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INDU envelopes/NASD breadth system


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#1 airedale88

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Posted 17 February 2007 - 09:28 PM

remains on it's intermediate buy, as stated a few weeks back it would be exceedingly rare for any important correction to occur while NYSE breadth remains this strong....

http://stockcharts.com/c-sc/sc?s=$INDU&p=D&yr=0&mn=6&dy=0&i=p22135382622&r=5592.png
http://stockcharts.com/c-sc/sc?s=$NYAD&p=D&yr=0&mn=6&dy=0&i=p50966274753&r=4574.png

Edited by airedale88, 17 February 2007 - 09:36 PM.

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#2 airedale88

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Posted 17 February 2007 - 09:43 PM

along with the 21 day mv avg oscillator of NYSE adv/dcl's, the 21 d.m.a oscillator of NYSE up/down volume also shows continued strength..

http://stockcharts.com/c-sc/sc?s=$NYUD&p=D&yr=0&mn=6&dy=0&i=p50966274753&r=523.png
airedale

Outspeaks the Squire, "Give room, I pray,
And hie the terriers in;
The warriors of the fight are they,
And every fight they win".

Ring-Ouzel, England

#3 Vector

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Posted 17 February 2007 - 09:51 PM

http://www.martincap...gs/CH_brdth.HTM

#4 fib_1618

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Posted 17 February 2007 - 09:59 PM

it would be exceedingly rare for any important correction to occur while NYSE breadth remains this strong....

Agreed.

In fact, the liquidity level in the NYSE right now is so strong that it can absorb any or all "surprises" - such as the recent sub prime loan news, for example.

Fib

http://stockcharts.com/c-sc/sc?s=$NYAD&p=D&st=2005-10-01&i=p20979387864&a=32225601&r=187.png

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#5 arbman

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Posted 18 February 2007 - 03:52 PM

Airedale, there is a clear divergence now in between the new highs made by dow and the NY A/D line. This latest high was also made by less issues in volume. The pull back was also on huge volume. INDU is also diverging from the envelop, it needs to start hitting the top of the envelop soon, otherwise, it will start to hit the bottom of the envelop eventually. In fact, I am pretty certain that a quick rally to the top of the envelop will be also sold. Obviously, the divergences are not important until confirmed with the price, but once confirmed they can not be ignored anymore... Everything says a pull back at least, but I don't expect the top to be in before March since there is still so much liquidity despite the fact that the growth in the new liquidity is quickly declining... Although these divergences or any other economic indicators will not be enough probably to prevent everybody sitting on the sidelines from buying in the next few weeks, or the shorts from covering. So if it blows off more, I won't be surprised... Personally, I closed my March puts on the pull back that I loaded up on the first 2 wks of the Feb, the calls on Wed thru Fri, rolled my hedges to March and kept the remaining April and June puts on my short side of the portfolio. A few long side allocations remain long, yet the big majority in cash for the long portfolio... I will try to play the both sides as long as the volatility continues to increase, but I think the risk is also increasing with it. Most of my new long trades will continue to be day or short term swings from here... I think the open interest in this post Feb-expiration will tell a lot about what to expect next few weeks. One thing is clear, the commercials are overall bearish... - kisa

#6 airedale88

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Posted 18 February 2007 - 11:15 PM

Airedale, there is a clear divergence now in between the new highs made by dow and the NY A/D line. This latest high was also made by less issues in volume. The pull back was also on huge volume. INDU is also diverging from the envelop, it needs to start hitting the top of the envelop soon, otherwise, it will start to hit the bottom of the envelop eventually.

In fact, I am pretty certain that a quick rally to the top of the envelop will be also sold. Obviously, the divergences are not important until confirmed with the price, but once confirmed they can not be ignored anymore...

Everything says a pull back at least, but I don't expect the top to be in before March since there is still so much liquidity despite the fact that the growth in the new liquidity is quickly declining...

