(2019-05-12, 12:20 PM)isatrader Wrote: Attached is my updated custom breadth charts that I do based on the daily point and figure double top breakouts and double bottom breakdowns.
Totals for the week:
+227 double top breakouts
-432 double bottom breakdowns
-205 net breakouts - breakdowns
can i confirm my understanding based on this information and current market action..
taking the relationship of the daily breakouts vs breakdowns and the 200 day ma of that info, which correlates to a 50week ma
in mid december the ma broke through zero, culminating in the market (s&p)Â correcting quite violently
since then, the S&P has gone on to reach new all time highs whereas the ma has not crossed back above zero
which ultimately signals an inherent weakness and calls into question somewhat the recent advance. and now we have a correction..
thats what im reading into these numbers
i guess two questions come to mind..
1) how does the overall ma affect the overall market to "allow" an advance to new highs without being substantiated by a series of new breakouts. my take on that question would be the weighting of the constituents. you could have 200 breakdowns outweighed by one breakout and the relative weighting of that 1 could tip the s&p upward even though everything else is negative
2) how can we benefit from that information. could/should we be amending investor/trader methods to be more short term in nature where we have this weakness and then switch back to investor when all aligns
RE: Stan Weinstein Stage Analysis and Market Breadth
It's hard to say if it shows inherent weakness or just a lag that is more representative of the broad market position (see NYSE and COMPQ charts). As we don't have past data to compare against. However, it moves in similar ways as the advance decline data, and Percentage of Stocks above their Moving Averages. So based on those, the longer term measures like the 200 day are more useful as confirmation data imo, as the short term indicators give new buy signals earlier after a Stage 4 decline, and tend to move back to the tops of their ranges and then pullback towards the middle of the range on corrections, with not too much depth below the zero line on those pullbacks. So once we see all the time frames for the point and figure double top breakouts and double bottom breakdowns on buy signals then we'll likely be back in Stage 2 phase. So I think the fact that the 200 day longer term measure hasn't yet given a buy signal means that we are still operating in a Stage 1 phase.
On your questions.
1) Weighting is the key here. Indexes might be averages of the stocks in them but they are not equal weighted, so like you said can be moved by their largest components and distort the actual position of the market. This is why I like the breadth indicators so much like the point and figure double top breakouts and double bottom breakdowns, advance decline, and Percentage of Stocks above their Moving Averages etc. As they all show an unbiased view of the market strength, and so can be used to assess risk, and hence when to be more aggressive or more cautious with your portfolio.
2) That is how I play it, as I use these for risk assessment. So unless all the time frames, i.e 10 day, 20 day, 50 day and 200 day are all on a buy signal, then I tend to be much stricter. So for example, at the moment I'm only about 65% invested in my pension portfolio, and only have a single position open in my short term trading account.
isatrader
Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill - Reminiscences of a Stock Operator.
RE: Stan Weinstein Stage Analysis and Market Breadth
(2019-05-17, 05:25 PM)isatrader Wrote: On your questions.
1) Weighting is the key here. Indexes might be averages of the stocks in them but they are not equal weighted, so like you said can be moved by their largest components and distort the actual position of the market. This is why I like the breadth indicators so much like the point and figure double top breakouts and double bottom breakdowns, advance decline, and Percentage of Stocks above their Moving Averages etc. As they all show an unbiased view of the market strength, and so can be used to assess risk, and hence when to be more aggressive or more cautious with your portfolio.
I can see what you are saying, however, looking at the data I have seen some thinly traded or very small value stocks move very wildly whereas the larger ones don't. Care would be needed that these very small thinly traded stocks do not mess up the outcome perhaps? On the other hand, if they are numerous and fairly random perhaps they cancel, and if a large number move in unison then that is good data?
RE: Stan Weinstein Stage Analysis and Market Breadth
(2019-05-17, 09:14 PM)pcabc Wrote: I can see what you are saying, however, looking at the data I have seen some thinly traded or very small value stocks move very wildly whereas the larger ones don't. Care would be needed that these very small thinly traded stocks do not mess up the outcome perhaps? On the other hand, if they are numerous and fairly random perhaps they cancel, and if a large number move in unison then that is good data?
Not a useful conclusion, just a thought.
Those kinds of micro cap stocks are not really included in the numbers. As only US stocks from the major exchanges with a market cap of above $1million are scanned, and no stocks from the OTC (over the counter market) are included either, where the majority of those kinds of thin stocks are traded. And also the way point and figure charts work is to filter insignificant price movements and noise, as the P&F traditional box scaling method that is used requires bigger percentages moves in the smallest stocks to add a single X. For example a $5 stock uses a 0.5 scale, so to add an X it needs to move 10%. Whereas a $50 stock only needs to move 2% to add an X. See https://stockcharts.com/school/doku.php?...pnf_basics for how it works. But with the traditional box scaling and a 3 box reversal it does a pretty good job of only capturing more significant moves in a stock, and filtering out the rest of the churn. As to get on the daily list the stock needs to have made a P&F double top buy signal or P&F double bottom sell signal.
isatrader
Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill - Reminiscences of a Stock Operator.
RE: Stan Weinstein Stage Analysis and Market Breadth
Breadth
For equities, with my scoring system in the last day or two breadth has strengthened compared to the dip earlier in the week. However, the shorter term momentum, based on MACDs versus their singal lines of various breadth indicators, is still negative.
