21 replies to this topic

[mortiz]

I make no claims to be an expert on the Balance-Of-Power (BOP) indicator and highly respect its effectiveness particularly from MSS' work with this tool. From my understanding of the indicator's construction, I am assuming higher-than-we've-seen-in-daily-price-volatility for awhile would need to be in play for BOP to achieve extremes greater than the +0.20 to +0.25 extremes over the past few years. I suppose I could test it myself, but my guess would be the indicator's contained range over the past few years would be replicated in the late 1994 to mid-1996 time frame when implied volatility was low, as it has been for the past couple of years. And I would also guess the BOP range expanded in the 1997 to 2000+ time frame when price volatility expanded. Just an untested theory why the SPX BOP version has not breached the +0.30 level during this entire bull run. FWIW Randy

[eminimee]

Fib...just to be clear....I'm very bullish but I think we pull back to at least 1360 if not 1325. Another reason for me to give up here as it's very difficult to continue to give the ST,IT,LT perspectives with each and every comment. VLE will find it's top at 2317/20 by the way
http://stockcharts.com/c-sc/sc?s=$NDX...2262&r=1018

[fib_1618]

I'm very bullish but I think we pull back to at least 1360 if not 1325.

The objective of this thread was not to point fingers, but to have a dialogue of the actual facts of current money flow that's available for investment and what it may mean for the price patterns of the major market averages. I pretty much know everyone's market outlook by reading the comments posted. My comments and questions have been in a general sense to this juncture as to vicariously ask the same questions that others might have in the community, no less, to promote a thought process of why the market can continue to move higher in spite of the fundamental facts that conditions us think in the opposite fashion.

So let's try this. Let's assume for a moment that the NYSE & PM Breadth charts were inverted, and that the price patterns were also trending lower. Would it then be easier to forecast a "melt down" under the current conditions shown based on this same data, all things being equal? Would it have more validity in your eyes that a lack of liquidity is the main engine in pushing prices lower and will continue to do so until this directional flow changes?? And if the answer is yes, then wouldn't this same theory work if liquidity were rising as it would be if it were falling? Is there a technical double standard to this kind of information as far as its usefulness in making money in the markets?

Again, you be the judge and jury of the facts at hand, as well as, the merit it provides.

Fib

[eminimee]

My problem is ..."what's a melt down?"...I find the conversation futile as no matter what any indicator is saying....a 5 to 8% correction can come at any time. If we are talking the end of the bull market I would say the indicators are not supplying evidence of that.

[VolPivots]

I wasn't trading back in 1994, but looking at the charts early that year everything looked fine and dandy. Cumulative breadth had been trending strong for at least 3 years and VIX was hitting record lows. What happened in February that year I wonder? My point here is simple....ya never really know. I will suggest that VIX/VXO are not currently pricing in volatility levels for a 'meltup', but it just gets cheaper as each day passes

What happened almost 13 years ago to the day?
http://stockcharts.com/c-sc/sc?s=$NYAD&p=D&st=1991-01-01&en=1994-02-10&i=t68384170455&r=1286.png

[fib_1618]

a 5 to 8% correction can come at any time.

Can it? With the exception of last summers pull back into what turned out to be the 4 year cycle low, a cursory view of the major market indices have shown a lessening of corrective forces the higher the NYSE advance/decline has traveled - with the recent pause a sideways consolidation. And now, the line is accelerating again to the upside. If the marketplace has this many problems pushing one way, in finding sellers, wouldn't the trend of least resistance find it easier to move in this same continued direction, and at the same accelerated rate, as that of A/D line?

Fib

[fib_1618]

What happened almost 13 years ago to the day?

February 4 - The Federal Open Market Committee raises the Fed Funds target rate for the first time since May, 1989. The rate is raised by 25 basis points to 3¼ percent.

I will suggest that VIX/VXO are not currently pricing in volatility levels for a 'meltup'

Maybe, but the squeeze is definitely on, and we know that volatility rose during the mid 1990's advance as the Dow rallied 3000 points or about 40% in value.

