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mortiz

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Reply with quote  #1 
Wednesday 7-19-06 posted the third NYSE 9:1 up-to-down volume day over the past 24 trading days, have very little time for analysis other than listing the criteria used for the below table:

1) Three 9:1 up-down volume ratios within 34 trading days (arbitrarily picked Fib number)

2) No down-to-up volume ratios greater than 9:1 within the the cluster of up-down 9:1 ratios.

Nothing else was considered, just the above criteria.  There were more of these events in the 1940s, but do not have time to include them right now.  Needless to say, events meeting the above criteria are rare.  Results since 1960 were more bull friendly than those in the 1950s.





FWIW

Randy
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GarySmith

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Reply with quote  #2 

 

What's that old saying about how this isn't your father's......

 

I don't think following a 9 to 1 day there has ever been as ugly a trading day as today based on the combined internals of the NYSE and NASDAQ markets.

I also have a watch list of around 40 high beta/ former high flyer stocks  and they just got smashed today.  If this keeps up Fib may very well hit that 4 year cycle low on the head next week.

 

 

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mortiz

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Reply with quote  #3 

Gary,

 

Depending upon our respective ages, our father's/grandfather's market was certainly different in the 1930s and 1940s with respect to extremes in internals ratios, it was in those days most all-time ratio records were established.

 

As usual, am pressed for time this morning, but did a quick check of when the NYSE down-to-up volume ratio was greater than 3.0 (as it was yesterday)following a 9:1 up-to-down-volume ratio day as observed on Wednesday, 7-19-06.  The NYSE did not suffer near the carnage as the NASDAQ yesterday, but applying the above filter to the NYSE since 1950, a down-to-up volume ratio greater than 3.0 following a up-down ratio greater than 9 is rather rare, four total events prior to the current one:

 

1) June 1950

2) November 1958

3) October 1987

4) August 1998

5) July 2006

 

I don't have time to analyze the price results of those five events over the following days/months, but perhaps those with access to longer term price data can fill in the blanks.

 

One characteristic not addressed in the original comments concerning three 9:1 up-to-down volume days within a 34 day time window with no intervening 9:1 down-to-up volume days, was the concentration of the Zweig momentum thrusts:

 

1) 1962: the signals were in a 12 day window

2) 1975: dispersed over 25 trading days

3) 1984: Three consecutive days

4) 1987: 29 trading days, with the final two on consecutive days

 

One could conclude, the current volume plurality configuration fits best with 1975 (dispersion of the thrust signals over several weeks) and 1987 events (time dispersion as well as a significant negative plurality following a 9:1 day).

 

Anyway, we are getting some great volatility to keep the day traders busy, but I have been leaning towards Fib's cycle low scenario (9-month, possibly 4-year) for a few weeks now.  There is a lot of evidence one or both of those cycles are forming.

 

FWIW

 

Randy

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GarySmith

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Reply with quote  #4 

 

Thanks Mortiz, as usual, great work.  You must have some data base at your disposal.  Actually, my reference to this not being your father's market was more about how this market is not like the 80s and 90s as upside "follow-through" is a foreign concept to this market of 06.  I can't recall  a market with such a lack of follow-through.  That's fine since before we get any type of significant bottom we need to condition traders sentiment-wise not to expect follow-through.

 

I realize sentiment has become a controversial trading tool in the trading community in recent years but at least for those who use it I believe they have overlooked the subjective art of forum groupthink.  It's as if there has become a herd of black and white sentiment mavens who fall all over themselves in the analysis of sentiment indicators and in effect become part of the sentiment equation themselves by their uniformity in being either bullish or bearish. 

 

So far at least today, another real ugly one where all the former leaders are just getting shot to pieces and whre the indexes don't tell the whole story of this carnage.  And how about those Transports?

 

Not much into cycle analysis but again Fib could hit this one on the head.  I would assume he could be off by one or two days yet still be pretty prescient if next week is some sort of major cycle low.  I still would like to see even more of a wash out in trader sentiment and the unwillingness to chase the next rally.  But who knows, maybe more days like yesterday and today could do the trick?

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fib_1618

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Reply with quote  #5 

Though no exact dates were given, a little research shows:


1) June 1950 - North Korea invades South Korea...US gets involved on 6/25


2) November 1958 - Nothing of special note that I could find, but NASA sent up its first rocket the month before during the Space Race, and the Cold War was going into its peak - and - it was a 4 year cycle bottom year.


3) October 1987 - The "Crash" on 10/19 - Which included blockades in the Persian Gulf region and daily US clashes with Iranian Fighters among other things


4) August 1998 - Iraq kicks out the UN; Multiple US Embassy Bombings; Russian Currency Crisis; US Cruise Missile Attacks on Al-Qaeda on 8/20


5) July 2006 - World War Scrimmage Between Israel and Hezbollah - July 12


Quote:
I still would like to see even more of a wash out in trader sentiment and the unwillingness to chase the next rally....and how about those Transports?

