29 replies to this topic

[tommyt]

Fib Am I right in saying that you don't think the mkt could have a bigger sell off because the summation is way up high? If so, most declines start up "somewhere" in the summation. More important is the structure of the summation, dot gaps, divergences, trend. Calling an initial ST pullback in an uptrend is one thing which a trend follower would ignore, agree. I believe the real way for a trend follower to use the summation was to look for the trend change when it crosses its zero line. My time frame and yours are seemingly different in this case, so we both could be right. I do believe the summation will have the beginning of an impulse gap today, and price will follow next week in a bigger way..Good hunting!

[arbman]

Fib

Am I right in saying that you don't think the mkt could have a bigger sell off because the summation is way up high? If so, most declines start up "somewhere" in the summation. More important is the structure of the summation, dot gaps, divergences, trend. Calling an initial ST pullback in an uptrend is one thing which a trend follower would ignore, agree. I believe the real way for a trend follower to use the summation was to look for the trend change when it crosses its zero line. My time frame and yours are seemingly different in this case, so we both could be right. I do believe the summation will have the beginning of an impulse gap today, and price will follow next week in a bigger way..Good hunting!

I think he is trying to say most sell offs from these levels will be bought and new highs are more likely then just topping all at once. In other words, he wants to see gradual deterioration in the market breadth in a regular bull market. I think this will be a more abrupt turn (still gradual probably though) in both the breadth and price momentum actually since I see this as a bear market bounce of gigantic proportions...

Edited by arbman, 16 October 2009 - 11:54 AM.

[tommyt]

In other words, he wants to see gradual deterioration in the market breadth in a regular bull market. thats what the Mc Osc /summation is saying...in the last 6-7 trading days, the M Osc barely went up, showing weakness setting in in breadth. And that was to new recovery highs, so it attaches some significance. How much can be debated. I don't want to short just to do it...this is one tool in my bag currently saying warning.

[SilentOne]

I think he is trying to say most sell offs from these levels will be bought and new highs are more likely then just topping all at once. In other words, he wants to see gradual deterioration in the market breadth in a regular bull market. I think this will be a more abrupt turn (still gradual probably though) in both the breadth and price momentum actually since I see this as a bear market bounce of gigantic proportions...

That's the way I see it. But I think that deterioration in market breadth has already begun several weeks ago. At some point soon this market will turn hard. I watch many stocks in Canada and their technical picture is deteriorating, outside of materials and energy.

The other surprising thing is how the vol is still fairly static today and almost at yesterday's lows. At some point very soon, this should change.

cheers,

john

[tommyt]

Silentone, I guess we seeing about the same thing...the vix complacency at this level the last few days is really surprising...no respect for the puts, or massive call buying.

[Woody]

Silentone, I guess we seeing about the same thing...the vix complacency at this level the last few days is really surprising...no respect for the puts, or massive call buying.

T with you and John on this.......I have studied MCO and MCSumm at length coutesy of Fib's chat groups......my 2 cents is that Breadth be it NH/NL or MCO or MCSumm very good at picking bottoms by showing positive divergence, probably because bottoms tend to be spikey affairs with retests, tops otoh deteriorate gradually and that is why price is a better yardstick ....as you say breadth is but one measure, when the real IT trnd changes, we will see similar trend changes in Oil, Gold, Copper, Dollar, Junk Bonds, Mkt Leaders like Apple, Goog, GS etc

[fib_1618]

Am I right in saying that you don't think the mkt could have a bigger sell off because the summation is way up high?

That would be the implication of a highly "overbought" (or "oversold") marketplace as it's very difficult for prices to catch on to an opposing trend under these circumstances. It would be like if you didn't have snow shoes on a frozen pond...you might get a bit of distance, but the odds say that you will slip and fall in your effort without the traction needed to hold on.

More important is the structure of the summation, dot gaps, divergences, trend.

Not only more important, but things like this is what makes the McClellan Summation Index so valuable. In fact, the MCSUM can also tell you how much the average stock will move on a given day..but that's for another time.

I believe the real way for a trend follower to use the summation was to look for the trend change when it crosses its zero line. My time frame and yours are seemingly different in this case...

Nope our time frames are exactly the same. Our disparity is in our determination of when a trend can be created based on the amount of liquidity available between buyers and sellers...but the functions of both the MCO and MCSUM remain constant.

I do believe the summation will have the beginning of an impulse gap today, and price will follow next week in a bigger way

Not only is it unlikely that price will follow in lock step with the MCSUM moving lower at this stage, but the amplitude of any decline will be tend to be smaller than that of breadth itself. Remember, you still have a couple of EMA's still holding many of the index price patterns in bullish configurations at this time, and like the last two shake outs, one or both will tend to hold the uptrend in price in check. This will only change as the MCSUM moves closer and closer to that of being neutral or the zero line.

But I think that deterioration in market breadth has already begun several weeks ago. At some point soon this market will turn hard. I watch many stocks in Canada and their technical picture is deteriorating, outside of materials and energy.

As some may know, every weekend I post a series of cumulative charts for both the US and Canadian markets. As of last weekend, there is nothing to suggest any weakening in these internals. What you may be noticing, however, is that the rate of ascent (momentum) has lessened over the last couple of weeks. How this is interpreted depends greatly on the position of the A/D or U/D lines respectively, and though they may not be as robust as they once were, all still remain with a series of higher lows and higher highs. Until this changes, the path of least resistance, and any surprises that go with it, remain to the upside.

Thanks for the discussion.

Fib

[tommyt]

thank you Fib...now, how did all this start? have a good weekend all.

[milbank]

Great post Fib. Thank for taking time to explain your thoughts.

I definitely second Vic's post Fib_1618 and thank you SilentOne, Arbman and others for contributing as well to a very interesting and educational discussion.

[OEXCHAOS]

This is some great and interesting stuff. I'm archiving it in IU.