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mortiz

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Reply with quote  #1 

This is a very quick and dirty search for extreme down volume days (more than 95% down volume) followed by extreme up-to-down volume ratio days within 15 trading days of the extreme meltdown days.  This is an extension of another study and needs to be refined to include more events within the past 30 years.

 

The filters for these results are stringent:

 

1) 95% down volume day within 20 days of a six month price high as measured by SPX 

 

2)A 10:1 or more up-to-down volume ratio day followed within 15 trading days of the "meltdown" event.

 

These filters replicate what the current market action has displayed over the past week.  Qualifying events of these filters are very rare since 1950, with all occurring in the 1950s except two events, one in 1982 and the event that completed today with an up-to-down volume ratio exceeding +15.

 

 

Note: the last column should read "UD Ratio Within 15 Days" instead of AD ratio.

 

I plan to conduct a study with less rigorous requirements to include more qualifying events, so consider this a preliminary offering due to the very small sample space (these combinations are very rare). Please do not risk any resources on these results alone, consider it market trivia, the sample space is far too small.

 

We report, you decide 

 

FWIW

 

Randy 

 

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GarySmith

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Reply with quote  #2 

 

 

FWIW, 1950 and 1955's massive downside days were (as I guess most are) news related from the Korean War in 1950 to Ike's health problems in 1955.  In fact, when Ike had his attack the market was at an all time historic high.  His heart attack on September 26 resulted in the biggest dollar loss on the NYSE since 1929 and the heaviest volume since 1933.

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mortiz

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Reply with quote  #3 

Gary,

 

Thanks for adding "what" the news was sparking these overwhelming down volume days from the 1950s... I was around most of that decade, but was a very young lad, not paying attention to news yet.

 

The September 26, 1955 down volume percentage of 99.89% (the definition of wipe out) was the second highest down volume percentage since 1940, which is the extent of my NYSE volume data base.  The September 1955 down volume percentage was only exceeded by an event on May 13, 1940 of 99.92%... likely sparked by the war in Europe, wasn't that about the time France was falling under the boot of Germany?

 

The most recent down volume percentage debacle of 99.02% posted a week ago (2-27-07), was the 21st highest posting since 1940.

 

Randy

 

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mojave

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Reply with quote  #4 

Great discussion.  TickerSense has a link to Paul Desmond's (Lowrys Reports) MTA paper discussing 90% up & dn days. Specifically applicable to this discussion.

 

It's a short, easily-understood (non-technical) read w/ data going back to 1960. 

 

http://tickersense.typepad.com/ticker_sense/2007/03/talk_about_a_la.html 

 

Sorry, can't upload .pdfs here, but it's worth a read.

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mortiz

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Reply with quote  #5 

mojave,

 

Thanks for the link to Paul's usual interesting studies, and welcome to Technical Watch (appreciate your providing the link in your profile to your work as well). Lowry's has one of the most complete data bases around, and they spent a lot of time digging out that data...  as well as the news events behind the extremes.

 

I found the price change data especially interesting, a data point I monitor as well, but only have a fraction of the legacy data Paul has.  On 2-27-07, the sum of the NYSE issues' advancing price changes was a mere 1.2% of the total component price changes for the day, the lowest value in the past 5+ years, including the meat of the bear market period. Then the market turns around this past Tuesday with 96.7% of the total NYSE component price changes being positive.

 

Historical norms suggest the action over the past week or so, is not a kickoff to a price collapse, but is more of a very sharp correction within an ongoing bull market.  The probability of a lower price low in the coming weeks is high (IMHO), but those thinking this decline is the beginning of the end of Western civilization will likely be disappointed.... but we'll let the market tell us if that is the case.

 

 

Randy

 

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mojave

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Reply with quote  #6 

I appreciate the welcome, and I don't want to wear it out by posting what might be redundant stuff (I'll make time over the next few days to really look around), but since we've mentioned Paul Desmond I'd like to offer a couple other things:

 

In the Feb '07 issue of AIQ's Opening Bell newsletter (free, btw, I'll post the link if anybody cares), Desmond discussed his studies of tops (pretty timely). 

 

He demonstrated something I think we generally already understand - namely, that a high percentage of stocks top well before the indices themselves top, or as I say, "bad things rarely happen w/ the McSum above zero" because the AD typically tops well before the indices. 

 

To my point: The 3/24/00 top saw only 3.8% of SP1500 stocks making new highs that day, while nearly 60% of stocks had already corrected at least 20% from their highs.  In contrast, as of 2/20/07, stocks hitting new highs was 17% and still trending higher, while only 8% had corrected at least 20% from their highs.

 

(I'm not sure where we go next, but I do have a smallish QID position.)

 

 

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mortiz

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Reply with quote  #7 

mojave,

 

As long as there are no copright laws violated, I would be interested in reading Desmond's work in the AIQ letter.

 

Thanks

 

Randy

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mojave

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Reply with quote  #8 

Here's the link: http://www.aiqsystems.com/obmsubscribers.htm

 

I'm not an AIQ user, but they've published these free "Opening Bell" newsletters for a while now. 

 

Feb's newsletter was written by Paul Desmond, describing those "typical" market tops ("typically" a clear majority of stocks top well before indices).

 

The Mar newsletter (just out) followed-up showing how to use AIQ to track Desmond's thesis.  Again I don't use AIQ, but enjoy reading the letters.  The data I provided previously simply came from that letter.

 

I've really enjoyed reading the archives; 1/2 way thru '05!

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