And so it begins?


Fib





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traderpaul

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Reply with quote  #6 
One cannot compare the figures with the ole days.....Back in the seventies the commission was about $100 for 100 shares, $1000 for 1000 shares.....Which made day trading/short term trading impossible.....Now you have day trading where you can trade the same stock four times a day and the commission is less than $10 for 1000 shares.....also they did not have program trading back in those days.....Are we comparing apples to oranges?....
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mortiz

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Reply with quote  #7 

Dave,

 

Thanks for the historical perspective of the news coinciding with Zweig volume momentum thrusts followed by a significant down volume day.  Here are the actual dates of the events:

 

1) 6-29-1950

2) 11-18-1950 (and 11-19-1950)

3) 10-22-1987

4) 9-9-1998 (and 9-10-1998)

5) 7-20-2006 (and 7-21-2006)

 

More on the consecutive multiple down-to-up volume plurality days following a Zweig thrust signal later.

 

Gary: your comments on the lack of follow through following a Zweig thrust day will be addressed in further detail.

 

My comments on this topic are likely beginning to get boring, but the action on the NYSE Friday, 7-21-06, added a little more flavor to Zweig momentum thrust volume events with the NYSE posting its second consecutive day of down-to-up volume ratios greater than 3:1 following a Zweig thrust signal.  Friday's NYSE down-to-up volume ratio was 3.66 following Thursday's 3.04 negative volume plurality.

 

Following a Zweig thrust event, two consecutive days of negative volume pluralities is a very rare event, occurring only two other times in the past 56 years, in November 1957 and September 1998 (dates given above).

 

To "fill in the blanks" of significant negative volume plurality days following a Zweig thrust day, the below table summarizes four prior times over the past 56 years when this phenomena unfolded.  On average, the month following these Zweig thrust-then-down-volume day event do not bode well for the market.

 

However, note the differences in average SPX price gains going forward when a Zweig thrust day is followed by two consecutive negative volume plurality days versus a single negative volume plurality day.  Due to the very small sample space of these events, their statistical significance could rightfully be questioned by the purists, but the aftermath of these events are nonetheless rather consistent.

 

With the limited sample space, it difficult to derive any definitive conclusions, but there seems to be a tendency for prices to still be struggling a month after the Zweig thrust, then negative volume plurality events. But looking down the road, the market tends to reward the bulls who act upon these signals.

 

 

To visually illustrate the price action following a Zweig volume thrust event followed by two consecutive days of negative volume pluralities greater than 3.0, is a chart from the 1950s showing the aftermath of the single negative volume day following the Zweig thrust (1950) as well as the two consecutive days of negative plurality in 1957.

 

 

Next is the September 1998 Zweig thrust event followed by two consecutive days of significant negative volume plurality.  Note the early September 1998 price low was tested about a month later in early October 1998.

 

This expansion upon the Zweig thrust indicator with associated negative volume plurality days could prove to be useless and pointless knowledge, but I found the price outcomes going forward to be somewhat consistent, despite the very limited sample space.

 

FWIW

 

Randy

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mortiz

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Reply with quote  #8 

Paul,

 

You always manage to come up with some reason that invalidates any historical precedent that may not fit your current position... in the fullness of time we will determine if action in the 21st century compared to historical events are worthless or not.

 

$1000 commission for 1000 shares?  Can you provide evidence of that??? I didn't begin trading stocks until the early 1980s (mutual funds for me until then) and I know commissions weren't even close to a $1 a share in the 1980s. I don't recall the actual costs of hundred lots of stock, but it wasn't $1 per share.

 

Thanks for your feedback.

 

Randy

 

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traderpaul

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Reply with quote  #9 
If I have commission slips to proof it.....Would you pay me the difference?.....The actual was $110 for 100 shares, $220 for 200 shares.....Those were before Charles Schwab days......He started the discount brokerage

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traderpaul

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Reply with quote  #10 
BTW those were the seventies, some forty years ago......My fist car was a Pinto.....A fill up was $4.....Now the same fill up (using the same tank capacity) $31.....Min wage was $1.25 per hour....
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mortiz

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Reply with quote  #11 

Paul,

 

In the late 60s I had a muscle car that guzzled gas like nothing does today... glad I was into those cars then and not now.

 

When I got home from day job weekend work, I had a mail awaiting me from a retired acquaintance (who is lurker on a few boards) who began trading/investing in the 50s, and he confirmed commissions as high as $1 or more per share were possible in those days dependent upon the account size.  He recalled there was a "negotiable" 0.1% charge on the value of the trade plus a variable flat fee that could be as high as $40, although I suspect this gentleman's account was larger than average, so he may have enjoyed more preferred rates than the average "bear".

