Mike
06-12-2011, 12:26 PM
8765
Pascal used the term "bipolarized" in his extensive June 13 Comment of the Day analysis. The term relating to everyone being in the same trade. In my analysis I am experimenting with a technique to gauge the herd mentality or actually measure the bipolarness of trading with an indicator I call "Co-Action". The NYSE market internals data Advancers and Decliners tells us on any particular day how many stocks went up or went down. Clearly if most go down then everybody is in that trade. The daily data stream is volatile. I run a simple 50-day moving average on the difference between percent stocks up and percent stocks down. The attached powerpoint file shows two identical charts one with arrows identifying prominent peaks in the Co-Action indicator in blue with the NASDAQ daily chart in red. The second page shows the chart with arrows now identifying market troughs with their alignment with market bottoms.
The data is biased in the positive plane as stocks generally go up more than down. The horizontal black line is a linear regression of the blue Co-Action line to attempt to divide the world up between positive and negative coaction.
I gues it is not rocket science that coaction could be existent around accelerated market moves. We have all been expecting a bounce and now that I look at the second chart (bottoming chart) I notice that it is not until now that the blue line is in position of some past bounce regions. Enough of the herd had possibly not joined the sell/short trade prior to Friday's close. Clearly there are deeper sell offs on the chart and that could happen here if we get into some forced selling (margin calls).
Pascal used the term "bipolarized" in his extensive June 13 Comment of the Day analysis. The term relating to everyone being in the same trade. In my analysis I am experimenting with a technique to gauge the herd mentality or actually measure the bipolarness of trading with an indicator I call "Co-Action". The NYSE market internals data Advancers and Decliners tells us on any particular day how many stocks went up or went down. Clearly if most go down then everybody is in that trade. The daily data stream is volatile. I run a simple 50-day moving average on the difference between percent stocks up and percent stocks down. The attached powerpoint file shows two identical charts one with arrows identifying prominent peaks in the Co-Action indicator in blue with the NASDAQ daily chart in red. The second page shows the chart with arrows now identifying market troughs with their alignment with market bottoms.
The data is biased in the positive plane as stocks generally go up more than down. The horizontal black line is a linear regression of the blue Co-Action line to attempt to divide the world up between positive and negative coaction.
I gues it is not rocket science that coaction could be existent around accelerated market moves. We have all been expecting a bounce and now that I look at the second chart (bottoming chart) I notice that it is not until now that the blue line is in position of some past bounce regions. Enough of the herd had possibly not joined the sell/short trade prior to Friday's close. Clearly there are deeper sell offs on the chart and that could happen here if we get into some forced selling (margin calls).