My take about the strong breadth

The majority of the individual stocks correlated up to 80-90% with the moves in the broad stock market at the lows. This is the usual crash pattern, the market crashed, meaning every stock declined, then bounced and then declined some more. The moves became very very harmonic AND correlated for the entire market. These harmonic movements somewhat go out of sync as different parts of the economy grows at different rates, so you have to group the cyclical spectrum of stocks with different growth patterns before you can make an healthy forecast.

The market still has a lot of such strong correlation, it came out of a recession since the middle of Q2, even though the govt did not really talk about it yet. It has been a jobless recovery or a very strong bounce. The credit extended to the banks could not be efficiently lent to the nation during this cycle. The govt MUST by pass the banking, Fed MUST lend to the small businesses directly from here to sustain the growth, the banks are not performing.

So, I still see this strong harmonic movements as an artifact of a strong harmonic bounce. I have demonstrated here, I have a different approach and I am not going to go into the details. I have shown you though what's going on here for sometime. I still see this as a very strong bear bounce that will snap back down eventually. This is why the crash gap and the 50% line is very important, the breadth and the prices must peak together around here, otherwise I also think that we will probably reach to the next retracement levels around 1200-1220. I am not ignoring what the market is saying, it is just I am interpreting it with what worked for me...

Best of luck.

Edited by arbman, 16 October 2009 - 11:30 AM.

Your methods are interesting to hear about. I work for a private equity as trader and quant; I experiment with many trading models. Currently no model seems appropriate for forecasting this market with any accuracy, except trend following versions, ARIMA etc. My VIX models say the market has a ways to go given the vector it is on currently. My e wave work is pointing to a 10,400 Dow top and a 1200 S&P top. I use Phi Mate dates for, turn timing;I use it for the same reason anyone uses Fibonacci: descriptively it works, yet no one can theorize just why it works except it seems to empirically describe times series behaviors. My current turn date is 11/4 more or less, and I suspect it is a major turn in the broad market. Your graph seems to point to 11/4 also as maybe a pivot. Is a version of your work reported anywhere as a methodology or model? The Wilmot site has some harmonic models. Keep us up to date, I will watch your blog. Thank, Best, Islander.

Edited by Islander, 17 October 2009 - 04:45 PM.

Is a version of your work reported anywhere as a methodology or model? The Wilmot site has some harmonic models.

I don't think so... But it is unique not only because the way I extract the patterns, but also how I organize the resulting patterns. My methods also start very gradually to find out what matters the most right NOW in the smallest time frame and then works to the larger and larger time frames. Most people work the opposite way, they look at the largest trend and extrapolate it. So, I react to what happens right NOW more than what happened up until now, although what happened in the past is something that will be in the market's memory for some time...

I essentially start by removing the detail that I can tell what it is for or I toss them back into the bag of unknowns to be reorganized or analyzed later. Eventually the expectation is to find out how everything fits together and whether they all make sense as a large relational tree. This is not the same for the signals within one time series vs the different time series with respect to each other. In the end, I expect the signal to noise ratio will go higher when there is enough organization in the data in every sense...

What we need is an organizational tree that says this is happening because of this and this is effecting this that much and this ultimately depends on this in every time frame that we consider important... A kind of analysis that we can say there is very little unexplained left at the end. Some of these are simply convolution integrals that will tell you what is leading or lagging, but I needed to separate first the time series into the proper collection of patterns and trends to compare. This decomposition into the patterns and trends is the heart of my algorithm, I've never seen anything like that anywhere, but it has characteristics similar to Caterpillar SSA method. The crude correlation analysis or other ARIMA methods did not yield what I really looked for that purpose...

For example the leading element in this market has been the gradual devaluation of USD and its return on the growth rather than the inflation up until now. What the crowd fails to recognize is that the growth component is not yielding a whole lot better than inflation anymore, yet the crowd is still busy extrapolating the trend, not how this trend can be sustained anymore, the printing is not the way to prosperity, yet they are staring at the trend and ignoring the facts since they cannot tell where the turning point will be... The crowd is surely positioning itself in the wrong side of the trend in my opinion from here, there won't be much more upside without the real economy recovering much much faster...