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mortiz

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It has now been six months since a rather rare cluster of three NYSE up-down volume ratios greater than 9:1 unfolded within 34 trading days, the events are referred to as Zweig UD volume thrusts.

 

The topic was discussed in a couple of threads when the events began surfacing in June 2006 and refreshers can be found at these links:

 

http://forums.technicalwatch.com/tool/post/fib_1618/vpost?id=1259494

 

http://forums.technicalwatch.com/tool/post/fib_1618/vpost?id=1226364

 

This new thread addressing the Zweig thrust updates was created for quicker reviewing.

 

A quick overview of the criteria used in deriving future index returns as defined by the SPX:

 

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.

 

The following spreadsheet snapshot provides other times since 1950 when clusters of three or more Zweig UD volume thrusts within 34 trading days.  The SPX percentage returns over future time windows are calculated using the SPX price on the day of the third Zweig thrust as the reference point.

 

It has now been about six months since this latest cluster of three Zweig thrusts meeting the criteria and the SPX is up a bit over 13.5% since then (July 2006).  In most cases, the nine-month time frame exhibits the highest returns within one year following a Zweig thrust cluster, thus historical probabilities are on the side of yet more price appreciation.

 

 

As the table suggests, this most recent cluster of three Zweig thrusts has nominally under performed other averaged events since 1960, but the 2006 event has still led to reasonable price gains for those remaining on the long side.

 

A data point on the side of further price appreciation resulting from the July 2006 event, is the NYSE cumulative AD line, which achieved another multi-decade high on Friday, 1-12-07.  Significant price tops (followed by declines exceeding 10%) do not coincide with NYSE AD line new highs.

 

Another trivia data point, is the NYSE daily cumulative ratio adjusted AD line is now within 1400 net raw advances of setting a new all-time high, breaking the all-time high mark of early 1959.

 

FWIW

 

Randy

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