Originally Posted by
Normand
Hi Mike
Keep your CANSLIM posts coming, they are very valuable.
I have been following VIT’s Pascal, Bob & Billy posts for two years, the Robots (IWM & GDX) and Billy’s robot posts since May, IBD The Big Picture all of 2011 and your CANSLIM posts since the new VIT web site. A lot off complementing ideas and approaches. Very enlightening!
Since your post, following your Vegas seminar, I have tried to understand this new market timing approach. I put together an excel spreadsheet to combine this new market timing approach with other approaches to get a combined picture. A copy is attached.
October has been a very interesting month for market timing as shown when you put all this together.
Regarding your new approach it raises a number of questions:
1. The IBD Market Pulse Distribution Days and yours don’t match, why? IBDs are in red, yours are in black and when both matched they are in blue. I am still struggling with the definition of a DD, can you please explain? Could you please define what make an IBD DD?
2. I am also wrestling with FTD. Could you please provide your definition? Here is the IBD definition: Follow-Through Day Concept
System developed by William J. O'Neil to identify an important change in general market direction from a definite downtrend to a new uptrend. From the beginning of any attempted rally during a definite downtrend, a 'follow-through' day is identified when the index closes up 1.7% or more for the day on a significant increase in volume from the day before. The first two or three days of a rally are normally disregarded as it has not yet proven it will succeed and 'follow-through' with power and conviction. 'Follow-through' days therefore generally occur the fourth through seventh day of the attempted rally. They serve as a confirmation that the market has really changed direction and is in a new uptrend.
3. On October 18, you have indicated a “Force 5”, what is a Force 5?
I have gone through your course material, the “ How to make Money in Stocks” book and search the IBD site for Distribution Day with little results. Yet, these concepts are the foundation of the IBD Market Timing.
Looking forward to your comments,
Normand
Normand,
The Market Pulse is still tuned to the way of doing business prior to the Market School model. It is still good advice but it will be different in some details. Market School Market Exposure Model will reset the distribution count on the initial FTD. On the NASDAQ this occured on 10/18/11. Market Pulse is counting from the FTD on the NYSE Composite. Market School will pay attention to a FTD on another index but they will shift to the NASDAQ as soon as they can. Their procedure is to note the FTD on another index but as soon as the Exposure Count of the NASDAQ equals the Exposure Count on the other index they shift to the NASDAQ chart even if a FTD on the NASDAQ has not occured. The Model will then guide their exposure.
A distribution day is a day where the index drops by 0.2% or more on volume higher than the day before. Distribution days are counted in a trailing 25-day window with no distribution days counted before the FTD reset. Also some distribution days are determined to be overcome by subsequent market action. If the index on an intraday basis excedes the close of a distribution day by 6% or more, that particular distribution day is dropped from the count. Stalling days can also be determined to be a distribution day. A stalling day is nominally a day where the idex has moved up in the prior days an then goes up a much smaller amount on greater volume. In Market School a much more explicit model for stalling was given to us. It is quite complex. Essentially what the team did was give Bill O'Neil a bunch of charts and asked him to identify the stalling days. A complex model with three types of stalling came out of this exercise. It would take me a half hour to type the definition and I would probably even them make a mistake so perhaps I will scan a page and post it in the future. Stalling is more rare than regular distribution days.
The Market School difinition of a FTD is currently 1.25% increase on volume higher than the day before on day 4 or later in a possible market rally. In history before 2001 the threshold was 1%. After 1/1/2001 it is 1.25%. This is another place where the Market Pulse can differ in the details. There are some notable times of extremely low volatility where the model will reduce the threshold. The Market Model will manage the exposure after this simpler 1.25% definition on the cases where the FTD leads to a failed rally.
I don't remember the Force 5 comment. There is a company by that name with symbol FFIV. It was a prior great leader that broke down.
Mike Scott
Cloverdale, CA
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