Best Thread Market Breadth

[isatrader]

New Highs New Lows

Attached is the updated daily and weekly New Highs New Lows charts. This weeks reading of 958 new highs was the highest reading that Stockcharts have on record, and their charts go back to 1990. So I've also attached the 22 year chart of the net new highs and new lows as well, which shows it in context over the years.

The Top 5 weekly New High - New Low readings since 1990

1. 14/9/2012 = 878
2. 29/9/1997 = 629
3. 12/4/2010 = 579
4. 2/6/2003 = 577
5. 30/6/1997 = 548

 

[isatrader]

Attached is the updated P&F breadth charts.

The head coach of the NYSE Bullish Percent Index ($BPNYA) has moved back above it's 70% level again, as it did in January and so has now reached the end zone of the playing field. Dorsey did an article back in January about how long the NYSE Bullish Percent Index stays above the 70% level before reversing back to a column of Os; and the average time was 96 days over the last 25 years. During these times the best average returns were in the mid and small cap stock indexes, followed by the Nasdaq and then the S&P 500.

So although the market risk is now in the high category, on average it's held up for a further three months, so it's not a time to panic. But it would certainly be sensible to start planning your strategy for when it does next turn down, so that the nice gains that have been made over the last few months don't all evaporate.

NYSE Bullish Percent Index ($BPNYA)

NYSE Percent of Stocks Above their 200, 150 and 50 Day Moving Averages

The long, medium and short term breadth measures continued to gain strength again with the NYSE Percent of Stocks Above 200 Day Moving Average ($NYA200R), the NYSE Percent of Stocks Above 150 Day Moving Average ($NYA150R) and the NYSE Percent of Stocks Above 50 Day Moving Average ($NYA50R) all pushing closer to the tops of their normal ranges.

 

[isatrader]

Major Sectors Bell Curve

It's been a long while since I last did the Major Sectors Bell Curve using the free Bullish Percent Sector Charts from Stockcharts. I find that the bullish percent bell curve is a very effective way of looking at the internal structure of market, and gives you a visual snapshot of what's going on. It's not as good as Dorsey's one as it only looks at the broad sectors, but it is free and gives you a better idea of what's going on in the NYSE Bullish Percent chart that I post every week.

Each sector bullish percent chart shows the percentage of stocks that are on a P&F buy signal at that time, and so every stock is given an equal weighting, unlike the major indexes.

Currently, the picture is very bullish with 9 of the 12 sectors on Bull Confirmed status and with close to or more than 70% of their stocks on P&F buy signals. This gives a median distribution for the sectors of 76.66%

However, 5 of the sectors are up near the top of their ranges, with for example the Energy sector with 97.77% of stocks on a P&F buy signal - which is an extreme level that it hasn't been at seen since 2005. So the risk profile of the sectors is mostly in the High to Very High category currently, which means that I'll need to watch for signs of weakness developing in the sectors, so that I can change my strategy when this latest bullish move is over.

Below is the table showing the individual sectors and their status and the Major Sectors Bell Curve from it.

 

[isatrader]

Attached is the updated P&F breadth charts.

There was little change in the long term NYSE Bullish Percent Index ($BPNYA), which only saw a 1% change, and so continues to be in a column of Xs and on Bull Confirmed Status.

However, the NYSE Percent of Stocks Above their 200, 150 and 50 Day Moving Averages all reversed to a column of Os this week, with the NYSE Percent of Stocks Above their 200 Day Moving Averages adding an O below the key 70 level. Which changes the status from a bull correction to a bear alert. However, the 150 and 50 Day closed slightly higher than the 200 day and so are on bull correction status.

The line chart of the NYSE Percent of Stocks Above their 150 Day (30 week) Moving Averages shows the positive trend still and has no divergence from the price action as yet, which would signal weakness. So on the current evidence, it appears to be a normal pullback to value within an uptrend.

Attached are the charts

 

[isatrader]

Attached is the updated P&F breadth charts.

There was little change in the NYSE Percent of Stocks Above their 200, 150 and 50 Day Moving Averages charts this week with only slight moves up in the percentages. All three are back above their key 70% level in a column of Os and so are on Bull Correction status in the high risk end zone.

The long term NYSE Bullish Percent Index ($BPNYA) barely moved this week and so continues to be in a column of Xs and on Bull Confirmed Status.

Below are the P&F charts and I've also included the NYSE Percent of Stocks Above their 150 Day Moving Average line chart which shows the swing low that has formed around the key 70% level. A break below that would signal weakness in the broad market, but I don't consider it a sell signal until the percentage breaks below the 30 week weighted moving average as well.

