close folks. If it doesn't happen now, it will most certainly happen before the end of february.
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QUOTE (HaveNoCents) an example, at the top of the 2000 bull market there were only 201 stocks above the 50 day moving average
I meant to say sectors, not stocks.
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Joined: 1/21/2005
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HaveNoCents,
Thanks for the post. I agree. My indicators had me exit just before the end of the day today. The Nasdaq and Russell 2000 are at Elliot Wave 5's on the daily and
weekly. I'm now looking for collars on the stocks on
which I'm still long. My targets are $RUI 556 to 520 and $COMPQ 1716-1570 both by 12/4/07. I've been wrong before, but caution got me out in March of 2000 and has given me a return of >16%/yr on stocks since 1982. This should be an interesting year.
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HavenoCents,
I'm inclined to agree with you about the possibility of a correction.
Your approach is interesting. Do you ever look at the Worden % above avg indicators? For the past year, these breadth indicators have been negatively diverging from all of the major averages, especially % above 200 day moving average.
Having said that, I believe there is also also good possibility that the market could hold up until April before selling off.
Seasonally, April is one of the weaker periods, and we are in a strong period now. I had expected a sell off already in December, but the market broke out above my projected resistance levels.
From both an Elliott and Cycle POV, the market is much closer to a top than a bottom. The $100,000 question is how close is the top?
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I have looked at the % above 200 day moving average but I feel it gives false signals. Look at the peak of the russel 3000 in March, and then look at the peak of the 200 day index. The index continues to rise as the stock market falls. It is dealing ONLY WITH STOCKS. At least by doing the analysis on Market Sectors, you get an overview of the entire market. It is basically impossible for the market to go up when a large percentage of sectors are down.
Although I believe that certain months tend to be better than others historically, I have never seen a market correction wait for a "typically" bad month. It happens when the market is overvalued. We are there. The correction can be monday or in a couple of months. My guess is that by the Jan 26, reporting date, we will have our answer.
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HaveNoCents
Isnt it important how high the sectors are relative to the moving averages? If sectors were 40% above the MA
it seems different then if they were 1 or 2% above. Also the direction of the sectors would be important. If sectors are heading down they would count above the MA now but will eventually fall through (Sector rotation??).
Its hard to belive we can be in the same situation as
2000 (although anything is possible) most of last year
the indexes were down (SP500,DOW,QQQQ). The SP500 finished up 4.77 percent with dividends.
Thanks
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QUOTE (diceman) HaveNoCents
Isnt it important how high the sectors are relative to the moving averages?
From my experience, no it isn't. When a market is in the beginning of an uptrend I have never seen 200 SECTORS above their 50 day moving average. It takes a great deal of time for that to happen. Sectors become in favor and out of favor, one sector replaces another. When no sectors are worthy of more money the market falls. This is why I keep averages for the 17,50,and 150 day. The 17 day average is still at 195 sectors. That same 17ma was 211 sectors 30 days ago, AND 221 sectors 60 days ago. There is a trend. The economy is good, but not that good.
During a typical bull market you may see 170-180 sectors at one time or another above its 50 day moving average. Over 210 is out of site. During a correction, the sectors above their 50 day moving average will drop below 75.
The only question is whether is will be in one large drop, or gradually. My guess is we will get it it one large drop. The averages may not have done well last year, but STOCK PICKERS made a fortune. My returns last year from mutual funds averaged 16%. My aim basic value fund has gone up 67% in the last 3 years. My international funds have had similar results.
All I can say is on monday I will be shorting stocks. I have already sold all my stocks except for 1, and I have a close stop on it. I am taking profits on my mutual funds and moving 25% of my funds to bonds or moneymarkets.
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QUOTE (terrymccall) HaveNoCents,
Thanks for the post. I agree. My indicators had me exit just before the end of the day today. The Nasdaq and Russell 2000 are at Elliot Wave 5's on the daily and
weekly. I'm now looking for collars on the stocks on
which I'm still long. My targets are $RUI 556 to 520 and $COMPQ 1716-1570 both by 12/4/07. I've been wrong before, but caution got me out in March of 2000 and has given me a return of >16%/yr on stocks since 1982. This should be an interesting year.
