45 replies to this topic

[DrWu]

The May event is merely noise, for those using EOD mathematics.

[TechMan]

First of all, allow me to say this again. I respect posters putting themselves out there making the calls based on the probabilities in their analyses. Sometimes it works, and sometimes it doesn’t. Basically, we’re all just talking here. When the calls don’t turn out the way you see them, you won’t hear me criticizing you for making the calls. The last thing I want is not to see you posting here ever again.

Now…

The key here is the distance between each individual post that is generated by the McClellan Oscillator. If you notice the current 4 day pause, the lack of distance between each post instructs us that the bears have very little control of the action...that the bulls are in the power position.

Fib - The near 3% NYSI plunge on Tuesday was not just a “pause”. Even on January 20, before the NYSE Index dropped 300 points in the following 2 sessions, the decline of the NYSI was merely 1.6%. Had you said that the bulls and the bears were in a tug of war over the past week, I’d have gone with that. But, your assertion that the bulls are in the “power” position is questionable.

Actually, the NYMO had been within the confines of an indecision pattern since the initial July thrust. Given that the McClellan Oscillator measures the speed between the short term (19 day) and intermediate term (39 day) exponential moving average of the advance/decline line, it would then be reasonable to expect that there would be less and less fuel available to drive prices in one direction or the other after the initial thrust.

Although contradicting your previous assertion about bulls in “power” position, I do agree with this analysis. Connecting July peak and lower highs of Sep. and Oct., and Aug. low and higher low of Oct., we actually have a symmetrical triangle (indecision).

Keeping in mind that the new highs/new lows data is the last to confirm a trending price move.

But that’s just not true. If it’s true, it had to be correct all the time. If you’d look at January top and August top, you’d see the NYHL declined ahead of the price.

As far as “trending price move”, the NYHL appears to be consistently moving right along side, if not earlier than, the price.

I don't believe that using a measurement differential of price momentum is an appropriate application to be used with regard to a percentage measurement of a stock's time given simple moving average.

Fib – The Rate of Change (ROC) does not just apply to the price movement. I’m sure you knew that. It’s widely used in various types of quantitative analyses, financials and otherwise.

As for “with regard to a percentage measurement of a stock's time given simple moving average”, I’ve no idea what you’re saying.

Bottom line… Do stick around, Fib, regardless what the market does. We’re all just talking here. That’s all.

[VolPivots]

The INTERNALS areweaker now than they were at the April top...I measure them differently than the norm. It's much easier to make breadth look positive when ~60-65% of the days have been gap ups since the beginning of Sep , accounting for 60-65% of the total rally gains. However, intraday cumulative SPY points are well below the April highs, much like they were way back in the fall of 2007 (June saw a peak in intraday cumulative gains and a lower high at the Oct peak). In fact, they aren't even at the same levels they were back last Oct, Dec and Jan of this year...the same level that provided support Jun-Aug 2008 and the breakdown level that preceded the great crash of Sep 2008. Major resistance until proven otherwise....

This market was 'forced' higher by overnight bid monkeys...no ifs ands or buts about it. It was NOT driven by strong intraday accumulation momentum (rate of ascent/momo is SIGNIFICANTLY slower than that of the early Feb10 low to April top)....most of the rally occurred while most were sleeping. And cumulative AD volume highlights this REALITY...well below the April high, though price is near the same levels, or higher for some indices.

[fib_1618]

But, your assertion that the bulls are in the “power” position is questionable.

Think of it this way...if you're charting a price pattern, and you happen to use a 19 day and 39 day EMA to help in determining not only the direction of the price pattern, but also the strength of this same directional trend by the degree of separation between these same two EMA's, one side would have the power until that configuration changes. It's the same thing here. Any daily or ongoing percentage declines or advances on the Summation Index have no real bearing on its analytical composition - the Oscillator would (in a way) - but not the Summation Index.

Although contradicting your previous assertion about bulls in “power” position, I do agree with this analysis.

Again, you're dealing with two degrees of trend....the MCO, short term - the MCSUM, intermediate term. They don't have to agree, and when they don't, you're more than likely to see choppy price behavior as the two time lines battle it out for overall longer term direction.

But that’s just not true. If it’s true, it had to be correct all the time. If you’d look at January top and August top, you’d see the NYHL declined ahead of the price.

Again...I am talking about the cumulative NHNL...I've included a chart below for your reference.

The Rate of Change (ROC) does not just apply to the price movement. It’s widely used in various types of quantitative analysis, financial and otherwise.

One can use any analytical tool they wish to make their point, but if it were developed for one purpose, using it for other means is likely not to give (or mean) the same expectation. For example, if you were able to put a square adapter on the end of a round hose, and tried connecting it to a round spigot, you might get some of the water through the hose, but it would be a messy job to do so. It just wouldn't fit right.

