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I am in the process of developing a system for trading the stockmarket on a short term basis. I do have a few observations to make about the market based on a few indicators.
On a basis of about 5500 of the most actively traded stock on the NYSE & OTC:
Date Russell 3000 10 Net HL 10Vol% AdLine %10day
19971113 512.93 -905 48.88% -2,777 24.59%
19971114 519.35 -347 49.02% -1,557 30.00%
19971117 529.12 331 48.53% 442 40.76%
19971118 524.93 76 46.55% -688 39.59%
19971119 527.57 -44 45.60% -862 41.67%
19971120 535.18 436 49.87% 336 48.44%
19971121 536.90 466 53.20% 277 50.01%
19971124 528.19 -253 51.36% -2,120 40.01%
19971125 530.27 -373 51.95% -2,323 39.30%
19971126 531.13 -111 56.15% -1,961 42.01%
19971128 533.08 137 55.35% -1,250 44.26%
19971201 543.21 420 54.72% -170 49.86%
19971202 541.58 190 50.10% -712 48.37%
19971203 544.42 -2 52.08% -727 48.25%
19971204 543.31 236 51.50% -664 49.94%
19971205 548.82 84 50.76% -23 52.32%
10 Net HL is the difference between the number of stocks making 10 day new highs minus the number of stocks making 10 day new lows.
10Vol% is the 10 day average of the percent volume (Upvolume as a percentage of Up+down) on a 10 day average
Adline is just that, an adline on these 5500 stocks
%10 day is the percentage of stocks above their 10 day moving averages.
An interesting statistic not shown above: the average volume of the stocks making 10 day new lows has been greater than the average volume of the stocks making new highs for the last few days.
The fact that the AD Line is below of that on 11/21 when most averages were higher is bearish.
The fact that the market has had quite a runup and Volume % 10 day has dropped from 56% on 11/26 to <51% with the market at new highs is bearish.
The fact that NewHighs 10day - New Lows 10 day is dropping and non confirming the previous highs is bearish.
The fact that the % of stocks above their 10 day moving averages cannot get much above 50% is very bearish with this kind of runup..
Conclusion, This appears to be very bearish. It really makes the rally from late October to appear to be a 'B' wave in nature.
I wouldn't be surprised to see a selloff back down to near the late October lows.
We are in the process of developing this system and a graphics program to display the numbers.
I really don't have much time to discuss this as I am preparing for a month long trip into Ukraine, Russia, and Central Asia. Don't be surprised if I don't answer e-mails.
I just wanted to go on record that I would be very careful with positions on the long side in this market for a few weeks.
Sunday evening, December 7th.
Eric White
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