 

[isatrader]

Attached is the updated cumulative daily and weekly Advance Decline charts. The NYSE Advance Decline Cumulative Volume / NYSE Primary Market Total Volume ($NYUD:$NYTV) daily and weekly charts which measure the volume of the NYSE Advance Declines. And the daily and weekly New Highs New Lows charts.

All of these measures continue to look positive and aren't showing any divergences with the price action and so still confirm the current trend imo. Note the Advance Decline line is pushing close to new highs again.

 

[isatrader]

SPY/TLT Ratio

The S&P 500 SPDRs/iShares Barclays 20+ Year Treasury Bond Fund (SPY:TLT) ratio made a swing low at the two year downtrend line support and reversed back up this week. The 1 box P&F chart also reversed back to a column of Xs this week and remains in a positive trend. Below are the charts.

 

[isatrader]

This weeks negative price action has made some changes to breadth charts with the short term NYSE Percent of Stocks Above their 50 Day Moving Average forming a double bottom breakdown and changing status today from Bull Correction to Bear Confirmed. There are now only 61.38% of stocks trading above their 50 day moving averages, which brings it back down to the early July levels.

The medium to longer term breadth charts of the NYSE Percent of Stocks Above their 150 and 200 Day Moving Averages also changed status and are now on Bear Alert as they have both pulled below their 70% levels. I prefer to go by the weekly levels for signals to filter the noise a bit, so we'll see if the market can find some support.

NYSE Percent of Stocks Above their 50 Day Moving Average ($NYA50R)

Another interesting breadth chart is the New High New Lows, which has pulled below it's key 100 level today and is back in neutral territory. So definitely one to watch closely in the comings days to see if the new lows start to outnumber the new highs as that would indicate a more serious correction is underway, which it doesn't currently as the new lows were only 22 today.

New Highs ($NYHGH) New Lows ($NYLOW)

 

[bearsworth]

How were you able to get the stockcharts to say Bullish Signal Reversed. I am typing the same one and I get Triple Bottom Breakdown. I guess my question is how were you able to expand the time.

 

[isatrader]

How were you able to get the stockcharts to say Bullish Signal Reversed. I am typing the same one and I get Triple Bottom Breakdown. I guess my question is how were you able to expand the time.

Below where it says Bullish Signal Reversed you'll notice that it says User-Defined, 2.0 pts/box 3 box reversal chart. This is because Breadth Charts use a custom setting of a 2 pt box size with a 3 box reversal setting. So at the bottom in the settings you'll see Chart Scale: and then a Scaling method drop down menu. Click this and change to User Defined. Then change the Box Size next to it to 2.0. Attached is a screenshot.

 

[bearsworth]

Ahhh. Thanks again.

Below where it says Bullish Signal Reversed you'll notice that it says User-Defined, 2.0 pts/box 3 box reversal chart. This is because Breadth Charts use a custom setting of a 2 pt box size with a 3 box reversal setting. So at the bottom in the settings you'll see Chart Scale: and then a Scaling method drop down menu. Click this and change to User Defined. Then change the Box Size next to it to 2.0. Attached is a screenshot.

 

[isatrader]

Attached is the updated cumulative daily and weekly Advance Decline charts. The NYSE Advance Decline Cumulative Volume / NYSE Primary Market Total Volume ($NYUD:$NYTV) daily and weekly charts which measure the volume of the NYSE Advance Declines. And the daily and weekly New Highs New Lows charts ($NYHGH).

The New Highs New Lows recovered a little bit from earlier in the week, but it is still lingering in the neutral zone with the New Highs minus the New Lows figure under the key 100 level still. The New lows ($NYLOW) however, are still very minimal as there was only 15 in Fridays session.

The cumulative daily and weekly Advance Decline charts ($NYAD) are showing a similar consolidation pattern to the market price action, but the NYSE Advance Decline Cumulative Volume / NYSE Primary Market Total Volume ($NYUD:$NYTV) daily charts are showing a divergence with the price action after making a lower high and has closed the week below it's 50 day MA for the first time since early August. The weekly chart is still in ok shape though, but it is another warning sign to be aware of.

 

[isatrader]

US Industry Sectors Breadth

I've spent some time this week working on creating breadth charts for the nine major US industry sectors. It's a slow process as I've had to input the data of the amount of stocks in each group above and below their 150 day moving averages manually into excel to calculate the percentages. So far I've done eight of the groups which are the XLF, XLY, XLI, XLP, XLE, XLV, XLB and XLK and inputted a year and half of data for each. I intend to complete this in the next week for the other group and then update the amounts weekly so I can track what's happening below the surface on a sector basis.