The Rate of Change indicator was developed to measure the speed (or momentum) of change between one period and another either in points or percentages. The ROC used in most charting software is that of percentage. This change is a direct reflection of the degree of which money is specifically moving in or out of one issue only and not a group. So to apply such an indicator to another indicator that measures the percentage of stocks that are trading either above or below a simple moving average (the percentage of percentage), though interesting, is not likely to give the analytical advantage that one would expect to trade off of. However, as I said in my original reply, the zero line would act as a demarcation point for whatever you choose to use it for. Right now, it's neutral.

Bottom line… Do stick around, Fib, regardless what the market does.

I appreciate your support, but I have been called irresponsible (and slightly insulted) for making a true and accurate statement based on solid technical historical evidence. No one even asked to me to show why I feel comfortable in making such a statement, but I provided one piece anyway. If something different happens that isn't usual and customary because of it, I would be highly surprised, and therefore should be banned from making such statements in the future. So my deal stands. It stands for integrity. It stands for the art and understanding of technical analysis.

The INTERNALS are weaker now than they were at the April top

By my work they are not, but we all work with different angles and viewpoints. Mine is just one.

Thank you all for the discussion...hopefully I've stimulated some new life into Traders-Talk that's been rather insipid of late.

Fib

http://stockcharts.com/c-sc/sc?s=$NYHL&p=D&st=2010-01-01&en=(today)&i=p90869275495&a=118792572&r=2296.png

[melonseed]

The May event is merely noise, for those using EOD mathematics.

Dr Wu,

I have very deep respect for maths, but its application to trading is just increasing or decreasing probability. I don't know what you refer to as 'noise' but there's nothing unreal about May event. Real crash happened involving real gains and losses. Transactions were triggered forcefully as well.

Factoring maths in trading is logical, but your statement had just discounted 'act based on human decision', which is absolutely real in trading. The one factor that makes traders wrong irregardless of how much evidence is gathered.

Regards.

[orange]

fib_1618, Your opinions on the breadth indicators are certainly appreciated

[TechMan]

Fib - No disagreement on the insignificance of each data point on cumulative or summation plots. That’s not what these longer term indicators are about. That’s TA 101. I brought up the noticeable NYSI drop on Oct. 19 just for the sake of argument about your use of the word, pause. I do pay attention to the spreads (or as you put it “degree of separation”) between moving averages. I must also add that some of my own cumulative indicators (i.e. CLV) are still in a long term uptrend. But, it’s the short-term that concerns me most as a day trader. As for the use of the ROC, I could not disagree with you more. I’m not asking you to agree with me but merely to have an open mind about using the ROC in conjunction with the % of stocks relative to their moving averages. The Rate of Change does not have to apply to just one single object. It’s by all means applicable to a group of objects. And, it’s certainly applicable to percentages just as well. Keep an eye on the extreme highs and lows of the ROC as a contrarian signal. And, of course, the zero line in the middle. I’ll try to post a chart or two in the future. For now, have a great evening. Now I’m hoping the market will decline only 1.99% on Monday... :-)

Edited by TechMan, 23 October 2010 - 06:05 PM.

[SemiBizz]

I have been watching this for some time...

The one thing that confuses and befuddles the HFT Model

Is UNEXPECTED HIGH VOLUME.

As long as volume stays low, the robots continue the vacuuming procedure.


When Volume came in during the FLASH CRASH, you saw the HFT rendered helpless.

Question...what is the difference between program trading and high frequency trading as it relates to price action and its reaction to movement?

Fib

TIME FRAME

[fib_1618]

I have been watching this for some time...

The one thing that confuses and befuddles the HFT Model

Is UNEXPECTED HIGH VOLUME.

As long as volume stays low, the robots continue the vacuuming procedure.

When Volume came in during the FLASH CRASH, you saw the HFT rendered helpless.

Question...what is the difference between program trading and high frequency trading as it relates to price action and its reaction to movement?

Fib

TIME FRAME

How so...in what regard??

Fib

[tommyt]

"Impossible...can't be done. The current technical condition of the market(s) will not allow it...there's just too much liquidity to absorb a shock. I liken May to that of flying in a plane at 30,000 feet...smooth air, some bumps, and all of a sudden, you hit a sever air pocket without any warning. No amount of analytical evidence (radar) would had predicted this, but it happened anyway." 900+ pt drop in a short period of time is a relevant move. So the answer is yes, a sizable drop can happen even with good momentum in place. HFT has helped the market trade stupid IMO. The market is waiting for this election and fed announcement, and a very decent move is close at hand. I will lean short, but I may buy a bunch of premium next week if it presents itself.