Market Monitor | stockbee

8/06/2007

Market Monitor

  • It was a impressive bounce going by the news accounts. Part of it was short covering. Part of it positioning before the Fed meet.
  • You can read the news account, or you can look at actual numbers. When you look at actual numbers what do you see. First 300 plus positive 4% plus day since start of correction. First time the 50% plus numbers reaching 3 in this correction, signaling loss of upside momentum. Both these are early indicator of probable turn .
  • You can also look at the numbers and find lot of negatives. 4% plus down movers were still in 300 plus territory. so selling still continues. the 65 days ratio is firmly in bearish territory. Everyday fresh set of stocks from the 100% plus (Double Trouble ) universe are witnessing high volume breakdowns.
  • Look at the McClellan Summation Index, it is firmly in bearish territory.
  • None of the sentiment indicators are showing extreme readings.
  • So it is mixed picture. I continue to believe the bottom will be a process with slow stabilization in Market numbers. First active selling has to stop, at today's reading of 335 on 4% down, we are still not in the stabilization zone. The 100% plus number deterioration should stop and stabilize. The 65 days ratio should stabilize and start reversing. All these things on long side can happen pretty quickly if market reverses. But I would rather wait for the confirmation.
  • Market Monitor is overall filter for all the trading systems which I trade and it is primarily aimed at anticipating risky and safer zones. The riskiest period is when the 65 days ratio turns negative. So I see no need to override a well thought out method and react to market bounce emotionally. Many of you who have been actively trading the various methods outlined here know, how quickly some of the stocks in these scans make 25% plus moves once they get going, so missing first few days of turn and waiting for confirmation is not going to affect performance much.
  • As to what to buy, I am actively looking at scan members from all methods like EP, Double Trouble, 70 plus EPS and earnings breakout universe. Many stocks have not been dented by the correction and still in the Double Trouble universe and they are the ones to look at. look at stocks like AAPL, RIMM, CROX, CMG, FCN, GHM, FARO, ELON, LFL, ISRG, PRXI , NUAN, etc. They have withstood selling and might breakout in few weeks or days.

5 comments:

rol lew said...

"The riskiest period is when the 65 days ratio turns negative."
Pradeep - can you pls give an example of what would represent negative numbers here?

thx

Pradeep Bonde said...

http://spreadsheets.google.com/pub?key=pyB0fv3thl6RYpeDrfGoEcw
see the ratio of stocks up or down 25%plus in 65 days.

Semsons said...

When the up/down 65 days ratio turns below one, do you consider it the most important red flag of the signals give your market monitor?.

Best.

Pradeep Bonde said...

Yes. The others act as a early warning signals. In this correction by 3 rd day the ratio flipped, that is why I have repeatedly said dip buying is unlikely to work immediately and the market character has changed.
Dip buying works very well when ratio is positive.

levy13 said...

Pradeep - can you give the TC codes that you use to come up with the list (of which you calculate the numbers)

Thanks