Attached are the Sector Percentage of Stocks above their 150 day Moving Average charts that I've done so far. Note that Technology gave a sell signal last week and other than financials there's large divergences with the price action in most of the sectors. i.e. there are much fewer stocks supporting the up-trends in these sectors. Tech for example had around 65% of stocks above their 150 day moving average at the March/April highs, whereas now we are testing the same price levels but only 39.95% of stocks in the sector are above their 150 day moving averages - so 25% less stocks in the group.

 

[isatrader]

Attached is the updated market breadth charts

 

[isatrader]

SPY/TLT Ratio

Lastly here's the SPY/TLT Ratio for this week. The 1 box P&F chart is right on the edge of a double bottom breakdown which would indicate a short term shift in the favour of treasuries. However, it's still well above the medium term uptrend line currently. Below are the charts

 

[kleros]

Re: US Industry Sectors Breadth

@isatrader. nice work on these sector charts. i know these are a pain to create. what are your buy/sell levels when looking at these point and figure charts. for instance, what caused technology to be a sell? also, what determines the change in colors on the attached graphs. i have been looking at creating these for shorter time periods but haven't had the time yet. also, looking to see how to incorporate these type of charts in a swing trading strategy for leveraged ETFs.

kleros

 

[isatrader]

Re: US Industry Sectors Breadth

@isatrader. nice work on these sector charts. i know these are a pain to create. what are your buy/sell levels when looking at these point and figure charts. for instance, what caused technology to be a sell? also, what determines the change in colors on the attached graphs. i have been looking at creating these for shorter time periods but haven't had the time yet. also, looking to see how to incorporate these type of charts in a swing trading strategy for leveraged ETFs.

kleros

The way I've set them up is using the same principles as the Market Breadth Status from Investors Intelligence which I posted earlier in the thread in post #15 here: http://www.trade2win.com/boards/technical-analysis/147476-market-breadth-2.html#post1830598 - so even though they are line charts you can still use the P&F methodology of double top breakouts and double bottom breakdowns for short term signals and trend line breaks for medium to longer term signals. But to tie it back in with the Weinstein method I use the 30 week weighted MA as part of the signals with a buy signal being a breakout above a swing high that occurred above the 30 week WMA and a sell signal being a breakdown below a swing low and then crossing below the 30 week WMA. So the sell signal is faster as there's often no swing low until the end of the move once it gets through the 30 week WMA, as breakdowns happen quicker than bullish moves.

It's still a work in progress as it's based on the method I've created on the NYSE Percentage of Stocks above their 150 day (30 week) MA. So it might need tweaking for the sectors, which have much fewer stocks in the sample size and hence may be more volatile, which I can get to once I've input in all the data and added a few more years to the charts.

But generally you want to be looking for breakouts above a swing high from below the 30% level and breakdowns below a swing low from above the 70% level. And a sector will be in better shape if it's on a buy signal above 50% and in worse shape if it's on a sell signal and below 50%. Does that make sense?

 

[kleros]

Re: US Industry Sectors Breadth

Makes sense. thanks. I look forward to seeing more of your work. I need to read more about Point & Figure charts. Should I buy Dorsey's book? Overall, how do you use them in conjunction with Weinstein's stage analysis?

kleros

 

[isatrader]

Re: US Industry Sectors Breadth

Makes sense. thanks. I look forward to seeing more of your work. I need to read more about Point & Figure charts. Should I buy Dorsey's book? Overall, how do you use them in conjunction with Weinstein's stage analysis?

kleros

It's an excellent starting point imo, and there's also a free online resource that they have to help you to learn the basics called the P&F university: PnF University

Stockcharts also has a large free resource which you can use to learn P&F: http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:pnf_charts

Dorsey's book is very much about the relative strength uses of point and figure which is why I think it compliments Weinstein's method so well, as they have the same general principles. Another P&F book which dentist007 recommends in his thread is The Definitive Guide to Point and Figure by Jeremy Du Plessis, which goes into great detail about different applications of P&F and the more short term uses.

P&F is a way to eliminate the noise as time is taken out of the equation and only significant moves defined by the box size and reversal settings that you choose will add to the chart. It's a pure price action method and allows you to see important formations and define support and resistance with ease. So with regards to Weinsteins method is helps me to define the stages, determine the breakout levels and work out whether support and resistance levels are significant or not. Weinstein actually talks about using them on page 21 of his book.

The way I learned to understand point and figure charts is by creating a few by hand in excel after reading the Dorsey book and using the free resources on the web that I've highlighted. I started out by plotting the closing figures for the 60 minute charts of GBPUSD onto a spreadsheet as Xs or Os and then adding the trendlines as I went along. It's very easy to do, and I personally think it's the best way to understand it.

 

[bearsworth]

The P&F chart for the $NYA50R now shows a Green "Low Pole Reversal" with User defined 2pts.