Post by G on Aug 23, 2008 17:51:46 GMT -5
I've been meaning to do this for awhile. I know my site is mainly about comics, but I feel speculating in comics is kind of like the stock market too. And I get attracted to both kinds of speculation. I probably would have never paid attention to stocks if I had never been involved in comics. Anyway...
IBD which is something I have a subscription to has an article everyday called "The Big Picture" and it gives you a run down on what happened the previous day. I try and read that every day. But there is also a small box on it called "The Market Pulse". This is sort of a Directional Flag. It will tell you quickly at a glance which way the market is or has been heading.
Well, it might be simple enough to just look at a chart and see if it is going up or down. But, that would not be too worthy of an asset on what happens now. You need to know when is a good time to get in and when is a good time to get out....
The way it works is like this...if the market is tanking (going down), it is known as a "Correction" and the Pulse looks for "Rally attempts". A Rally attempt is the first day the market moves up after a down period. But a rally is not made in one day. I don't care if the market jumps 500 points in 1 day, its still not considered a rally. A rally is not a rally until you get what is known as a follow through day or a confirmation day. This has to happen between the 4th and 10th day after the 1st day of the rally attempt. If on the 4th day or later the market goes up at least 1.6% with higher than the previous day's volume. It is considered a follow through and a new market rally has begun. This is usually when the most money is made the quickest. In those 1st few weeks when the market rally is confirmed. The leaders of the rally often make huge jumps. And generally good stocks in general also perform very well.
How does one know if a rally attempt fails? 2 ways...if any of the following 10 days goes lower than the 1st day. (Say for example the market is at 11,200 on rally attempt day one. Goes up to say 11,270 by day #3, but on day #4 falls down to 11,980. That undercut where the rally tried to begin. And thus the rally attempt is over. Also if there is no confirmation or follow through by day #10, you simply find the next up day in the market and call that rally attempt day #1 again and start the process over.
Once the market is in a confirmed rally. Its buying season! If you have a few you've kept you eye on that look good, now is the time to get in! But once the rally is underway, how do you know when the end is near? The key sign to look for is what is known as distribution days. A distribution is any down day with volume higher than the previous day. Higher volume on a down day is a sign the institutions (the big money like banks) are selling out. They tend not to do it all at once. So the market begins counting distribution days as a sign that the market is topping. Generally about 4-6 distribution days in about a 5 week period is a troubling sign that the market is topping and heading for a downward trend. Eventually with enough distribution days IBD will finally say the market is in a correction. That's usually time to get your money out and wait on the sidelines for the next follow through day.
Why am I saying this? Well, since I have been watching, they have been right every time! When the market was flashing a lot of distribution in November, I took my money out and waited out the Correction and I was damn glad I did. Around March, the Rally was finally in place and I was back in. But then I got lazy and around May the market was flashing distribution quite often. Eventually IBD said the market was back in a Correction. I yawned and did nothing and I proceeded to lose a good amount of my money over the next few months. I vowed to try and pay better attention in the future because I knew what it was saying and I paid no attention to it.
So...Where are we now? Well, on July 29th, the IBD Market Pulse went into "Confirmed Rally" and for a few weeks we raced upwards. There has been a distribution day here and there. Finally earlier this week IBD changed the Pulse from "Confirmed Rally" to "Market Under Pressure". Generally meaning another distribution day or 2 and we will be in a full blown correction. Luckily we ended the week with some up days. Its currently like driving under caution. It doesnt mean its time to panic. Because if the market has a couple of weeks without a distribution day, the worry of topping begins to subside. But if we have another 1 or 2 distribution days in the next week or two, the signs should indicate the Rally is over.
This is why I created this thread. Going forward, for myself (as reference) and anyone else who might care, I will try and make this the Market Pulse thread. The pulse doesnt change daily. Sometimes it might not change for weeks. The idea here is when it does change...post it! So that is what I will attempt to do with this thread. Each time it changes, I will update, I will not post nearly as much as this post. I just needed some kind of back ground to start off with to get at what Im trying to do or say here. From now on, the updates will be much smaller when they come. So, now is as good a time as any to start.
