29 replies to this topic

[arbman]

The bottom line to all of this is that the trend is your friend, and until money flow moves in the opposite direction, there's no sense in trying to be a hero in picking a top as the percentages show you will fail in this effort. Better to wait until there's enough of an internal breakdown first before allowing your hard earned money to be exposed to a possible top in the making. The market will do this in its own time, its own terms, and it really doesn't care what you think it should do...and when.

Fib, I watched you over the years how you successfully used the trend and the breadth for your advantage. I have a different edge than yours actually. I use cycles in a much different way and representative of the breadth. I get the majority of the market and timing on my side, all I can tell you is that these moves are not sustainable around here and even though we might see slightly higher, I do not think we will see substantially higher before we give back these recent gains. We all trade within the capability of our tools, I combine a lot of tools too and other market variables.

If you watched my trades since 2006, most of my timing was based on the cycle and "cycle breadth". It works, have I made mistakes? Of course I did, can this go much longer than I am currently anticipating (1120-1140), sure it can... But I have seen these moves over and over; I have the analytical forecast that the leadership and the cyclical structure are not favoring much higher sustainably, we will close Intel's gap, I actually see we will also close 1040 gap and perhaps lower...

Can I be wrong? Sure I can, but this is what makes the markets. From what I understand you want to react to the changes in the breadth structure, I watch what changes the breadth structure... I never say I must be right, or the market must do this or that, it is just a different edge and it works in all time frames...

[tommyt]

Fib, thanks for your response. I have a slightly different take, in that these tools I use give me a heads up for POTENTIAL change ahead...no denying the trend is up until further notice, but I have a breadth alert now, and will be very quick to short any 60 min signals. I also have a sentiment alert from a few different sources, here's one. P/C stuff finally going to an extreme, and expo will be over after tomorrow:

#2

[fib_1618]

I use cycles in a much different way and representative of the breadth. I get the majority of the market and timing on my side, all I can tell you is that these moves are not sustainable around here and even though we might see slightly higher, I do not think we will see substantially higher before we give back these recent gains.

Well, if we look at the NYSE breadth MCSUM, and the sideways movement of the last two months (within a highly "overbought" condition), this presents to one and all that this current move is, in fact, sustainable. Is this something that is usual and customary? No, not at all. But then again, never in the history of the marketplace has liquidity levels been so massive which would produce these kind of situations to begin with. Abnormal times like this will also play havoc with everyone's technical work. In the case of cycles, they can either hurry up and provide an stimulative shift in their oscillation - or - they can extend and then nest at the very last minute to satisfy this same expectation.

The collective trick with monetary money flow is that it is what it is until it isn't. There really isn't anyone out there that can consistently judge when the trading public is finished doing what its doing - be it loading or unloading - and the stimulative forces behind such important decisions. This then makes the cumulative lines the only way for us to know exactly how much money is available for investment at any given time - aka liquidity - and when situations can present themselves where new directional price moves can be taken advantage of.

Now, far be it from me to challenge anyones methodology...every market participant has their own set of rules based on their own trading experiences. But what I think we can agree on is this: whether we use something like cycle work (or any other analytical tools) to anticipate market reversals at any given time period, the only way we absolutely know that something is "different", that would compliment this same expectation, is when money flow leads the way. So although one may feel confident that something can't be sustained, until you see the reservoir level act to where this expectation can materialize, you must give the benefit of the doubt to the path of least resistance until proven otherwise.

I have a slightly different take, in that these tools I use give me a heads up for POTENTIAL change ahead...

Any good technician who is worth his or her weight is ALWAYS looking for reasons for their being wrong (as opposed to reinforcing their being correct). In this current case, we might see the MCO move below the zero line tomorrow, but how important will that move be as far as our individual game plans? Given the current height of the MCSUM, any move below the zero line right now would NOT produce a trending price move in this same direction. Given this idea then, the short term trader would be well advised to play "hit and run", while the intermediate term trader would "hold" and initiate protective stops to profitable positions.

To wind this up, I believe that the McClellan's are two of the very best tools out there simply because one measures the speed in which money is moving in or moving out, while the other shows us how prices will react with this same stimulative effect. The more the stimulus, the easier it is for the many (total issues) to move in this same direction without a great amount of effort. Another way to put it: trading is a game of probability and outcome. So if you can find a way to follow the money at any given time, and determine how much conviction there is behind it, your trades will be more profitable, more consistently, with least amount of damage to your trading account.

Fib

[IndexTrader]

Excellent post Fib. And good to see you again. I hope all goes well. IT

[NAV]

I use cycles in a much different way and representative of the breadth. I get the majority of the market and timing on my side, all I can tell you is that these moves are not sustainable around here and even though we might see slightly higher, I do not think we will see substantially higher before we give back these recent gains.

Well, if we look at the NYSE breadth MCSUM, and the sideways movement of the last two months (within a highly "overbought" condition), this presents to one and all that this current move is, in fact, sustainable. Is this something that is usual and customary? No, not at all. But then again, never in the history of the marketplace has liquidity levels been so massive which would produce these kind of situations to begin with. Abnormal times like this will also play havoc with everyone's technical work. In the case of cycles, they can either hurry up and provide an stimulative shift in their oscillation - or - they can extend and then nest at the very last minute to satisfy this same expectation.

