Wednesday, October 28, 2009
Look out below
I assume by now everyone has sold out and will be waiting for a while, as the market "corrects" the advance that began in March. To put it into context, here's a chart of the Dow Jones Industrials which just happens to show a Climax Low signal (in light blue) at the exact bottom. And then here's another chart, this time of the Nasdaq showing the recent Climax High signals (in red) and resulting sell-off. Note the increase in volume on the selloff following the Climax High signals. Note also that it's broken below the 50-day exponential moving average (shown in blue).
Somebody asked how we divine these things. It's simple really. We look for the Climax Low and Climax High signals in the market indexes, combined with "at or near a high, closing slightly higher or around unchanged, on an increase in volume from the day before" when looking for a top. We need a good acronym for this. Also have not worked out a computerized "flag" to display it on a chart, but it's not to hard to spot visually. I discussed it in a blog post a while back.
When it comes to tops, not to mention bottoms, there are additional signs. As a current example, are the markets extended above their 50-day moving averages? Chances are things will return to baseline. Has a rally just started, or has it been going on for months? Hitting closer to home, just look at any recent stock purchases. Are they doing ok, or are they under water?
We use the GigaScanner to cycle through a list of market indexes and ETFs representing various diversified market indexes. Signals usually occur in the majority of our charts at the same time. We take them in context of our special breadth indicators based on the Numbers of stocks doing things. Things like Climax highs and lows, up and down on Big Volume, etc. Also we watch the Leading stocks, i.e., the stocks in the Leading Stocks link in the Stock Picks page. But this is somewhat of a lagging indicator (by a few days or weeks). Being leading stocks, we find they will be the last to succumb. When they do, "look out below".
Somebody asked how we divine these things. It's simple really. We look for the Climax Low and Climax High signals in the market indexes, combined with "at or near a high, closing slightly higher or around unchanged, on an increase in volume from the day before" when looking for a top. We need a good acronym for this. Also have not worked out a computerized "flag" to display it on a chart, but it's not to hard to spot visually. I discussed it in a blog post a while back.
When it comes to tops, not to mention bottoms, there are additional signs. As a current example, are the markets extended above their 50-day moving averages? Chances are things will return to baseline. Has a rally just started, or has it been going on for months? Hitting closer to home, just look at any recent stock purchases. Are they doing ok, or are they under water?
We use the GigaScanner to cycle through a list of market indexes and ETFs representing various diversified market indexes. Signals usually occur in the majority of our charts at the same time. We take them in context of our special breadth indicators based on the Numbers of stocks doing things. Things like Climax highs and lows, up and down on Big Volume, etc. Also we watch the Leading stocks, i.e., the stocks in the Leading Stocks link in the Stock Picks page. But this is somewhat of a lagging indicator (by a few days or weeks). Being leading stocks, we find they will be the last to succumb. When they do, "look out below".
// posted by gigascanner @ 6:24 PM 
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