New Indicator, new insights...

This is a custom cumulative indicator I just threw together real quick, the reason why? Because very rarely do we see "V" shaped reversals either up or down, however, I was thinking, what if the reversal period is actually building before our eyes and we don't recognize it?

So here's what I created, first I created a code that tells us what the price percent change is each day and since the moves have been so small lately, +.22% or something along that rather then what we use to see as an average move of 1%, I created the indicator to move up 1 notch if the close was greater then .25% and to move down if the gain was less then +.25%. A change of .25% up or down is almost meaningless, we have just seen a string of so many days of small gains that there's more of an illusion of strength then actual strength.

Here's what I came up with...

 The Dow-30

 The NASDQ 100

 Russell 2000-be sure to compare the indicator relative to where prices are now and where they were at similar levels in June/July of 2011

And the S&P-500

Next, I created the same indicator, except it will move up on any close above 0% (even .0001%) and move down on any close below 0%. Since we know that the market has been more interested in creating the illusion of strength by closing higher, but not as concerned with actual strength as we can see by the very low percentage gains, this indicator by itself would move nearly straight up, so I added one more indicator to our custom indicator and that is the Rate of Change. If the market is showing more strength, the white indicator will move up on a positive rate of change, if not, it will move down on the Rat of change decreasing. So as the rally unfolded, we can see the relative strength of it.

 The Dow 30 from a ROC uptrend to a recent downtrend.

 The NASDAQ is the clear winner among the averages, but even its rate of change has dropped off since the start of the uptrend, before it went flat in the middle of the trend.

 The Russell 2000had a positive ROC and then went flat from the early highs to just before the red arrow begins and the trend down.

And the S&P-500

The point of this exercise is not only to show the declining strength of the move up, but that there may not need to be a period of lateral or rounding over and a "V" shaped reversal is not only possible, but more probable (I didn't say highly probable, but more probable).