Fib

http://stockcharts.com/c-sc/sc?s=$VIX&p=D&st=2003-08-01&i=p41645343985&a=71438318&r=4923.png

[Echo]

Fib, nice thread.

One fly in the ointment for me the that breadth is still leading volume in some segments/indicies.

NYSE, MID, and SML have beaten or equaled their Nov mco peak for both breadth and volume.

SPX, NASDAQ, OEX, and WLSH only have beaten or equaled their Nov mco peak on the breadth side and not the volume mco side.

Does that concern you enough to suggest a better than even chance for a zero line snapback on the mco starting Mon, or do you think that will resolve itself in the next few days?

Echo

Edited by Echo, 04 February 2007 - 02:04 AM.

[fib_1618]

Does that concern you enough to suggest a better than even chance for a zero line snapback on the mco starting Mon, or do you think that will resolve itself in the next few days?

I guess it all depends on which forecasting methodology (or combination of) that you subscribe to.

In an overall constructive sense, what we do want to see in such matters is volume (in the way of plurality) either leading or at least moving in tandem with breadth in the direction in which money is moving. Both the raw NYUD, as well as the NAUD, are currently satisfying this objective and this suggests longer term strength as to the health of both of these exchanges.

What the McClellan Oscillator does is measure the short term trending strength of the advance/decline line(s) in either direction its traveling....very much like what a speedometer shows you when you step on the gas in your car. At this point, it's only been since last Wednesday where the last corrective process ended and the markets "foot on the gas pedal" has become heavy enough to give us a breadth thrust to the upside (a-la a "Jack Rabbit" start) on the NYSE data and those indices that take their weight from this same exchange. On the other hand, the NASDAQ exchange has created a breadth thrust of its own, while the volume side, although lacking acceleration, the NAUD line itself is not only leading the NAAD to the upside, but it remains in a bullish configuration as of this past week.

Now after such a robust move as we saw on Wednesday and Thursday, common sense would suggest that some sort of pause should be seen in the markets as an attempt to digest what's already been done, and so the small point changes of Friday. And at the same time, this digestion point is taking place at either the October or November highs (see the cumulative charts) and this would allow these same McClellan Oscillator readings to relax a bit in the markets attempt to bring balance back by moving to or towards the zero line. And under the current conditions seen by market breadth itself, it probably wouldn't too far reaching to expect these same markets dynamics take the time to regroup for a day or so before attempting to move above last falls overhead resistance as well - very much like we saw with the ratio adjusted NYAD line over the last 10 days.

I started this thread and asked the question "Melt Up in Progress?" and have presented evidence that if one were to occur this might be a good as time as any. I just don't know. Nobody really does. But what I do know is that there is something different going on right now in which I've annotated on the series of breadth charts that were linked at the beginning of this thread that do need to be noted for what they may suggest. It's up to all of us to judge what this all means in the bigger scheme of things and construct a trading plan that would compliment any or all possibilities within the scope of these same indisputable and unexaggerated pieces of information.

Fib

[mss]

I am reposting the first response to "fib's" post about a "melt up?"
My statement was that based on my analysis of the BOP indicator, price had broken above "its" yellow trend line. IF & IF the BOP broke above "its" yellow trend line then based on past opinion (my analysis) the market would, high probability, move higher and faster. The suggestion is IF & IF the BOP does not break "its" yellow trend line we would get a correction, NOT a crash.

You be the judge and jury.
Fib

My chart is not as fancy as your's, but it suggests we will know soon. The BOP (money flow) will break the yellow TL, as price has, or it will turn down. If it turns down odds are we get a correction, not a crash. The judge is still sitting on the bench and the jury is still out, JMO.



mss

Below are two long range charts, please look at them close and notice the areas of price action to the areas of BOP movement. Lag time is a factor, the first chat posted gives a better view, my opinion, of price/BOP relationship.
Nothing more, nothing less. You judge for yourself.





Best to you and may all your dark "rags" have buttons and bows.
mss