That's a perfect description of breadth, you can never take a price move and make assumptions about it without examining it's breadth. solid breadth, solid trend. Weak breadth and a weak trend or manipulation of prices.
This is a new indicator I'm still working on. I'm assigning a value to each of the 4 Price/Volume relationships; obviously price up / volume up is the strongest and price down / volume down is nearly meaningless. Then the values of each day's price/volume relationship are multiplied to give the colored bars that look like a cross between volume and MACD. You can see it's negativity during the sell-off in 2008, the cross up during the Fed's heaviest area of activity and the positive, but declining breadth in the March 2009 Rally, which 3C has confirmed again and again. Now our "BIG bounce" is clearly in negative breath.
A close up of the same SPY chart-this is still a work in progress, but pretty effective.Note how the recent bounce is not only not holding its own, it's getting worse! The red arrows show how breadth reading deteriorate during rallies and call reversals. This is why I always look at daily breadth, but here I'm taking it a step further and cumulating it with expressions of value for the relationships multiplied by the day's volume.
Now to look at the averages in different timeframes using different versions of 3 and 4C
DIA 30 min 3C variant
DIA 15 minute
SPY 10 min 4C
QQQQ 3C v.2 5 minute
SPY 3c v.1 1 minute
All the timeframes look pretty bad. See my post at Trade Guild tonight about BAC, this should not help sentiment during earnings considering the apparent deception at earnings to the tune of $10.7 Billion dollars of debt hidden.
Now for some shorts that are worth taking a serious look at:
CAR short-read the annotations, this may have a little upside but not much before it continues its plunge. This has a lot of downside left.
DAN short, this is an established down trend-Primary as well. The leading negative divergence will eventually pull prices much lower. Note the stages of the market: 1) accumulation 2) Stage 2 "Mark Up" 3) Distribution "Top" 4) Sell-off/decline.
Almost all stocks and markets go through this exact pattern eventually.
PIR short, same pattern as above-Note the very common triangle top, a breakdown, and leading divergences in my 3C and Worden's TSV which I have cumulated at the bottom. This rally will fail although it may reach the apex of the triangle, but not too likely.
FARO short, an established down trend with several serious levels of resistance. You can use the highest one for risk management/position sizing and add as it comes down. The volume on the bounce is pathetic. Be careful though as this has low volume, mostly because of the downtrend. Low volume is the hallmark of a bear market!
ABR short-note the same 4 stages-we are in stage 3 major distribution/top with a bad leading negative divergence!
TGT short. Again, the same 4 stages. Learn these 4 stages, it's imperative to know where you are within the 4 stages, this one is stage 4 decline- very high probability setup as you trade WITH THE TREND! Note how long distribution can occur. The pros don't buy on the way up, they sell. They bought at the accumulation bottom and slowly release their inventory as not to knock prices down during stage 2 "mark-up". This one is in stage 4 decline and early stages so there's a lot of downside left.
Finally, AMPL -THIS IS A LONG! Note it is in stage 1 accumulation, the triangle base confirms this and it looks as if it's ready to break out. I think momentum traders will gang up and force this one much higher. Recall the post about how momentum traders use the market maker to push prices higher at his own expense? That's what looks like may happen here, although I do believe it's the market maker accumulating, he just doesn't know what he's in for yet. This will be a very interesting and informative trade to watch unfold. It is speculative, but I believe worth the risk-with proper risk management which includes a wide stop initially.
Keep an eye on the BAC short I mentioned on July 6th, as I have been PREACHING, things happen in the market; CNBC will tell you why it happened today, but as I point out relentlessly recently on both sites, it's a bunch of BULL and their would be 4 letters after that that start with an "S" and end with a "T". It took 7 days to find out what really happened. They've been in the know and distributing BAC since they received the SEC letter in March and after their response in April. The breakdown was most likely due to the fact the knew the SEC release was imminent. Trust the chart-it's the only thing that shows action, everything else is just words and as we have seen, the words were worthless. NOTHING in the market is as it seems.
So watch for the market to turn, I think very soon. When this occurs or as any of these shorts turn down, I would consider any of them to add to your short position.
REMEMBER, shorts, real shorts (not buying inverse ETFs) have the advantage of being able to immediately use the profits to pyramid the trade or finance other trades. YOU CAN NOT do this with a long position. the profits in a long are paper until you sell the position and realize the gain, That is why the argument
"You can't make more then 100% in a short, because it can only go to zero" is totally wrong and not well informed.
I hope you found tonight's post not only useful for positions, but that you learned a few things that will help you become a better, more informed trader. And the BAC post at Trade Guild is a really excellent study in the market and the power of 3C to pick up on how these guys operate. Just watch the divergences and you'll know exactly what they are doing. Months later you'll find out why, which is mostly irrelevant to taking on the position.
Have a great week and WELCOME to all of our new members. We are running out of space!!!!
New members, be sure to check the
June 3rd "core short list" of ETFs but try to mix in some real shorts and read back a few months to understand what we are up to or just email me any time
RISK MANAGEMENT! RISK MANAGEMENT! RISK MANAGEMENT! RISK MANAGEMENT! RISK MANAGEMENT! RISK MANAGEMENT! RISK MANAGEMENT! RISK MANAGEMENT!
