Now and Then

Just poking around through the pilings that hold up the whole pier and some things looked familiar like the sharp sell off followed by a sharp "V" shaped rally, so I took a bit of a closer look with breadth indicators. Remember, these indicators are not even as subjective as MACD or RSI, these are the pure count, the actual percentage of stocks doing a particular thing, there's no interpretation, there's nothing but objectivity.

There are certain reasons price patterns and markets behave in similar fashion, while History may not repeat, it does rhyme and that's because of human emotions, even the HFT/Algos which are programmed, turned on and off and reprogrammed by humans.

I'll keep this simple , just pay attention to the name of the indicator and where it's at. All comparisons are against the S&P-500 in red, the actual indicator is in green. The rest is pretty self explanatory.

First what time period are we looking at?

 The very top of the 2007 SPX bull market , ironically on October 12th, very close to where we are today, 10/31. The first decline was -9.43% followed by a sharp "V" shaped rally to a new high on 10/12 of +11.26% followed by another decline of -10.09%

 This is what happened after that time period, 10/12/2007 in white with a >55% decline, to put that in to context...

This was the previous bull market lows to highs over a 4+ year period, the rally actually started March 17 2003, similar to this market's start on March 9th 2009. As you can see, it took about a year and a half to tear down nearly 5 years of bull market work.

Our last sharp decline that sent sentiment so south was -7.34%, less than the initial -9.34% in 2007. The rally of the "V" bottom so far is +8.34% vs the "V" shaped rally back then in to the top of +11.26% so volatility was actually a bit greater in 2007 at least until this point. Now the indicators.

 The NASDAQ Composite's (red) Advance/Decline line in 2007 (green)

The NASDAQ Composite's A/D line now.

 McClellan Summation Index vs the SPX (red) in 2007 @ 617

McClellan Summation Index vs the SPX (red) now at -1600, much worse. 

 The Percentage of All NYSE Stocks Trading Above Their 40-Day Moving Average in 2007, seeing a sharp drop below 20 after a negative divegrence, then on the rally breadth improved and the indicator read 73.71% as the SPX made a slight new high (SPX in red).

The Percentage of All NYSE Stocks Trading Above Their 40-Day Moving Average NOW vs the SPX in red. Likewise we saw a sharp drop below 20% and the most recent reading as of today is +63%, 10% below the 2007 reading at virtually the same place in the move.

 The Percentage of All NYSE Stocks Trading Above Their 200-Day Moving Average vs the SPX in 2007 with a reading on the rally of 51.40%

The Percentage of All NYSE Stocks Trading Above Their 200-Day Moving Average vs the SPX NOW with a similar slight new SPX high and a reading virtually the same at 53.46%.

 The Percentage of All NYSE Stocks Trading ONE Standard Deviation Above Their 40-Day Moving Average vs the SPX in 2007 with a sharper recovery to 56.58%

  The Percentage of All NYSE Stocks Trading ONE Standard Deviation Above Their 40-Day Moving Average vs the SPX NOW at 44%

 The Percentage of All NYSE Stocks Trading ONE Standard Deviation Above Their 200-Day Moving Average vs the SPX in 2007 at 36.7%

And  The Percentage of All NYSE Stocks Trading ONE Standard Deviation Above Their 200-Day Moving Average vs the SPX NOW falling short at 34.96%

  The Percentage of All NYSE Stocks Trading TWO Standard Deviations Above Their 40-Day Moving Average (momentum stocks) vs the SPX in 2007 with a recovery rally high of between 19 and 32%.

   The Percentage of All NYSE Stocks Trading TWO Standard Deviations Above Their 40-Day Moving Average (momentum stocks) vs the SPX NOW with a recovery high of 24.83%

   The Percentage of All NYSE Stocks Trading TWO Standard Deviations Above Their 200-Day Moving Average (momentum stocks) vs the SPX in 2007 @ 20.64% and...

   The Percentage of All NYSE Stocks Trading TWO Standard Deviations Above Their 200-Day Moving Average (momentum stocks) vs the SPX NOW at 15.64%

The similarities which are very uncommon are striking, you saw what happened to the SPX next after the pilings that hold up the pier rotted from beneath the market.

A few bonus charts...

 That HYG positive divegrence from earlier in the week I was a little concerned about and its sharp decline to negative

Today being October 31st is the day in which most MUYUAL Funds end their fiscal year and prepare their prospectus to show performance for new customers, today was the last day and it seemed that they were pushing for the best close at the close because the market traded lower from the open most of the day until the end of day when the VIX was whacked after outperforming all day, an obvious attempt to ramp the market, however HYG which would have been useful decided to keep selling off in to today's close.

 QQQ institutional timeframe of 5 min from the rally's start.

QQQ 10 min

QQQ 30 min at a leading negative divegrence and a larger relative negative divegrence

 SPY institutional timeframe of 5 min

SPY 10 min since the start of the rally

And SPY 30 min

And some interesting monthly Heiken Ashi Charts, similar to candlesticks, but better in many ways.

 SPX monthly Heiken Ashi with a much more bearish Doji (compared to candlestick charts) and note the increased volume.

 Monthly Heiken Ashi NYSE clearly breaking the multi-year trend and again on increasing volume, a bearish Hanging man

And finally, the NASDAQ Composite, all NASDAQ stocks with a very bearish Doji Star on increasing volume.

I've found that just like candlesticks, the increasing volume makes the Heiken Ashi's signal much more likely to be reliable.

Perhaps more later this weekend.

Everyone have a great weekend.