RE: US Stock Market Breadth – Quickest 10% Decline From an All-Time High in History
(2020-03-01, 01:05 PM)isatrader Wrote:
(2020-03-01, 12:28 PM)pcabc Wrote: Would those views apply to investor positions as much as trader positions? The reason I ask is there does not seem to be much in the way of a divergence in the advance / decline line for example. THe % stocks abovre the 50 day MA was > 70% for a while but the % above the 200 day MA has only been grazing it and it does seem to vary depending on which dataset you pick. I've not seen the breakdown in the momentum index that you have seen, and as I post elsewhere, I have been having data issues of late which makes apples to apples comparisons difficult.
Back to the % stocks above the 50 and 200 day MAs (I don't have 150 day data). From my data it has been notable that they have been declining since the end of January but only crossed below 50% in the past week, right at the start of the meltdown.
The NYSE advance decline line was only showing some small divergences via the different Momentum indexes and the McClellan Oscillator and summation index. But the other Nasdaq AD Line and the NYSE AD Volume both had divergences and weren't making new highs with the price action.
With the Percentage of Stocks above the 50, 150 and 200 day MAs, they all gave bear alert signals in the middle of January (see investorsintelligence.com - Definitions of current Market Breadth Status) when they moved strongly back below 70% while the stocks were making new highs still. You are right though that the 150 day and 200 day only gave full bear confirmed signals on the breakdown this week. But the short term 50 day MA gave a Bear Confirmed signal on the 27th January.
So this and other changes is why I had been highlighting in my videos for the last month that we needed to protect our account and have a more defensive strategy. As the market was very extended after 5 months of running strongly higher, and the breadth was showing some weakness appearing, which is why I had downgraded the Weight of Evidence to Neutral + status before this weeks fall. Which means taking a more defensive strategy in my playbook. But that is obviously more difficult for an investor than a trader.
This is a plus for the breadth calculations, that we had early advance of this
and it would be amazing if this site was used to highlight the fact and showcase weinsteins work
one of the problems we have is so many breadth "charts" that people post, its actually hard to see where it was a bearish signal. as nobody actually says so. we just keep posting charts, more charts..what do all these charts mean?
rather than having to refer to a definition, or refer to someone else's blog..here's my breadth charts and now come to my site, if we could just summarise
"one source of the truth" as it were
i can see a post of the 23.02 but it seems to give a very mixed picture
You could give a subscription based service. probably colour coded for idiots like me.
RE: US Stock Market Breadth – Quickest 10% Decline From an All-Time High in History
(2020-03-01, 01:05 PM)isatrader Wrote: The NYSE advance decline line was only showing some small divergences via the different Momentum indexes and the McClellan Oscillator and summation index. But the other Nasdaq AD Line and the NYSE AD Volume both had divergences and weren't making new highs with the price action.
I've had a fair bit on so I only realized that my advance / decline data supply had, regrettably, been lost, not ideal timing. My new approach is not showing these differences, but I don't have those exact sources at present.
Quote:With the Percentage of Stocks above the 50, 150 and 200 day MAs, they all gave bear alert signals in the middle of January (see investorsintelligence.com - Definitions of current Market Breadth Status) when they moved strongly back below 70% while the stocks were making new highs still. You are right though that the 150 day and 200 day only gave full bear confirmed signals on the breakdown this week. But the short term 50 day MA gave a Bear Confirmed signal on the 27th January.
So this and other changes is why I had been highlighting in my videos for the last month that we needed to protect our account and have a more defensive strategy. As the market was very extended after 5 months of running strongly higher, and the breadth was showing some weakness appearing, which is why I had downgraded the Weight of Evidence to Neutral + status before this weeks fall. Which means taking a more defensive strategy in my playbook. But that is obviously more difficult for an investor than a trader.
I've been fairly busy with other stuff. I have been monitoring my breadth, perhaps not closely enough and I'm changing to an investor mindset for my SIPP and ISA. Since the MAs were rising still, both for price and also various breadth curves, notably not for % stocks above their MAs though, I had been tuning this out to a fair extent as short term noise, especially as I have tried to pick finds / stocks which historically come good. Which is all well and good, but this drop has been far more brutal than I think everyone was assuming.
I'm seeing how my breadth scoring system goes. It was last green (buy) mid Jan with short term sell (yellow) late Jan) and long term position sell (red) late Jan strengthening back to short term sell. I over optimitisticaly opened a few positions seeing the improvment in breadth, breaking my earlier thoughts on what I should do. Red, long term position sell, showed again the day before the gap down. I should take my own breadth summary more seriously. But has I not swapped my mindset I likely would had at least lightened up. In my demo spread bet account I would have closed positions whilst they were close to the top if I paid heed to the yellow short term sell indication.
RE: US Stock Market Breadth – Quickest 10% Decline From an All-Time High in History
(2020-03-01, 01:50 PM)malaguti Wrote: This is a plus for the breadth calculations, that we had early advance of this
and it would be amazing if this site was used to highlight the fact and showcase weinsteins work
one of the problems we have is so many breadth "charts" that people post, its actually hard to see where it was a bearish signal. as nobody actually says so. we just keep posting charts, more charts..what do all these charts mean?
rather than having to refer to a definition, or refer to someone else's blog..here's my breadth charts and now come to my site, if we could just summarise
"one source of the truth" as it were
i can see a post of the 23.02 but it seems to give a very mixed picture
You could give a subscription based service. probably colour coded for idiots like me.