 

Back to the point of this thread, one truth that hasn't changed, ever, is collective human nature that includes fear, greed, and hope.  Combine human nature with the concept of liquidity, and the willingness of available liquidity to be risked in security positions, one has the basic ingredients that make markets the greatest show on earth.

 

We can agree to disagree, but regardless of commission sizes, day trading (which adds to the liquidity ingredient), program trading, or astrology, history, on average, tends to repeat itself as a result of human nature and the availability/willingness of liquidity to be risked in markets.  At least for my feeble mind, it will take a lot more than the size of commissions paid 30, 40, 50, or 60 years ago to convince me, in the long run, markets movements are that much fundamentally different today.

 

Human nature and the liquidity concepts do not change, IMHO... and I've heard the computer based program trading argument for the human nature component, but how does one discount the liquidity component? 

 

FWIW

 

Randy

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jmicou

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Reply with quote  #12 
Randy,

Given that you are using ratios, would this not help in giving an apples-to-apples analysis over time and size?

One ratio that may be of interest, would be a total market up volume to total market down volume ratio analysis. I assume you have more than enough to deal with now.

Thank you for your work.

As a side note, the charts just don't look bullish right now. Hmmm.Maybe we just need more buyers than sellers on a more frequent basis.

regards,

Johnny

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GarySmith

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Reply with quote  #13 

 

 

Mortiz, nice work as usual.  I may go back to your other thread and look at the various signals since 1963 and overlay those with sentiment such as Investors Intelligence.  My complaint remains that in spite of the carnage recently, investors and advisors remain too complacent, much more complacent than after past 9 to 1 signals which have usually occurred after a period of declining prices similar to the present.  However, ***I don't want to get too rigid in that viewpoint***  because other than sentiment, I see all the ingredients here for an explosive move higher.  If I had my druthers though,  the market would languish here for months as the fundamentals deteriorate or more preferably,  continue its present decline at a more accelerated rate while the public becomes totally disenchanted which thereby sets us up for an even more explosive move up.  Recent past major moves up ala summer 82, late 87, late 90, early 95, late 98,  late 99, and early 03 have occurred during backdrops of a heck of a lot more investor fear than I  am seeing now.  About the only big move up in recent times that I can recall that wasn't accompanied by some type of investor fear came  in late 86/early 87 and that was eventually undone by the crash in October 87.

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mortiz

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Reply with quote  #14 

A near miss today (7-24-06) for another 9:1 UD volume ratio on the NYSE.  If integer rounding would be used, the 9:1 ratio would have been achieved, the fourth since mid-June, and the fifth since April.

 

 

Composite UD Volume Ratio: 8.74 : 1

Composite $UD Volume Ratio: 10.35 : 1 ($ weighted UD volume ratio)

 

Common Only UD Volume Ratio: 9.3 : 1 (the commons made it)

Common Only $UD Volume Ratio: 10.8 : 1

 

Maybe the near miss will result in a follow through for a change?

 

FWIW

 

Randy

 

 

 

 

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mortiz

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Reply with quote  #15 

As of Friday (10-13-06), we are about three days short of 3 months elapsing since the rare "three Zweig thrust signals" fitting the following criteria:

 

1) Three 9:1 up-down volume ratios within 34 trading days (arbitrarily picked Fib number)

 

2) No down-to-up volume ratios greater than 9:1 within the the cluster of up-down 9:1 ratios.

 

Thought it would be of interest to check how the SPX has performed since last summer's cluster of Zweig thrust signals. The below table is an update of the original one at the beginning of this thread.  In large red fonts, the 15 day, one month, and three month later SPX returns are listed in the 7-19-06 row.

 

 

Of the five triple Zweig thrust events since 1960, the returns since the July, 2006 event, are more muted than average.  If all of the "triple Zweig thrust" clusters since 1950 are considered, then this most recent thrust cluster has performed on-balance, above average.

 

Will try to remember an update for the six month SPX returns in January, 2007.

 

FWIW

 

Randy

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GarySmith

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Reply with quote  #16 

 

Thanks Randy, and in all cases but one it looks like we will have more of the same (up and away) over the next three months.  I'm hoping we will have yet another another rare Zweig momentum indicator kick in sometime and that's his ten-day advance/decline ratio greater than 2 to 1.  I believe this decade it has only triggered once, in June 2003, and that too prove quite profitable.

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mortiz

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Reply with quote  #17 

Gary,

 

You have a tendency to arouse my curiosity (the 10 day MA of advance-decline ratios greater than 2.0).  I did a quick test of how many days since 1926 the NYSE A-D ratio 10 day MA was greater than 2, and there have been 1700 days, of 21,500 possibilities, where the 10 day A-D ratio was greater than 2.0.