The collective trick with monetary money flow is that it is what it is until it isn't. There really isn't anyone out there that can consistently judge when the trading public is finished doing what its doing - be it loading or unloading - and the stimulative forces behind such important decisions. This then makes the cumulative lines the only way for us to know exactly how much money is available for investment at any given time - aka liquidity - and when situations can present themselves where new directional price moves can be taken advantage of.

Now, far be it from me to challenge anyones methodology...every market participant has their own set of rules based on their own trading experiences. But what I think we can agree on is this: whether we use something like cycle work (or any other analytical tools) to anticipate market reversals at any given time period, the only way we absolutely know that something is "different", that would compliment this same expectation, is when money flow leads the way. So although one may feel confident that something can't be sustained, until you see the reservoir level act to where this expectation can materialize, you must give the benefit of the doubt to the path of least resistance until proven otherwise.

I have a slightly different take, in that these tools I use give me a heads up for POTENTIAL change ahead...

Any good technician who is worth his or her weight is ALWAYS looking for reasons for their being wrong (as opposed to reinforcing their being correct). In this current case, we might see the MCO move below the zero line tomorrow, but how important will that move be as far as our individual game plans? Given the current height of the MCSUM, any move below the zero line right now would NOT produce a trending price move in this same direction. Given this idea then, the short term trader would be well advised to play "hit and run", while the intermediate term trader would "hold" and initiate protective stops to profitable positions.

To wind this up, I believe that the McClellan's are two of the very best tools out there simply because one measures the speed in which money is moving in or moving out, while the other shows us how prices will react with this same stimulative effect. The more the stimulus, the easier it is for the many (total issues) to move in this same direction without a great amount of effort. Another way to put it: trading is a game of probability and outcome. So if you can find a way to follow the money at any given time, and determine how much conviction there is behind it, your trades will be more profitable, more consistently, with least amount of damage to your trading account.

Fib

Good points Fib. But i think your timing of making these points maybe at the maturing end (or terminal) of the IT trend. A post like this 200 points below with conviction would certainly have made a difference. But talking about a trend or sustainability of it after a huge move IMO is always playing with fire, unless one is positioned from way below and has the pyschological tenacity to withstand a 10%+ drawdown. Given where the A/D line is, any washout would certainly lead to new highs or at least a restest of it and i agree with you on that. But, how deep could be the washout, is the real concern.

One analyst, probably the only one, i recall during this uptrend, who said with conviction to buy the market with both hands when S&P was around 850 was Terry Laundry. He posted solid technical explanations to back his view. Back in July, he made a clear case for a Oct top. Don't know if he is right or wrong, but when someone with such uncanny technical abilities is calling for a top, i would pay some attention.

And we have the Pesky 20 week cycle lows coming by the end of Nov.

Best

[fib_1618]

But i think your timing of making these points maybe at the maturing end (or terminal) of the IT trend.

Maybe...I might be...but my decision to intercede at this time had absolutely nothing to do with the timing as it did in providing interpretative assistance of the McClellan tools to those who were showing frustration on this topic. As you may know, I have been taking it easy over the last year and making any critical comments about the markets elsewhere. I might add that one of these infrequent commentaries just so happened to be made on March 12th. Many did read that post and it did make a difference...and that was 400 SPX points ago.

In any event, it wasn't my intention to be late to the party or to crash it....only to keep it on track.

Best to you
Fib

[Echo]

Hi Fib, What is your thought on the ledge the NY breadth Mcsum is sporting? Given the current configurations of the NYAD, MCO, and components, do you think it is a ledge made to fall off of? TIA. Echo/Doc

[tommyt]

another way to use the summation, is to wait for a gap, or opening up on the dots.

[entre]

I think it is possible to get a decent read on the unprecedented liquidity that is screwing with the overbought oscillators since the new look Federal Reserve is bolder and cockier.

[fib_1618]

What is your thought on the ledge the NY breadth Mcsum is sporting? Given the current configurations of the NYAD, MCO, and components, do you think it is a ledge made to fall off of?

I don't know if I would classify the current configuration as true ledge...maybe more of a "flotation zone". But as you know, I recently annotated this pause with a pink support line as being important to the overall structure of the Summation Index itself. With the NYSE MCSUM being above its zero line for a longer period of time that is usual and customary, and break below this same support area will more than likely begin the unwinding process that many have been salivating for over the last two months. However, this doesn't necessarily mean that price will move in lock step with this same unwinding process. In fact, we're more than likely to see higher price highs until the NYSE MCSUM is able to move back below the +500 level than we are in developing a down trend.

another way to use the summation, is to wait for a gap, or opening up on the dots.

Yes, there are many interpretative values to both McClellan tools - especially with the MCSUM - that I didn't bring up. Tommy's reference to the individual postings also gives the analyst a cursory view on how fast money is either moving in or moving on an intermediate term basis...the further the individual postings, the faster the trend in that same direction. And since the individual postings are based on the daily MCO figures, this reinforces the idea of the MCO being accelerometer.

I think it is possible to get a decent read on the unprecedented liquidity that is screwing with the overbought oscillators since the new look Federal Reserve is bolder and cockier.

This is why the daily review of the cumulative A/D line is important as it's a direct reflection on the actual liquidity generated by the Federal Reserve to keep the markets liquid, and with the additional aid of the McClellan tools, one then take this raw information and give it the scope needed to position accordingly in real time.

Fib