Ummmmm What happens when you put 12 Ellioticians in a room discussing Elliott? You get 12 interpretations of the theory.
For MY two cents, I believe the SP500 and NAZ have completed wave 1 of a 3, and we have some more days of down/sideways trading. One could argue that wave 2 finished at the lows of today or this may be the wave 1 of the correction.
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After today's earnings I am sure the market will be down quite a bit tomorrow.
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Registered User
Joined: 12/8/2004
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New numbers
sectors above today 30days ago 60 days ago 90 days ago
17day ma.......160.......205........221.........194
50day ma.......200.......220........210.........191
150day ma......210.......208........212.........201
The short term indicator 17ma is droping quick. Betcha tomorrow it might be close to 100.
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Joined: 10/7/2004
Posts: 166
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QUOTE (diceman) HaveNoCents
Its hard to belive we can be in the same situation as
2000 (although anything is possible) most of last year
the indexes were down (SP500,DOW,QQQQ). ...
Thanks
Remember we did were not dealing with ETF's in 2000. The S&P, Dow, QQQQ were more dominant then. I agree with Havenocents, the opportunities are in shorts and Bonds. eg. most good Hi-Yield, Intermediate Term or Multisector Bond funds pay nearly 10% dividends a year. If you went to cashand bought a single Hi-Yield Bpnd fund in March of 2000 you'd be up 64% today doing nothing for the last 6 years!
Sounds too easy but its true. Look at TAHYX and compound the monthly dividends and annual Capital Gains.
Happy charting
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Joined: 12/19/2004
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HavenoCents,
Your crystal ball appears to be in good working order--there was a bloodbath in the Japanese markets overnight, and the index futures indicating an open of at least 1% lower.
This sell off is something I've been expecting since Thanksgiving. It looks like it is finally here.
I plan on adding to my long put positions in the morning.
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Today the intraday low on the 17ma dropped to 108 sectors. The market made a nice recovery back to 132 sectors. I guess we will have to see how much today's earnings reports affect the market.
Todays results
sectors above today 30days ago 60 days ago 90 days ago
17day ma.......132.......199........221.........196
50day ma.......195.......219........209.........188
150day ma......206.......204........211.........200
It's scary to think that during a normal market correction stocks above the 50ma drop to under 80. We still have a ways to go.
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A somewhat interesting observation.
There were 468 stocks that gapped down today that did not recover any of the gap. Of the 468, 162 of them were in the banking(60) and financial sector(102).
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Sorry, I hit post before I finished the last post.
Of the 157 stocks that gapped up and held their gap the largest group was also banking (38).
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Well the market improved today. Does it change anything? Absolutely not. The trend is going to by sideways or down.
Todays results
sectors above today 30days ago 60 days ago 90 days ago
17day ma.......166.......200........225.........202
50day ma.......202.......225........214.........194
150day ma......213.......212........212.........207
I think this was a good day to add to any short positions. Even if 17ma goes back to over 200 it just puts us right back in the situation we were a few days ago. My guess is money is changing from strong hands to weak hands. Institutions are not panicking because it will make the retail investor panic. The greatest way to lose money is to THINK the market is making a comeback.
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HaveNoCents,
How steep do you think the comming correction is going to be?
As for me, I see the major averages in a secular bear market from 2000. Just look at the monthly and quarterly charts of the SP-500, and you will see what I mean.
The move from 2002 is a cyclical bull market rally (inside of a bear market) that was caused by the massive simulation of the Fed, the Bush administration, and Japan. See my post from 2 weeks ago about the dollar on this.
There are huge economic imbalances in the economy. The U.S. govt. and the consumer is heavily indebted. Corporations are also heavily in debt, but these liabilities (pensions, health care) are largely off balance sheet, and underfunded. When I hear corporate balance sheets "look great" I always remind myself of this fact.
The U.S. ecomomy is a credit addict. It seems we are fast approaching the point where credit cannot expand fast enough to keep the stock markets moving higher.
With an aging population, with negative savings, and a net worth tied to the stock and housing markets, I'm very bearish over the long term. With the inverted yield curve, I'm convinced we are much closer to a major market top.
