19 replies to this topic

[OEXCHAOS]

This is an interesting thread. I hadn't thought about this type of thing in a while, and I suspect that others haven't either. Post of the Day. I'm pinning it. Good work! The Admin

[traderpaul]

How often do you see bids pulled on the last second? Stock that keeps on going up with no down ticks and down big on next day? Stocks that looks like she is falling off the cliff up big the next day?......

[IYB]

How often do you see bids pulled on the last second? Stock that keeps on going up with no down ticks and down big on next day? Stocks that looks like she is falling off the cliff up big the next day?......

<{POST_SNAPBACK}>

Paul- The reason what you've decribed happens, imho, is because of market psychology in its finest and purest form: The last stage of any cycle - whether we are talking about a 20 year cycle or a 20 hour cycle - is euphoria (or capitulation). A trend is born of fear, grows on skepticism, matures on confidence, and dies of euphoria. Thus when you see the stage where, as you say, there are no opposing ticks (to speak of) and the stock just runs one way unopposed - you know that you are seeing the final stage (capitulatiom/euphoria) of a minor trend. The next day, a new trend begins (often in earnest) in the opposite direction.

I am constantly on the watch for buying or selling opportunities such as you've decribed - the capitulation stage, when they fit in with my overall trading plan. This last Teusday morning, for example, saw this kind of up action in QQQQ, as well as several individual stocks, and I exited call options. Fwiw. D

[TrillionDollarMan]

Re Jesse and volume.... ...I LOST a bet once. I said Jesse used volume. Another guy said he didn't. I said, "Just check in "Reminiscenses..." and you'll see. He said, "No, U check. And if u're wrong, I'm right YOU'll see". So I did check. Not one direct reference to volume in the book. I lost the bet. Smitten is more suggestive of Jesse using volume in his books about Jesse...but that's Smitten writing and not Jesse. I suppose that in place of actual volume figures, Jesse may have LISTENED for the SOUND of volume in the ticker....even if there were no figures accompanying, and no 2 minute charts on a computer to track. TDM

[danzman]

Re Jesse and volume....

...I LOST a bet once.  I said Jesse used volume.  Another guy said he didn't.  I said, "Just check in "Reminiscenses..." and you'll see.  He said, "No, U check.  And if u're wrong, I'm right YOU'll see".  So I did check.  Not one direct reference to volume in the book.  I lost the bet. 

Smitten is more suggestive of Jesse using volume in his books about Jesse...but that's Smitten writing and not Jesse.

I suppose that in place of actual volume figures, Jesse may have LISTENED for the SOUND of volume in the ticker....even if there were no figures accompanying, and no 2 minute charts on a computer to track.

TDM

<{POST_SNAPBACK}>

He never talks about what goes into his tape reading, other than to
say it worked for him. That doesn't mean he didn't use volume.
People will often tell you part of the truth without giving away the
farm.

In fact, when decribing his other operations, all he does is talk about
volume...giving valuable lessons about the proper times to sell
and cover. As IYB said, he often tested the market with orders to
see how it would react. Of course volume was a factor in his decision
of how much to buy or sell and when.

The amount of volume (or more importantly money) is takes to move
a stock is very important...it's one of the basic principles of trading
ANY market. FWIW

D

[calends]

I think Lowry's Buying Pressure and Selling Pressure are the closest thing to what you're talking about.


Paul Desmond's 2002 Dow Award paper discusses the concept of points gained and points lost used in conjuction with adv and dec volume.

[sagitarius_d]

I just finished reading Jesse Livermore's authobiography by Sarnoff.. I think this is the "real" story there..Smitten is just hype in order to sell more book.

[SanchoPanza]

danzman, Any thoughts on how time might factor in to your thesis, or do you suspect it is best applied only to adjacent bars? In other words, taking your monthly view over a much longer time frame, could one interpret that because more volume has been required to move price from the October, 2002 low than from March, 2000 to October, 2002 that the long term path of least resistance is down? Insight/thoughts appreciated.

[danzman]

danzman,

Any thoughts on how time might factor in to your thesis, or do you suspect it is best applied only to adjacent bars?

In other words, taking your monthly view over a much longer time frame, could one interpret that because more volume has been required to move price from the October, 2002 low than from March, 2000 to October, 2002 that the long term path of least resistance is down?

Insight/thoughts appreciated.

<{POST_SNAPBACK}>

You must understand that if you use very long-term data, you must contend with the rising volume as more and more people enter the market. SPY trading is much higher now than in 2000. If we look at recent months of SPY trading since 2004, you can observe that the above normal volume came on down months.

If you zoom in even further, you will see that most of the volume came near the bottom. That means it was tough to move the market down after it reached a certain level (change in price / volume is smaller than average). As the market rose, it took less money to move it...the path of least resistance is up.

Now here's an observation that you should also think of. If it's tough to move the market down (someone is buying to match the selling) but then that support area fails (and it's easy to push it down now), watch out.

D

[capitulation]

What works for me is to look for weak stocks when the markets are having a decent up day and strong stocks when the markets are having a down day. I make note of the strong and weak ones and watch them daily. The daily and 60 min charts help me figure out the best entries and exit points. I nailed QLGC short a while back when it was dying while the rest of the market was still moving higher. Then this strategy helped me go long on the same stock after it broke its downtrend and started moving higher. It isn't an exact science but it works great for identifying stocks that are good longer term swing trades. Cap

Edited by capitulation, 21 February 2005 - 06:33 PM.