 

Many of those 1700 days came in clusters.  I will look into this more closely later, but here is a breakdown of the 10-day MA ratios greater than 2.0 since 1970, keep in mind many of these were multi-day clusters counted as a single event:

 

1970s: 15 events

 

1980s: 11 events

 

1990s: 3 events

 

2000s: (and counting): 3 events

 

The events thus far in this decade were 6-5-2003 (good memory), 4 days between 5-27-04 and 6-7-04 (following the sharp spring 2004 sell-off);

 

and a three day cluster between 7-28-06 and 8-1-06..... hmmmm.

 

This phenomena will have to be looked into further.....

 

Thanks for the feedback Gary.

 

FWIW

 

Randy

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GarySmith

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Reply with quote  #18 

 

Randy, not sure we are on the same page here and don't want you to do a lot of unnecessary work until we can clear this up.  You came up with many, many more than Zweig did in his book. There he listed only 10 cases between 1953 and 1988.  All 10 signals were profitable after 6 months with an average 15.6% gain. However he did say there were a few repeats which he didn't include which came a month or two after the original signal.  But he implied there weren't all that many of these.  And I know there was only one this decade in June 03.  I looked at my data from Barron's in the May 04 period you refer to and the best 10 day stretch I could find was from Tuesday May 18 through Tuesday June 1. (Monday May 31 was a market holiday)  There I found 21342 advances and 11569 declines so not greater than 2 to 1.  This was NYSE Composite daily breath but NYSE common breath still wasn't 2 to 1. After over 20 years of saving data from Barron's I quit earlier this year and don't have the most recent you refer to but pretty sure there were no 10 day stretches where the total advances were 2 to 1 greater.  PM me if necessary if you think we should discuss this.  Maybe these signals aren't as relevant anymore since after all, this market definitely has been in a big bull phase recently with super breath.  The only reason I mention this Zweig momentum indicator is it would just be confirmation we are still in the early phases of this current move as opposed to the later innings.

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mortiz

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Reply with quote  #19 

Gary,

 

As you are aware from our off-line discussions, there was a misunderstanding in the approach for the Zweig AD momentum indicator.  I used a 10 day MA of daily advance-decline ratios, while Marty's indicator is the ratio of a 10 day moving sum of the advances and a 10 day moving sum of the declines, which is a far better way of measuring unusual breadth momentum.

 

Courtesy of Gary's digging through Marty's book, here are the dates since 1953 through 1988 when a ratio of the A-D 10 day moving sums exceeded 2.0:

 

1/26/54

1/24/58

7/11/62

1/16/67

12/4/70

1/10/75

1/6/76

8/23/82

1/23/85

1/14/87

 

Since Marty's book was published, there has been one additional event when the 10 day moving sum ratio of advances and declines exceeded 2.0, and that was 2-5-91. No AD momentum signals have been generated since the 1991 event.

 

I checked back further in time, and these events were far more common in the 1930s (16 events) and 1940s (21 events).  There was also Zweig AD momentum qualifier on 11-20-51.

 

With all of the AD momentum qualifiers in the 1940s and 1950s, it is no wonder the all time high in the ratio-adjust cumulative AD line was set in the late 1950s.

 

FWIW

 

Randy

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mortiz

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Reply with quote  #20 
We are one day short of nine months since the three Zweig up-down (UD) volume initiation thrusts (UD volume ratio greater than 9:1), so time for a price returns update.  Since it is unlikely time will allow an update on Monday, 4-16-07, this update is based upon the closing SPX price Friday, 4-13-07.  If there is a significant price move one way or the other Monday, a revision for the nine-month line in the sand will be posted later.  The criteria for these events are laid out earlier in this thread.

As of Friday, April 13, 2007, the SPX has gained 15.32% since the day of the third UD volume ratio greater than 9:1 within a 34 day period (in July 2006).  The most recent event gain is right in between the average 9-month gains since 1950 and since 1960.  Not an outstanding return, but not too bad either.



Since the Zweig UD volume initiation thrusts in 2006, there have been two more in 2007 thus far.  Using rounding factors (over 8.6 Up-to-Down volume plurality) for qualifying Zweig thrust events, the 2007 9:1 up-down volume days now sum up to seven such events over the past 250 trading days (one of the days was slightly under 9:1).

Looking back to 1950 for other 250 day time frames containing seven or more 9:1 up-down volume ratio days, this phenomena is also rare.  Here is list of other time frames since 1950 where at least seven Zweig volume trusts have occurred within a 250 trading day window:

1950
1955 through 1957 (overlapping time frames)
1959
1982-83 (overlapping time frames)
1984
1988
2007

Time is short for me today (nice weather for a change), so cannot collate price returns following clusters of seven or more Zweig volume thrust events within a 250 day window, but those with access to price charts going back to 1950 can likely get a picture of price performance following those time frames.

FWIW

Randy
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