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The REST of the Story- When NYMO Falls Below -100


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#1 IYB

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Posted 06 September 2022 - 11:36 AM

September 3, 2022

 

========================

 

What has been will be againThere is nothing new under the sun.” Ecclesiastes 1:9
 
What happens today has happened before and will happen again.” Livermore
 
Rather than love, money, or fame, give me the truth.” Henry David Thoreau
 
If you can keep your head when all about you are losing theirs…Yours is the Earth and everything in it,” Rudyard Kipling.
 
Let our Kindness be God’s ambassador,” Dr. Greg Borrer.
 
=======================
 
Tracking Account Value: 3,049,873, +145% YTD
 
Primary Trend: ~ BEAR MARKET
 
Intermediate-Term: ~ Downtrend
 
LOLR Trend: ~ Downtrend
 
Tracking Account: 10% UVIX, 10% TZA, 11% SQQQ, 21% SPXU, 48% Cash
 
Stops: UVIX 9.88, TZA 28.92, SQQQ 36.9, SPXU 13.95
 
==================== Answering The $Billion Question
 
 
 
 
================
 

Friday: 4:00

 

LT        LOLR     STS

 

Down  Down    DOWN

 

0/7       0/7         0/7

 

Breadth: -489/-1115

 

NYMO: -95.54: Rising/NYSI Falling

 

NAMO: -75.78: Falling/NASI Falling

 

=========================

 

Our story today may not be “The Godfather.” But it’s one that every serious trader might find at least as compelling. The story begins with the 1929 stock market crash and the Primary Bear Market that followed:

 

NYMO29.png?resize=1000%2C1213&ssl=1

 

The McClellan Oscillator (NYMO):

 

Developed by Sherman and Marian McClellan in 1969, the Oscillator is computed using the Exponential Moving Average (EMA) of the daily ordinal difference of advancing issues (stocks that gained in value) from declining issues (stocks that fell in value) over 39 trading day and 19 trading day periods.

 

So how is it that we have the oscillator readings for 1929? Math is math. Stockcharts computed the Oscillator from 1925 forward by using McClellan’s formula: The McClellan Oscillator is calculated by subtracting a 39-day exponential moving average (of advancing issues – declining issues) from a 19-day exponential moving average (of advancing issues – declining issues).

 

{As a side note, at SevenSentinels.com, we continuously calculate the intraday NYMO and publish those numbers on our website and TWITTER (open to all) during each market session. We know of no other source for traders of this intraday data.}

 

Our story continues as we note that markets began to slide following the 1929 peak for the DJIA at 391.17 on September 3, 1929.

 

But it was not until May 5, 1930, eight months and two days later, that NYMO set a low under -100 and began to bounce. The DJIA closed that day at 259.68, then turned up the following session:

 

30-first.png?resize=1000%2C1213&ssl=1

 

Now, most movie fans would exclaim at this point, “Ah-ha! That’s the bottom of this segment of the Bear Market.” But they would be WRONG- and this would seriously hurt their trading results! They likely hadn’t seen this film play out dozens of times in their life, as has your author. The DJIA continued lower until it bottomed for that cycle at 211.84 on June 24, 1930. 

 

That further took the DJIA lower by -18.4% over the seven weeks AFTER the NYMO low of sub -100 back on May 5.

 

**A deeply negative NYMO reading does NOT tell a trend trader to cover shorts or to go long, or both!

 

Interestingly Thursday, September 1, 2022, was one day short of 8 months (about the same as the 1930 NYMO low following the 1929 top) beyond this Primary cycle’s peak intraday high of 4812.62 on January 3, 2022.

 

Be aware that we cannot yet know that the Thursday McClellan Oscillator low of -101 at SPX 3966.85 was the NYMO low. But the above example from 1929 and dozens of other examples covering the last 92 years suggest that SPX will move significantly lower over the coming weeks regardless of whether NYMO has bottomed.

 

In last week’s article, one study we displayed suggested that the next low *could* come in at under 2800 in the last week of September:

 

SPX-FAN.png?resize=1000%2C1251&ssl=1

 

===================================

 

This week’s story began in 1929 and continued into a whole new century. But to save you time, we’ll provide the “Cliff Notes” for the years from 1930 to 2022. Mostly annotated charts.

