51 replies to this topic

[TechMan]

Its flaw is its inclusion of so much CDO, CMO, ABS, CLO, MBS, CDS, CBO, CPDO, LBO, MBO, CP, ABCP, etc. Many folks just refer to these as "bonds", but they are in fact the distinct forms of the structured finance instruments that caused the meltdown. They have yet to be honestly marked to market, and so the A/D line is a government subsidized indicator nowadays.

A Government Subsidized Inidcator... Thanks for the insight and an unique perspective. I know old subject always has the possibility of bringing up new ideas and insights. I'm glad we're rehashing these topics here all the time.

[Rogerdodger]

I guess somebody asked Laundry about A/D and he comments briefly today LINK.
Audio Comments
I take it that regardless of it's components, it behaves in a manner sufficient for his T Theory to identify previous tops and centerpost lows.

Also Mike Burk:

The NYSE advance - decline line (NY ADL) hit an all time high last Friday.

Advance - Decline lines are a running total of declining issues subtracted from advancing issues. Until recently (about 10 years ago) the NY ADL had a slightly negative bias making it useful for identifying developing tops. There has been a substantial increase in the number of fixed income issues traded on the NYSE which has caused this indicator to develop a wildly positive bias. Fixed income issues accrue value daily until they go ex-dividend, usually monthly or quarterly.

The chart below covers the past 3 years showing the S&P 500 (SPX) in grey and the NYSE ADL in blue. Dashed vertical lines have been drawn on the 1st trading day of each year.

Although the data has been contaminated, a new all time high for this indicator cannot be bad.

[TechMan]

Techman-thanks for the thread, everything here is worth discussion-and I have found your work a nice addition to the board. I'm glad no one seems to be holding back here, if there is emotion in the back and forth-so what?-the market is a cauldron of emotion anyway.

Thank you and well put, SPOOK. I've also found you to be one of my favorite commentators here although I disagreed with you from time to time. I wish that you would share more of your work here with all of us.

Edit: I think the very first post that I'd ever read on this forum was yours. Now, how 'bout that!?

Edited by TechMan, 28 February 2010 - 12:52 PM.

[mortiz]

The AD line topic has been beat to death for many years, but for those willing to decompose the NYSE issues into common stocks, preferreds, REITs, bond CEFs, non-bond CEFs, etc, there is considerable utility in monitoring NYSE component AD lines. The value of the NYSE AD line can boiled down to a few words: measure of liquidity.

The link Fib provided earlier in this thread illustrates the value in decomposing the NYSE membership into various groups. Many of us, including Fib, the McClellans, and many others have studied NYSE AD lines (keep in mind the all-time high for the NASDAQ AD line was posted in 1972) and it does an excellent job in measuring the health of market liquidity.

IMHO (and Tom McClellan's), the bond CEFs are *the* canary in the liquidity coal mine. We like to hear the constant banter of "the NYSE AD line is useless due to the pollution of preferreds, CEFs, etc in the composite AD line". Such comments keep the majority from investigating what is really going on beneath the surface.

The NYSE bond CEFs can be broken down into three categories: corporate bond CEFs, state municipal bond CEFs, and national municipal bond CEFs. The NYSE corporate bond CEFs can be further decomposed into investment grade bond CEFs and High Yield (junk) bond CEFs. I feel the junk bond CEF AD line is a very useful tool for keep the intermediate to longer term trader/investor on the right side of the market.

The below chart of the junk bond CEF AD line illustrates such:





FWIW,

Randy

[TechMan]

Hi mortiz – Thank you very much for sharing your thoughts and the nice Junk Bond CEF chart. From the number of views on this thread, I guess it’s safe to assume that this topic’s yet to bore readers to death. With all the due respect, however, there’s something illogical about your comment. By breaking down the NYSE components into various groups and finding them useful, you’re essentially agreeing with those, whom you’ve just criticized for complaining about “"the NYSE AD line is useless due to the pollution of preferreds, CEFs, etc in the composite AD line".

[Echo]

Randy,

Quick question regarding the high yields. The Merrill Lynch High Yield Master II that Gary Smith has pointed out in the past is not showing new highs as of Friday, instead, it dropped further into Feb 14th and has since rallied back up to levels seen at end Jan, but not higher highs. Now granted, it rallied very hard through Dec and early Jan.

Also the smattering of HYs I follow and again that Gary has pointed to in the past also have shown fatigue in the past couple of months:

High Yields

I'm not sure why your chart is different from these? Could there be a data issue?

Thanks for a most informative post!

Doc

[IndexTrader]

INDEXTRADER - I'm fine with the way you put it all in perspective in your last comment. Civility and mutual respect fascilitate flow of ideas and information. However, in the past month or two, you had taken 3 swipes at me, and I had let the first 2 times go. I don't know for sure if you meant it, but you had come across as quite territorial.

If my comment hit a nerve that made you uncomfortable, no one's forcing you to read them. You can just skip all my postings. However, if you're in the true spirit of exchanging information, then I'd welcome more input from you.

Frankly, I think you're way overly sensitive. Disagreeing with what you say is not "taking a swipe" at you. My understanding from your post here is that you felt I had "taken a shot" at you. Now it's evidently "taking swipes" at you at some undefined point in the past. I doubt it TechMan. I'm not even posting here much in the recent past. In either case, if I were you I would deal with your sensitivity or quit posting. By the way, nothing made me "uncomfortable" in this thread....again, I simply disagree with your point. Instead of trying to categorize my comments or opinions, why don't you simply stick with your own topic.

IT

[IndexTrader]

Good post Mortiz. Always appreciate your posts. IT

[TechMan]

INDEXTRADER - The first time was on my technical question survey project. Everyone joining the discussion was talking about the specific technical pattern except you. You criticized me instead for trying to prove something. I had to hold back and explain nicely to you that nowhere had I mentioned that I was trying to prove anything. It was simply a fun technical project for group discussion purpose.

The 2nd time was on one of my trades. While I was merely setting up part 1 of the trade, you cynically questioned me whether I had taken my loss yet. I got a double-digit gain out of that trade, as most of my real time real money trades posted here. Suppose I had lost money on that trade, your line of questioning would only aggravate the situation. As a senior citizen that has been around for such a long time, there’s no way you did not know that. So, the only intent that I could come up with is to take a cheap shot at me. But then, I let that go too.

I have personally made an effort not to comment on other people’s real money trades unless they’re successful. It’s a common sense and common a courtesy for grown-ups to know not to make people feel worse when they lose money.

And then this one, for the 3rd time…. The fact that you don't post much except on my thread only amplifies your agenda.

Edited by TechMan, 28 February 2010 - 04:05 PM.

[thespookyone]

Techman-Thanks for the comments. I'd like to share more of my actual charts and work, but I have a trading room where I teach-so I end up with some propriatary issues that many times hold me back. I will try and post more of my "stuff" when I can as time goes by.