I can easily see this market testing the 2005 lows before the first half of the year is through. I would not even be surprised if the market completely retraces the gains made from the August 2004 low, putting us down about 17% for the year. And that is just the start.
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My system only lets me know when things are turning negative or should turn positive. I have no way of estimating how far, and chances are if I could I would be wrong.
I do have to agree with you analysis about the aging debt ridden baby boomers of which I am one, and your economic imbalances. Health care costs are out of sight. I own my own company, and I can tell you we have had a 25% increase in each of the last 3 years in healthcare costs, and that is shopping pretty darn hard. I will not put my employees on an hmo type plan, but if things continue the employees will have to contribute more to their insurance.
My plan was to be totally our of the market by 2008. On the positve side most baby-boomers are not savers, so it is possible they will bel forced to work longer to survive.
I still think the economy is strong but the market has moved up faster than corporations can generate profit. Some way, and some how the presidential election trend always kicks in, so I think 2007 the market will be strong.
2006 is a mystery to me. To me it has the capability of dropping 20%, although I don't think it will.
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Joined: 10/7/2004
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Well guys, I must say that you are getting way ahead of the game here. Whether a correction of the degree you are speculating will happen or not, I am so sure. What I am sure about is this. There wasn't any better fit situation for this to happen that back in October, but it didn't. I bet it would, but it didn't. No problem here I can change my mind in the time you flip a coin. Second the Primary trend continues to be strong. Third this market for some reason or another (I can clearly figure out either) continues to be resilient, very resilient in breaking that primary. So with what the market is telling me I wouldn't be too worry about any major correction. In fact nothing much has changed in economic factors or corporate scene, and nothing technical is telling me to worry ahead of time.
Once thing is for sure in the last 2 yrs have been great times to trade ranges.
good luck.
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I disagree. October was not the time for a huge correction. The 4th quarter is normally very good for the market. It is typically not until January earnings season where institutions really make their decision as to whether the fundamentals support the price of the stock. I know we have had some pathetic octobers, but normally by the year end the losses are made up.
I pay no attention to fundamentals. The institutions know a hell of a lot more than I will ever know. They also know the "secret" earnings expectations. Stocks have earnings surprises and the retail investor buys the stock on the news. The institutions gladly sell it to them.
The only way this market can move forward is if it trades sideways until earnings catch up to the stock price, or as in 2000 it can move up with less sectors participating in the market move, which is by far the more dangerous situation.
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BigBlock,
I'm inclined to agree with you from a short term point of view. But the longer term outlook is still bearish.
Yesterday, I heard one of the few intelligent things from a Bloomberg commentator.
He said:
"Most economists on Wall Street project about 10% returns for stocks this year. With cash returning close to 5%, the risk/reward ratio for stocks doesn't look all that favorable."
There is little doubt in my mind that there will be some significant real estate price declines in many parts of the country this year. Soft landing--LMAO!.
"Average" real estate prices are meaningless. There are bubbles where it counts--in population dense areas on the coasts. People can't afford homes, and can only "own" them by taking out negative amortization mortgages, interest only or "balloon" loans.
The last time such financing was popular--1920's.
The flat (now inverted) yield curve is going to hurt those sub-prime borrowers, and make it harder for them to refinaince their way out of trouble. This is so despite the low level of all interest rates.
Keep in mind, the excuses they make about the yield curve now being meaningless were recycled from the top in 2000. "Technical" factors--lack of supply for long term govt. bonds, were supposedly the cause of the inverted curve in 2000. This time around "a savings glut" from Asia is increasing demand for U.S. debt.
History doesn't repeat exactly, but it does rhyme, and this tune sounds like a remake from 2000.
These factors are going to slow the economy for sure, but it won't show up in the govt. economic numbers until late this year, or early next year. This is especially so, considering all of the tricks they play with the calculations, which would make a Enron executive proud.
Housing has driven the economy since 2002. Once it slows, due to the credit expansion it has facilitated, there is going to be a multiplyer effect. Less home borrowing = less incentive to build = less construction/financing jobs, less purchase of materials, etc.
No one on the Street has any incentive to tell it straight. The prime time to sell, if you are long, is around now, while the going is good.
When it looks like nothing could be better, you are likely close to a top.