Although these divergences or any other economic indicators will not be enough probably to prevent everybody sitting on the sidelines from buying in the next few weeks, or the shorts from covering. So if it blows off more, I won't be surprised...

Personally, I closed my March puts on the pull back that I loaded up on the first 2 wks of the Feb, the calls on Wed thru Fri, rolled my hedges to March and kept the remaining April and June puts on my short side of the portfolio. A few long side allocations remain long, yet the big majority in cash for the long portfolio...

I will try to play the both sides as long as the volatility continues to increase, but I think the risk is also increasing with it. Most of my new long trades will continue to be day or short term swings from here...

I think the open interest in this post Feb-expiration will tell a lot about what to expect next few weeks. One thing is clear, the commercials are overall bearish...

- kisa



kisa, not sure what you mean by INDU divergence with the NYSE adv/dcl line. NYSE breadth remains very healthy, an important part of the intermediate signals this system generates. likewise for INDU diverging from the envelopes, they are derived from a 21 day smoothing of INDU price so what is there to diverge from? interpretation of the envelopes is not akin to bollinger bands, if that was your thought.

economic indicators, commercial positions, open interest, etc play no role in this system. i use it as a stand alone method of analysis without muddying the picture.

this method should respond quickly if an important top is imminent, for now there is no indication of it. that can change, and i'm watching it closely based on my expectations of future cyclic nests of lows coming due.
airedale

Outspeaks the Squire, "Give room, I pray,
And hie the terriers in;
The warriors of the fight are they,
And every fight they win".

Ring-Ouzel, England

#7 arbman

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Posted 19 February 2007 - 05:14 AM

Airedale, I think I overreacted, it is just that the level of comfort you and Fib (and denleo earlier) exhibit makes me very uncomfortable. You guys imply no risk in this market, I think it is going to be a wide trading range from here though. The slope of the rise has changed, INDU is not hitting the top of your channel implying an reacceleration imho. The divergence I am trying to point at is the market (based on the A-D) did not rally as strongly overall while INDU made new highs. There is definitely some strength. That's all I meant. BTW, I should've learned by now not to discuss anything else than your tools are showing, sorry for that, they were off topic... - kisa

#8 airedale88

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Posted 19 February 2007 - 06:00 AM

kisa, i have never implied no risk. that would be foolhardy. back on 2/06 i posted three charts demonstrating my Hurst analysis of where we stood in the phasing of the 48 to 54 month (4.5 yr) cycle with my explanation of what i saw cyclicly and in the last paragraph i stated..... "i remain long in es's in futures accounts and various etfs in a foundation account but with a wary eye for a change in trend. feb 07 marking the 47 month of a 48 to 54 month cycle keeps me on my toes." Hurst phasing analysis does allow one to make a reasonable estimate of overall cyclic trend over various time periods. these estimates keep me long. they will change sooner or later.
airedale

Outspeaks the Squire, "Give room, I pray,
And hie the terriers in;
The warriors of the fight are they,
And every fight they win".

Ring-Ouzel, England

#9 fib_1618

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Posted 19 February 2007 - 02:13 PM

it is just that the level of comfort you and Fib (and denleo earlier) exhibit makes me very uncomfortable...

i have never implied no risk

Neither have I, just that this same perceived risk factor is not as high as it can be.

Although flattering as it may be, having only 2 or 3 (non-subscription) analysts thinking this way shouldn't make you feel "uncomfortable" as we are not the majority. So on a contrarian basis, I would think this should actually make you feel comfortable as to the direction of the market unless you believe we - based on our individual track records - don't see something in which you (and others) might find having a greater risk factor to the current uptrend from last summer's lows. And if this is indeed the case, then one has to then determine how important this same thing is in direct relation to the markets direction, no less, their own personal trading philosophy.

Fib

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“Wise men don't need advice. Fools won't take it” - Benjamin Franklin

 

"Beware of false knowledge; it is more dangerous than ignorance" - George Bernard Shaw

 

Demagogue: A leader who makes use of popular prejudices, false claims and promises in order to gain power.

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