 

The following image shows each bottom in NYMO below -100 for the 1929 to 1932 Bear Market marked with a red dotted line.

 

The DJIA low occurred between 3 and 12 weeks later at a significantly lower level:

 

30s.png?resize=1000%2C1213&ssl=1

 

 

NYMO bottoms in a Bear Market under -100. Weeks later comes the low for the DJIA. Like clockwork.

 

This pattern occurred not just during the Great Depression. The pattern has always been, and momentum explains why. Upside momentum for a rocket or downside projection for a projective pointed downward into the ocean will peak BEFORE the rocket or the projectile reaches its target. NYMO measures breadth momentum for a market trend, upward or downward. Peak price follows peak momentum. Full stop.

 

In each image below we marked peak downside momentum with a red dotted line and down arrow, and peak downside price (which followed weeks later) with a blue vertical jagged line and up arrow.

 

1937.png?resize=1000%2C1213&ssl=1

1947B.png?resize=1000%2C1213&ssl=1

1962.png?resize=1000%2C1213&ssl=1

1970.png?resize=1000%2C1213&ssl=1

1974.png?resize=1000%2C1213&ssl=1

78.png?resize=1000%2C1213&ssl=1

2008.png?resize=1000%2C1213&ssl=1

2020.png?resize=1000%2C1213&ssl=1

All of this brings us to Tuesday, September 6, 2022 – eight months and two days past the SPX/DJIA peak of January 3, 2022. In 1929-30, the 1929 peak for the DJIA at 391.17 occurred on September 3, 1929, and it was not until May 5, 1930, eight months and two days later, that NYMO set a low under -100 and began to bounce. The DJIA close that day at 259.68, then turned up the following session:

NOW.png?resize=1000%2C1213&ssl=1

 

That pattern over the last century is clear, and to quote Jesse Livermore again:

 

What happens today has happened before and will happen again.”

 

To recap, we can expect that in this Bear Market, a move below -100 (such as that occurred Thursday) will NOT be the bottom SPX level of this cycle, but we can expect the Intermediate-Term SPX low to happen sometime in the 3 to 12 weeks after that low.

 

We cannot be sure just yet whether or not NYMO has bottomed on the currently unfolding decline. But we can know, based on historical precedent, that once that NYMO bottom has been established, we are still 3-12 weeks away from the SPX low for the Intermediate-Term Cycle. In this article, our late September projection last week and above is a reasonable candidate for that low around SPX 2800.

 

Our Trend tools will tell us once the Trend has turned back up. Finally, today, we would note that a very short-term bounce of a couple of days to even a week or more is becoming more likely and more imminent as the NYMO sinks to deeper negative numbers. 

 

We’ve been raising cash in our trading account and the tracking account in recent sessions. We will comment on the overnight futures at 9:15 AM Tuesday.

Screenshot-2022-09-05-174354.png?resize=

 

Special Offer: One Week of Seven Sentinels for One Dollar

 

We Update Intraday Breadth and NYMO Data Several Times Daily @sevensentinels on Twitter. This data is available to any who may wish to follow us there.


Edited by IYB, 06 September 2022 - 11:45 AM.

“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one.” Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds

#2 MDurkin

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Posted 06 September 2022 - 12:04 PM

Nice post. Thanks for sharing your thoughts.



#3 gismeu

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Posted 06 September 2022 - 02:14 PM

Thanks as well,

gis
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#4 OEXCHAOS

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Posted 06 September 2022 - 03:56 PM

Good work.


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#5 pdx5

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Posted 06 September 2022 - 05:00 PM

I will make it easier for y'all. Just watch when I jump in with all my remaining money to go long. That will be the start of the next leg down.


"Money cannot consistently be made trading every day or every week during the year." ~ Jesse Livermore Trading Rule

#6 beta

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Posted 06 September 2022 - 10:29 PM

WOW.  flowers.gif   Great to see all the talented TA traders back on board ... this may be THE most important trading months in many years coming up.


"Daytrading -- An Extreme Sport !"

#7 pdx5

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Posted 06 September 2022 - 11:10 PM

What trade? It is a step ladder going down to new 2022 lows in 60 days.
"Money cannot consistently be made trading every day or every week during the year." ~ Jesse Livermore Trading Rule