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Todays results
sectors above today 30days ago 60 days ago 90 days ago
17day ma.......86.......177........220.........190
50day ma.......167.......214........204.........183
150day ma......196.......194........200.........196
Quite a drop in the short term moving average. If Monday starts out positive and ends up negative it won't be a very good sign for the future of the market over the next few months.
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rmr1976 I agree with you about what the numbers are telling or will tell. I have been aware of this for quite a long time. Look at some of my previous posts and you will agree.
That is why I said in my comment "I can't clearly figure out" why the market keeps going up. But the fact is that it has been doing just that, and I don't argue with the market.
So I think we are here on the same pace.
HaveNoCents, I strongly dissagree with you. From a technical point (and that is what my view was based on) of view the market was at the best position to break the primary trend, but for some reason it didn't.
I closed my shorts, and didn't argue - went long. By the way October earnings are for the months of Jul, Aug, Sept (not the best months), but besides the market took Jul's lows and next was to take May's low which would have change the primary - but it didn't. Today the Markets had a bad day, but it hasn't changed even the intermediate trend. By the way I do not aggree with Mr. Worden's time frames for short, intermediate, and long. With that said the market has to take Dec's low to change the intermediate trend by my book.
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Bigblock, I think december lows fall well withing a normal correction. For me it would have to drop below october lows to change the intermediate trend.
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Agreed Havenocents. That is what I meant, it would have to break Dec's low to enter into a possible intermediate trend change.
good luck
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QUOTE (HaveNoCents) I use the following method to determine where the market is heading.
Short term: I take a 17 day moving average for the day, the 30 previous days, the 60 previous days, and the 90 previous days. I then do an easy scan on all of the market sectors. There are 239 total sectors.
For intermediate term I do the same as above with a 50 day moving average.
For Long term I do the same thing for 150 day moving averages.
I pick 150,50,and 17 because each is 1/3 of the previous average. Nothing scientific about that, just my preference.
At the close of today, thee averages were as follows
215 market sectors over there 150 day ma (90%)
209 over the 50 day
195 over 17 day
THESE NUMBERS ARE EXTREMELY HIGH, AND THEY WERE HIGHER THAN THIS 3 DAYS AGO!!! As an example, at the top of the 2000 bull market there were only 201 stocks above the 50 day moving average. At the bottom there were 15 sectors above their 50 day moving averages. The market has to knock down these numbers to keep growing.
Put your stops close folks. If it doesn't happen now, it will most certainly happen before the end of february.
HaveNocents;
I just learning how to write PCFs. Would you be willing to share your "easy scan" PCF on how to do this?
Happy Charting
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It's super easy. I'm glad you asked because I found that I was actually comparing todays price to the moving average of 30,60,and 90 days ago,which was incorrect.
for 17 day
C > AVGC17 this is current
C.30 > AVGC17.30 this is the 17ma 30 days ago
c.60 > avgc17.60 """"""""60 days ago
c.90 > avgc17.90 """""""""""""""""90 days ago
for the 50 and 150da moving averages just substitute 50 or 150 where you see the number 17
Then create personal scans. Be absolutely sure you select "media general industry groups" as your group to select from. You are basically creating 12 scans, 4 for each moving average.
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Joined: 3/7/2005
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no cents,what is your take on the market now and cpst.
thanks gary b.
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Joined: 10/7/2004
Posts: 319
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For those of you who have really studied Elliott Wave theory........do you really think this is a valid technical analysis tool......or is it just a lot of b.s.? Seems to me that Elliott Wavers are always negative on the market, especially now.
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Registered User
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Todays results
sectors above today 30days ago 60 days ago 90 days ago
17day ma.......136.......183........223.........195
50day ma.......183.......219........209.........190
150day ma......207.......210........209.........202
We are not making much headway in this NEEDED correction. The way the market has acted the past couple of days it makes me feel like the institutional investors are trying to lull the retail investor into a false sense of security. The longer this takes, the worse the correction will be.
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Joined: 12/19/2004
Posts: 457
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RWPOD,
I've studied Elliott Wave for a few years, and I can tell you that at certain points in the market cycle, it can be astoundingly accurate.
It is a great framework in which to use other technical tools.
At the very least, it gives very good risk/reward ratios, if you prefer to place tight stops.