I have been thinking along the same lines recently with regards to the amount of charts, which is why you may have noticed since the start the year that I've started posting less charts, and instead having been doing more of a weekly video roundup with some commentary of what I'm looking at. As hopefully this will provide more value for people viewing the site as it gives me a chance to explain in detail what I'm looking at.
The market breadth is excellent at helping with market timing, but it is quite subjective and open to interpretation, as different breadth indicators can be telling a different story to each other. So that is why I favour the weight of evidence approach advocated in Weinstein's book, as it gives you a combined result, which helps to filter the noise, and then you can determine which strategy you should be using.
Thomas Dorsey has done some great work on this area, and he uses an American football analogy for the Bullish Percent Chart and Moving Average Breadth, converting the 0-100% range to the American football field zones. i.e. you should be using a different playbook / strategy for when the breadth is in the different zones. So for example when the breadth is still rising above 70% you should add defensive stable positions. But when it's falling and above 70% you should be on Aggressive Defence, and Decreasing Volatility, and Raising Cash Levels etc (see attached Bullish Percent playbook).
So I use a similar approach, but based on the entirety of the market breadth charts that I follow to determine which playbook I should be using. Defensive Strategies, or Offensive Strategies.
To your last point. I don't think I'll be doing a subscription service. As I'm simply not qualified to tell other people what to do. As I make far too many mistakes still myself, and wouldn't want to be responsible for other peoples money. But I'm happy to share my thoughts on the site, and highlight what I'm doing personally. And will try to go into more detail to help people understand what I'm posting.
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: US Stock Market Breadth – Quickest 10% Decline From an All-Time High in History
(2020-03-01, 05:10 PM)isatrader Wrote: The market breadth is excellent at helping with market timing, but it is quite subjective and open to interpretation, as different breadth indicators can be telling a different story to each other. So that is why I favour the weight of evidence approach advocated in Weinstein's book, as it gives you a combined result, which helps to filter the noise, and then you can determine which strategy you should be using.
Thomas Dorsey has done some great work on this area, and he uses an American football analogy for the Bullish Percent Chart and Moving Average Breadth, converting the 0-100% range to the American football field zones. i.e. you should be using a different playbook / strategy for when the breadth is in the different zones. So for example when the breadth is still rising above 70% you should add defensive stable positions. But when it's falling and above 70% you should be on Aggressive Defence, and Decreasing Volatility, and Raising Cash Levels etc (see attached Bullish Percent playbook).
So I use a similar approach, but based on the entirety of the market breadth charts that I follow to determine which playbook I should be using. Defensive Strategies, or Offensive Strategies.
Regarding the bullish % or % stocks above their MAs. Though you talks about weight of evidence you seem to pay particular heed to these? If so, are you suggesting that if above 70% or below 30% then these indicators should be given more consideration to than other indicators?
RE: US Stock Market Breadth – Quickest 10% Decline From an All-Time High in History
(2020-03-01, 05:19 PM)pcabc Wrote: Regarding the bullish % or % stocks above their MAs. Though you talks about weight of evidence you seem to pay particular heed to these? If so, are you suggesting that if above 70% or below 30% then these indicators should be given more consideration to than other indicators?
From an investor perspective, yes. These do get more weighting than anything else when they reach the end zones at the top and bottom for me. As buy and sell signals from these areas are the strongest, and only happen once every few years or so. So I do favour these above the others as a market timing tool. But are even better when they align with the other breadth charts signals too. But I do think that they are most important as they give you similar insights to the Stages Survey.
You might find the following useful, which was a post on the DWA website back in early 2012 that shows the long term stats for what happens when the NYSE Bullish Percent Index first hits the 70% level on the way up (in this case the S&P 500 topped 56 days later), and their explanation of the Bullish Percent Index, and how it's used.
RE: US Stock Market Breadth – Quickest 10% Decline From an All-Time High in History
(2020-03-01, 05:36 PM)isatrader Wrote:
(2020-03-01, 05:19 PM)pcabc Wrote: Regarding the bullish % or % stocks above their MAs. Though you talks about weight of evidence you seem to pay particular heed to these? If so, are you suggesting that if above 70% or below 30% then these indicators should be given more consideration to than other indicators?
From an investor perspective, yes. These do get more weighting than anything else when they reach the end zones at the top and bottom for me. As buy and sell signals from these areas are the strongest, and only happen once every few years or so. So I do favour these above the others as a market timing tool. But are even better when they align with the other breadth charts signals too. But I do think that they are most important as they give you similar insights to the Stages Survey.
You might find the following useful, which was a post on the DWA website back in early 2012 that shows the long term stats for what happens when the NYSE Bullish Percent Index first hits the 70% level on the way up (in this case the S&P 500 topped 56 days later), and their explanation of the Bullish Percent Index, and how it's used.
These are very interesting as indicators as all the simple ways to track other indicators, advance / decline etc will tend to look positive at the end of tops whereas this flags reversal. I think I need to do three things:
1. Pay more attention to my existing indicators, get out of positions or set very tight stops on investor positions if I get a 'Long term sell' indication on my overal breadth scoring system. Perhaps I'll make exceptions for a few trusted positions such as MSFT?
2. In my charts colour where the indicator is above 70% and below 30% to give me a visual clue to pay more attention.
3. Tweak my scoring system. Currently it gives a +1 (bullish) if above 50% and below 70% and -1 bearish if below 50% and above 40%. I ought to do something to include the overbought and oversold zones as they currently score zero.