Current Pulse: Market went into Confirmed Rally on July 29th
4 distribution days since July 29th for the S&P 500 but only 1 for the Dow and the NYSE.
As of earlier this week, current Pulse:
Market Rally is Under Pressure
IBD which is something I have a subscription to has an article everyday called "The Big Picture" and it gives you a run down on what happened the previous day. I try and read that every day. But there is also a small box on it called "The Market Pulse". This is sort of a Directional Flag. It will tell you quickly at a glance which way the market is or has been heading.
Well, it might be simple enough to just look at a chart and see if it is going up or down. But, that would not be too worthy of an asset on what happens now. You need to know when is a good time to get in and when is a good time to get out....
The way it works is like this...if the market is tanking (going down), it is known as a "Correction" and the Pulse looks for "Rally attempts". A Rally attempt is the first day the market moves up after a down period. But a rally is not made in one day. I don't care if the market jumps 500 points in 1 day, its still not considered a rally. A rally is not a rally until you get what is known as a follow through day or a confirmation day. This has to happen between the 4th and 10th day after the 1st day of the rally attempt. If on the 4th day or later the market goes up at least 1.6% with higher than the previous day's volume. It is considered a follow through and a new market rally has begun. This is usually when the most money is made the quickest. In those 1st few weeks when the market rally is confirmed. The leaders of the rally often make huge jumps. And generally good stocks in general also perform very well.
How does one know if a rally attempt fails? 2 ways...if any of the following 10 days goes lower than the 1st day. (Say for example the market is at 11,200 on rally attempt day one. Goes up to say 11,270 by day #3, but on day #4 falls down to 11,980. That undercut where the rally tried to begin. And thus the rally attempt is over. Also if there is no confirmation or follow through by day #10, you simply find the next up day in the market and call that rally attempt day #1 again and start the process over.
Once the market is in a confirmed rally. Its buying season! If you have a few you've kept you eye on that look good, now is the time to get in! But once the rally is underway, how do you know when the end is near? The key sign to look for is what is known as distribution days. A distribution is any down day with volume higher than the previous day. Higher volume on a down day is a sign the institutions (the big money like banks) are selling out. They tend not to do it all at once. So the market begins counting distribution days as a sign that the market is topping. Generally about 4-6 distribution days in about a 5 week period is a troubling sign that the market is topping and heading for a downward trend. Eventually with enough distribution days IBD will finally say the market is in a correction. That's usually time to get your money out and wait on the sidelines for the next follow through day.
Why am I saying this? Well, since I have been watching, they have been right every time! When the market was flashing a lot of distribution in November, I took my money out and waited out the Correction and I was damn glad I did. Around March, the Rally was finally in place and I was back in. But then I got lazy and around May the market was flashing distribution quite often. Eventually IBD said the market was back in a Correction. I yawned and did nothing and I proceeded to lose a good amount of my money over the next few months. I vowed to try and pay better attention in the future because I knew what it was saying and I paid no attention to it.
So...Where are we now? Well, on July 29th, the IBD Market Pulse went into "Confirmed Rally" and for a few weeks we raced upwards. There has been a distribution day here and there. Finally earlier this week IBD changed the Pulse from "Confirmed Rally" to "Market Under Pressure". Generally meaning another distribution day or 2 and we will be in a full blown correction. Luckily we ended the week with some up days. Its currently like driving under caution. It doesnt mean its time to panic. Because if the market has a couple of weeks without a distribution day, the worry of topping begins to subside. But if we have another 1 or 2 distribution days in the next week or two, the signs should indicate the Rally is over.
This is why I created this thread. Going forward, for myself (as reference) and anyone else who might care, I will try and make this the Market Pulse thread. The pulse doesnt change daily. Sometimes it might not change for weeks. The idea here is when it does change...post it! So that is what I will attempt to do with this thread. Each time it changes, I will update, I will not post nearly as much as this post. I just needed some kind of back ground to start off with to get at what Im trying to do or say here. From now on, the updates will be much smaller when they come. So, now is as good a time as any to start.
Current Pulse: Market went into Confirmed Rally on July 29th
4 distribution days since July 29th for the S&P 500 but only 1 for the Dow and the NYSE.
As of earlier this week, current Pulse:
Market Rally is Under Pressure