Go throug a few of my posts where I give some Elliott Wave Analysis.
There is a bit of ambiguity in the Elliott Patterns that I see. We are either at the completion of a pattern, or very close to it.
Putting this in conventional technical terms, suffice it to say, the price action in all of the major averages, Russell included, are of the wedge variety. The exception is the Nasdaq, which looks more like a bullish ascending triangle.
The bearish price patterns, the rampant bullishness I hear on Bloomberg, along with the yield curve, and what I think is a housing bubble make me very bearish on stocks at this point in time. It is very late in the cycle, and Fed rate increases have slowed the economy significantly, although it hasn't shown up in the numbers yet.
Don't expect the market to wait for bad economic numbers to sell off. Major tops are made when everything looks wonderful, and no one is worried about anything.
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I thought I would give an update of where we stand today.
Todays results
sectors above today 30days ago 60 days ago 90 days ago
17day ma.......89.......172........222.........187
50day ma.......151.......205........207.........187
150day ma......191.......197........207.........195
I still think the 50 and 150ma will have to drop to below 100 sectors before we have a chance of being finished and ready again for a sustained upward movement in the markets.
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I'll play devils advocate for a moment.
The markets will not make an overt show to the downside (if and when) until after 'aggresive negotiations' are engaged with Iran. Markets tipping too soon tip our hand too soon. Opening of Iran oil bourse monated in Euro's will be preceeded or shortly followed by a false flag event (to be blamed on Iran) to whip the rabble into a frenzy and provide precedent to move agaisnt Iran, the fact they aren't making nukes notwithstanding.
Provides cover for temporary and small market correction, allows US et al to control more oil (underwrite more debt).
Time to tuck in my horns now.
May you be cursed to live in interesting times.
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Personally, I don't think Iran will have anything to do with it. Sure, CNBC may say it did, but I think the fed will overtighten, and profits will continue to disappoint.
We have been in a bull market for 3 solid years. We have all become spoiled because the last bull market lasted 10 years. Most bull markets only last 2-4 years. Most bear markets last less than a year. I think we are just getting back to normal markets.
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There is no such thing as a 'normal' market. And these are the least 'normal' times in two generations. However this market, monated in todays dollars and insulated from reality by layers of disconnects, can trend or 'base' sideways for 20 or thirty years just as easily as it can go up or down tomorrow.
Breadth indicators are skewed by decimalization, sector strength is occurring because more and more companies within sectors are changing character after completion of 5 yr downtrends. I see rotation and finding support more than major correction here.
If I'm wrong I'll trade the trend.
I alluded before to being a student of realpolitik. I know greed and fear and the extremes of said. BTW...the major news services have done their best to ignore the Iran bourse and play on the nuke fears. Being a good contrarian, I take note of it.
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I would have to agree that comparing todays markets to markets prior to 1981 would not be a very good comparison. All you have to do is look at volume in the stock market The volume has increased substantially ever since 1981. I do believe I can safely say we will never have a bull run for 10 years like we had in the previous bull market, unless of course they find a way to allow us to invest all or part of our social security in the markets.
That being said however, the retail investor was burned very badly from 2000-2002. Those who participated in that bear market really got a bad taste in their mouths. They now understand the true meaning of "irrational exuberance". They understand that all ipo's will not quadruple their price in one day as they did in the past. They realize that anything with a .com at the end of it will not automatically make them millionaires. People now know that you don't continue to buy on dips regardless of price. People now know that you don't stay 100% invested while in a bear market, so yes, markets are returning to some kind of normalcy.
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I agree with you far more than I disagree HNC. But you give the majority far more credit for intelligence than they display.
The majority still don't understand that they don't own their retirement accounts and that those accounts and future disbursements are tied to market value, not intrinsic value. Nor that most corporate retirement plans and all federal 'safety nets' are criminally underfunded. The majority still plow their money into funds and 401ks managed by others and are happy with the dismal results.
You are rare, old boy. Revel in it.
The game is still afoot Watson (or Holmes, as you prefer).
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LOL, well all I can say is if they don't understand they ought to be shot.
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From what I see of the supposed 'anti terrorist' teams being used to maintain general order, I don't doubt that that option had crossed someones twisted mind.
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