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Stan Weinstein's Stage Analysis and Market Breadth - Technical Analysis - Printable Version

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RE: Stan Weinstein's Stage Analysis - MalcolmSm1th - 2014-08-03

Tryst, I have my own indcators which I am still tidying up the code for and I am letting them loose on the FTSE-100 (that's London for those who drive on the wrong side of the road) and on Thursday night I had 18 new sell signals on these 100 stocks on top of the others that I was getting all week.

I am waiting to see what tomorrow gives us when our neighbours in England open the markets.

Nasdaq Breadth Charts - isatrader - 2014-08-03

The Nasdaq Bullish Percent Index

       

Nasdaq Percentage of Stocks above their 200 Day, 150 Day and 50 Day Moving Averages P&F charts

           

Nasdaq Percentage of Stocks above their 200 Day, 150 Day and 50 Day Moving Averages line charts

           

Nasdaq Advance Decline Line

   

Nasdaq New Highs New Lows

       

US Industry Sectors Breadth - isatrader - 2014-08-04

Below is the data table for the Percent of Stocks Above 150 Day Moving Average in each sector which I've ordered by relative strength, with the highest to the lowest percentage in each sector. Also attached is the visual diagram of the 9 sectors and the NYSE Percentage of Stocks above their 150 day Moving Averages line chart.

[Image: attachment.php?aid=12281]

As you can see the US stocks continue to deteriorate with 5 of the 9 sectors now below the 50% level, and two, along with the Nasdaq market, in bear territory below 40%.

The average for the nine sectors is 47.56%, and so the internals are showing that the US market is a Stage 3 phase overall, but as you can see, some sectors are in worse shape and are moving into Stage 4. Whether the rest of the sectors follow them down is unknown, but the method doesn't recommend buying during Stage 3, and so it's a time to be more defensive, or consider shorting in the weakest areas of the market imo.

RE: Market Breadth Extra - theory6453 - 2014-08-05

(2014-08-04, 11:38 AM)isatrader Wrote: The average for the nine sectors is 47.56%, and so the internals are showing that the US market is a Stage 3 phase overall, but as you can see, some sectors are in worse shape and are moving into Stage 4. Whether the rest of the sectors follow them down is unknown, but the method doesn't recommend buying during Stage 3, and so it's a time to be more defensive, or consider shorting in the weakest areas of the market imo.

Thanks for posting this. I've been meaning to pay closer attention to this part of the site so I glad I finally got around to looking at this.

Two questions of advice:

1) Since the data shows the US in a Stage 3 and we should be acting "more defensively"... I have three major positions (holdovers from IBD) that have under-performed (one's down 4% and the other's down 9%). My conundrum is that both have broken trend but neither have violated the 30 wma (although my gut tells me that it will happen soon enough with the way the market is going). In your opinion, would you hold and wait and see what happens or cut ties, take a loss, and move forward?

2) As to the post above re: the Stage 3 & deteriorating US sectors, I cross-referenced your post of shorts from the weekend with the sectors and the best short candidates (CIR & PNR) are in the same Sector/SubGroup- Industrials/Industrial Machinery... Would it be ill-advised to short two positions in the same subgroup? ADNC also looks like a good candidate and is in Technology sector, but I'm not sure my broker will let me short a position under $10, so that one might be out.

Thanks for your feedback.

RE: Market Breadth Extra - isatrader - 2014-08-06

(2014-08-05, 11:46 PM)theory6453 Wrote: 1) Since the data shows the US in a Stage 3 and we should be acting "more defensively"... I have three major positions (holdovers from IBD) that have under-performed (one's down 4% and the other's down 9%). My conundrum is that both have broken trend but neither have violated the 30 wma (although my gut tells me that it will happen soon enough with the way the market is going). In your opinion, would you hold and wait and see what happens or cut ties, take a loss, and move forward?

I don't really want to interfere with your open trades. All I'll say is that I think Stage 3 and Stage 1 are the most volatile, which means you can get big swings in either direction, especially in the early part of the transition from Stage 2. So we could get a sharp drop and then an equally sharp rally, and whipsaw back and forth. All you can do is look to how your individual positions are performing compared to the market action and make your judgement based on those.

The key thing that I look for is volume, as if the pullback in the stocks isn't showing a contraction in volume as it should in a normal reaction, and is instead heavier volume than the recent up moves then it would be of more concern to me.


(2014-08-05, 11:46 PM)theory6453 Wrote: 2) As to the post above re: the Stage 3 & deteriorating US sectors, I cross-referenced your post of shorts from the weekend with the sectors and the best short candidates (CIR & PNR) are in the same Sector/SubGroup- Industrials/Industrial Machinery... Would it be ill-advised to short two positions in the same subgroup? ADNC also looks like a good candidate and is in Technology sector, but I'm not sure my broker will let me short a position under $10, so that one might be out.

I think you should compare the two directly to only pick the best candidate, and also study the rest of the group and see if there isn't a better option as well http://stockcharts.com/freecharts/sectorsummary.html?&G=SECTOR_DJUSFE&V=W

RE: Market Breadth Update - isatrader - 2014-08-06

Here's a different look at some of the breadth charts and their current positions. As you can see the Percentage of Stocks above their 20 day MA in the NYSE, Nasdaq and S&P 500 have all reached the lower zone, and the 50 day is testing that area also. Only the Nasdaq is the lower half of the range though on the medium term 150 day measure, but we have seen a sharp decline through July on all three.

           

RE: Market Breadth Extra - Tryst - 2014-08-06

(2014-08-05, 11:46 PM)theory6453 Wrote: 1) Since the data shows the US in a Stage 3 and we should be acting "more defensively"... I have three major positions (holdovers from IBD) that have under-performed (one's down 4% and the other's down 9%). My conundrum is that both have broken trend but neither have violated the 30 wma (although my gut tells me that it will happen soon enough with the way the market is going). In your opinion, would you hold and wait and see what happens or cut ties, take a loss, and move forward?

Like, Isatrader stated, it is ultimately your decision.

Though I would ask myself this if (and I am a lot) in your position. Are you clinging onto your trade in hope that it will bounce...although you do have a valid technical indicator holding out to stick to. Though if everything else around the trade is bad, then you need to be emotionless with your trading and make the call.

One of many useful tips from Mark Minervini's book, 'Trade like a stock market wizard', he states that if soon after you place a trade and the trade doesn't act as you expected it too then get out. If the trade changes direction and then does what you initially expected it to, then you can always get back in.

That is easier said than done mind as I am in a very similar position with PGD. I am down about 10% and it is right on critical support. I know if this breaks on a weekly close I will shut out my position.

The Mark Minervini book is brilliant I think as it touches on some core trading traits which I can relate to in past experience. I am meaning to write a review on it under the journal section soon.

RE: Market Breadth Update - Tryst - 2014-08-06

Very interesting charts isatrader in your last thread.

In relation to the price of the corresponding index, I am not sure what constitutes the percentage values as saying that the breadth is bad in relation to the index price.

Tryst