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Update for Friday, October 7th
There is an interesting divergence setting up and in looking back through a year's data, I can't find a close duplicate, so time to watch it unfold.
Primarily, the $TICK indicator is strong:
[ATTACH=CONFIG]10780[/ATTACH]
As with all my images, right click to open in a new tab or window.
The cumulative tick pattern on the bottom is showing the "bullish rollover" that a ribbon band gives -- the instantaneous cume tick is in white, and the moving averages are in various shades of light purple (shortest) to dark purple (longest). The green line is the 10h MA line.
Immediately evident is that the first "breech" of the previous down leg occurred when the cume tick crossed the 1/2d MA from below around 10 a.m. on 10/5. It had not done this in several days, so this was an initial confirmation that the previous trend was in jeopardy.
The second head's up was the crossing of the 1d MA from below which occurred around 11 a.m. on 10/5. Note that both the 1/2d and 1d slopes had started to point positive shortly thereafter, and if the previous end-of-day-reversal didn't close your short positions, some backtesting that I've done with this "failsafe" slope method suggests that these two limit the downside damage if you miss an exit. These are not good exits by themselves, but they do help.
We all were challenged when the cume tick line reversed and headed down -- the aforementioned slopes also reversed which is why these are not a great exit indicator by themselves.
Finally, around 14:00 on 10/5 the cume tick line crossed the 10d MA from below, tested it a few times shortly thereafter, and then it's been off to the races since.
Of all the tests I've done all week, signals based on the cume tick line are the most robust compared to $TIKSP, $TIKRL, and $TIKQ or $TIKND. Hence, you'll see me using this more going forward (thanks Billy!).
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The aforementioned divergence is present in the $TIKSP (S&P500) and $TIKRL (Russell 2K small caps):
[ATTACH=CONFIG]10781[/ATTACH]
[ATTACH=CONFIG]10782[/ATTACH]
The SPX is on top and the R2K is on the bottom.
Note how the price of the SPX was steady or moving upward and it's cume $TIKSP pattern was dropping, causing the majority of the cume MAs to reverse too. Also note in the middle of the SPX pane the intra-day filter on the SPX showed clear selling pressure starting like clockwork at 14:30 EDT and price held relatively steady. I don't like steady prices on selling pressure -- this is churning -- and it shows great indecision.
The bottom figure is the Russell 2K and while we're clearly above the 10h MA (green), we seemed to have stabilized around noon and then experienced a slow drift down in selling pressure while prices remained more-or-less constant. This reversed around 15:30 pm, but it didn't give me the greatest confidence about the internals yesterday afternoon.
Consequently, I took 2/3 of my profits off the table at the end of the day, and while I'm glad I left 1/3 on the table, as I write this (10:15 am on 10/7), we're not moving much.
I'm keeping my eye on the ball to see if we stall here or inch higher. There's no reason to sell to lock profits, but I've not seen any compelling reason to enter new long positions either.
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Regards,
pgd
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Update for Thursday, October 13th -- Crossroads
Overall, I think the markets are out of sync -- rationale is in my post [URL="http://www.effectivevolume.com/showthread.php?3488-GGT-System-Status&p=17642#post17642"]here[/URL].
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Overall, the cumulative $TICK remains very strong:
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Note that:
1) the cumulative tick in the lower pane is constantly above all the moving averages
2) all the moving averages have a positive slope
3) all the moving averages are more-or-less constant-spaced, which means we do not have acceleration
I consider this an orderly movement upwards of the broader markets.
If we take a deeper dive into the SPX, R2K, and NDX, we see that the SPX is showing the most cumulative tick volatility, the R2K is less so but still volatile, and the NDX is impressively strong:
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[ATTACH=CONFIG]10902[/ATTACH]
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The SPX ($TIKSP) is on top, the R2K ($TIKRL) in the middle, and the NDX ($TIKND) on the bottom.
My view of what we're seeing here is a rotation from the SPX into the Russell and technology stocks, and this bodes well overall despite being very overbought at this level.
In my spare time (ha!) I have been working on strategies to trade these cumulative signals, and the most stable, longer-term in-sample/out-of-sample consistency appears to be using the cumulative $TICK as the primary market trending entity and entry signal, with additions and exits from those positions determined/confirmed by behavior on the individual cumulative $TIKXX indicators. The individual cumulative $TIKXX indicators are incredibly more sensitive to news events than the $TICK, but they do fare better than simply relying on the $TICK for exits. A further path for exploration here that I'm working on is to use the $TICK for confirmation of entry and using the individual security for timing the exit. This has worked better with the leveraged instruments than the unleveraged underlying.
More (and official results) to follow as time allows.
With respect to the above charts, even though we're clearly due for a pullback, today (Thursday) will be the first indicator of such a pullback according to the cume tick displays. Right now they are all indicating bullishness, so the depth of the pullback, e.g., does the real-time cume tick cross certain MAs, will determine whether we should remain bullish or start transitioning to a bearish stance. In the present displays, there really is no overwhelming bearishness...
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Regards,
pgd