Wayne's Confusion Index

[Mike]

I have been watching NYSE new 52-week lows rising. The chart below shows what is called Wayne's Confusion Index developed by Wayne Whaley. This index takes the minimum value of the NYSE 52-week highs or lows and then does a 5% exponential moving average of that value. When new lows and hew highs are both high this index will climb.

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The chart below is the historical one year performance of the S&P500 based on the value of the index. You can see that we have entered a troubled regime. Current index value is 1.73% and rapidly climbing. At this level the chart shows that less than 50% of the time is the market up the following year.

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This index reminds me of the Hindenburg Omen which works on the same principle: In an advancing market new highs are being made but when new lows begin climbing at the same time this implyies that part of the market is in their own private bear market. Eventually the new lows drag the market lower. We have gotten four Hindenburg Omen signals in the last 11 days. Google the term if you are unfamiliar. The makeup of the NYSE with so many ETFs and inverse ETFs may be confusing this type of analysis.

[Blinko]

Mike,

It has been some time since I looked at Wayne's definition for his index so my recall may be faulty. Recollection is that he was using data only from the S+P 500 for this.

Best, Puddy

[Mike]

Mike,

It has been some time since I looked at Wayne's definition for his index so my recall may be faulty. Recollection is that he was using data only from the S+P 500 for this.

Best, Puddy

You are I think correct. He started with this definition using NYSE originally and the table is from that definition. He switched to the S&P500 later. He has to compile the S&P data himself I believe as those statistics are not published. It would take a lot of time each day to hand compile S&P statistics so I remain rooted in the old definition. The fact that the NYSE is littered with long and short ETF instruments is why he shifted to the S&P. So the analysis is not as pristine as I would like but the best I can do with my resources. I believe the obvious shift toward more and more 52-week lows is still significant even with the issue stated above.

[Blinko]

It would take a lot of time each day to hand compile S&P statistics so I remain rooted in the old definition.

What stopped me was the compilation of historical data, which would be time consuming and more difficult in some cases where companies have since gone out of business, gone private, and so on.

Once the history is set up a simple Excel program can keep up with the downloads and conversions, albeit with occasional updates due to index composition changes.

I decided the setup time was not worth the potential reward. It would be a nice addition however.