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TW Patron++
Posts: 1,054
Reply with quote  #1 
Short on time tonight, but the NYSE had a down volume to up volume ratio of nearly 14 to 1 today (WSJ data) or little over 93% down volume.

We've gone through this exercise before (check out some of the TW threads addressing the topic) but these extremes are often coincident with internals momentum lows. 

These extremes can come in clusters over a multi-day period, and there is additional risk for the bulls.. the McClellan timing signals' bottoming cluster is still a week+ away, and they have had a hot hand of late in maneuvering through this market climate.

But some of the shorter term money flow indicators are getting over done for the downside, so a sharp rally in the near term is a high probability in the next day or two.



TW Patron++
Posts: 1,054
Reply with quote  #2 
Here are the internals numbers of the 4000 largest cap US common stocks divided into quartiles, Tier 1 comprising the 1000 highest cap US common stocks (Russell 1000), Tier 2 comprising the next 1000 highest cap stocks, and so on.  Amusingly, the very smallest cap stocks (Tier 4) which are the gang responsible for the NASDAQ AD line never going anywhere, were stellar performers on Tuesday's debacle to the downside.

The Tier 2 group comprises the 1000 largest cap companies of the Russell 2000 (RUT) and were simply decimated with respect to the negative breadth plurality.

July 24, 2007
GroupAdvanceDeclineDec-Adv RatioUp VolumeDown VolumeDown-Up Vol Ratio
Tier 17893812.0345,986,7673,992,581,87111.5
Tier 24891119.089,145,748857,695,1339.6
Tier 36989713.051,889,010350,628,9046.8
Tier 42466762.748,637,19483,331,0141.7

From Tuesday's tick and short sales data, the elimination of the uptick rule for shorting equities was evident, the SDOT short sales went through the roof and tick numbers posted some very extreme lows.

The probability of a bounce here is pretty high, but I will be surprised if Tuesday's action is the price low equities rally from in a sustainable fashion. One fact that needs to be kept in mind for this correction, is the liquidity problem evident in the markets over the past several weeks.

During past corrections over the last few years, the AD line topped out in sync with intermediate term price tops, providing the insurance the correction would not get out of hand.  Since the AD line has been diverging with price over the past several weeks, that "liquidity safety net" in place over the past few years is in doubt of being able to limit price damage to 5% or 6% declines (as measured by the SPX).

The AD line has not diverged long enough to even suggest these recent highs are "THE" highs, and money flow says much higher prices down the road.  However, the door has been opened for the bears to push prices lower than over the past 3 or 4 years.

Here is the link describing price action going forward following prior extreme negative volume plurality days:



TW Patron
Posts: 46
Reply with quote  #3 

Originally Posted by mortiz
the McClellan timing signals' bottoming cluster is still a week+ away,

Randy, refresh my memory.....whats the bottoming cluster definition?



TW Patron++
Posts: 1,054
Reply with quote  #4 

The timing model signals are included in each issue of the twice monthly McClellan Market Letter, here is an example:

Stock Indices (DJIA, SPX, Nasdaq, NYSE Comp., etc.)


Top SP500 Up/Dn Osc     June 12        June 11

Top NDX Summ Index     June 15       June 15

D Bottom DJIA Price Osc June 18   June 26

D Bottom Nasdaq A-D Osc June 20 June 26

D Bottom NDX Summ Index June 25 June 26

E Bottom NYSE Volume Osc July 10

E Bottom NYSE A-D Osc July 10

E Bottom A-D Summ Index July 12

Bottom DJIA Close/Sum July 17

Bottom DJIA ST Price Osc July 20


The formatting is screwed up since I am trying not to reveal the current details, but they are mathematical models which predict in advance several indicators' bottoming or topping action...  and they work very well on balance.


The cluster due late next week first showed up on the radar screen nearly one month ago, and there are several of them, increasing the importance of the message the model is telling.



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