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| StatTrader |
 Posted: Sun Nov 11, 2007 10:39 am Post subject: Tough Market Ahead |
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Member Of The Month! April
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I was hoping that by the end of this past week the market statistics would be poised to shift direction. Unfortunately, most of the statistics either continue to point downward or sideways with only a few holding out some hope for a decent bounce in the markets.
The first three indicators graphed below use 30-day simple moving averages and this allows us to "see" ahead one week (5 days) by plugging neutral numbers in for the coming week so that the graph shows the effects of the oldest 5-days that will get dropped from the average.
The first is the weekly volume breadth. In Excel, let one column be the difference between upside and downside volume for the day. The next column is the sum of the previous 5 days (1 week) and the last column is the 30-day moving average of the sum column. The graph below is of the 30-day moving average. It is very good at marking market tops and market bottoms. It bottomed on 8/21 and topped on 10/15. The 5-day look-ahead shows that it should continue falling.
The same calculation can be made using the number of advancing issues minus the number of declining issues for the first column and the next two columns are computed as before. The results are the same except the last market bottom was 8/22 and the market top was on 10/8. The indicator should also continue dropping this week.
The next is the 30-day moving average of upside volume as a percentage of total volume. It too should continue falling this week. It shows the last market bottom on 8/30 and the top on 10/12.
On the plus side, by the end of this week all three of the above indicators will be nearing the levels that normal mark market bottoms. So hopefully they will be ready to change direction sometime between Thanksgiving and early December. Christmas rally anyone?
The rest of the indicators in this posting are current through this past Friday. There is no "look ahead". Their direction is either supportive of the market or not.
The first of these is the up/down volume ratio. It is the ratio of the 10 day exponential moving average (EMA) of the volume of the preceding up days and the 10 day EMA of the volume of the preceding down days. In a healthy market this should be above 100%.
The 15-day TRIX of the SP-500 is rather gloomy. The markets don't allows fall when this indicator is dropping (see last May), but it is indicative of overall market weakness. This indicator is not near a point that normally marks a market bottom. It has pretty far to go to reach there.
The McClellan Summation Index is a good measure of market momentum. It is currently dropping like a rock. This is definitely not supportive of a rally in the markets. Though by Thanksgiving it could be reaching a level that normally marks a market low.
The percentage of stocks trading above their 50 day moving average doesn't usually indicate a market low until it dips below 20%. That suggests more downside ahead.
The 10 and 30-day moving average of the CBOE Equity Put/Call Ratio are rising and with the 10 day well above the 30 day, the 30 day should continue rising. This indicator moves inversely to the market and has a long way to go before it is reaches the levels that normally suggest a market bottom.
So that I don't come off as being a total bear, I did promise indicators that were not bearish. The first is the percentage of stocks trading above their 200 day moving average. This is already at the levels that normally mark market bottoms. During the last rally it didn't even get up to the levels that normally mark market tops. Could that suggest that the current correction is just a part of a broader rally?
And the 10-day TRIX of the CBOE Equity Put/Call Ratio just had a bullish crossover. This suggests that the Put/Call Ratio is losing momentum to the upside and could start falling. If so, then that would support at least a relief rally.
Most of the indicators are pointing down at least for the next week and possibly longer but enough of them should be reaching extreme over-sold reading by then that they would support a rally.
Be careful out there, |
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| Colli |
| Posted: Sun Nov 18, 2007 3:31 am Post subject: |
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| I would have to agree. I think we have not seen the end of the downward trend. What's more, I think it will pick-up speed and further downward interest rate adjustments will only give very temporary relief. If the dollar doesen't strengthen soon, we could be looking at some extremely bad times ahead. |
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| ithatheekret |
| Posted: Thu Nov 22, 2007 9:01 am Post subject: |
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We must have faith in Santa , if there isn't a Christmas rally , then help will be needed .
A December rate cut and a rally would fit in nicely. |
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| dmccrackin |
| Posted: Tue Nov 27, 2007 7:13 am Post subject: |
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| The dollar will continue to fall for a while. So ... Invest overseas:) |
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| Colli |
| Posted: Tue Nov 27, 2007 12:39 pm Post subject: |
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| I agree with DMCCRACKIN - investing overseas make the most sense right now (never thought I would hear my self say that). I have always believed in putting approx. 10% of my money in overseas investments but now I think 40% makes more sense and if the dollar keeps dropping, 50 to 60% isn't far off. The FED is shooting our country in the foot! |
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