Bulls Ramping Up Price

Written by Ryan Mallory | 01 September 2010

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The bulls are letting if fly today, and ramping this market up as high as it possibly can. I'm pretty confident that despite what CNBC is saying, that markets were going to rally today regardless of whether the news was good or bad. This rally, or at least the strength of it, caught me off guard - to say the least. Some will say that a lot of it is fresh money pouring into the market, being that it is the first of the month or maybe it is just one massive short squeeze - perhaps its a combination of both.

One other action I took that requires a slap on the hand, is not hedging yesterday when we had a nice doji candle on the S&P futures and on the S&P index itself. Such candles of late have seen some sizable rallies. Shame on me for that!

I've also included an S&P daily chart, showing the action today and where we stand in regards to the index as a whole. Right now we are threatening the 50-day moving average, and price has yet to gain enough momentum to push through the barrier. We'll see what the rest of the day gives us.

Here's a Look at the S&P Chart

Update On The T2108

Written by Ryan Mallory | 28 August 2010

Below is a two-year look at the T2108 Oversold/Overbought indicator. We are still in the mid-range just like we were last week. In fact, there hasn't really been much damage to the prices of stocks from the week prior to this past week. The prior week's reading came in at 50.07, while this week's T2108 is at 47.7. So we are still far from being oversold, and could still see much further downside in the days and weeks to come.

The T2108's purpose is to measure the percentage of stocks trading above their 40-day moving average. There is a little more to it that Worden doesn't disclose, but nonetheless, it is a valuable tool for gauging the overbought/oversold conditions of the market at hand.

Here's the T2108 Chart.

NYSE Reversal Indicator

Written by Ryan Mallory | 28 August 2010

Last week has to go down as one of the craziest trading weeks of the year. There was a lot of money gained and lost, and depending on what side of the trade you were on, you either cursed the market or embraced it. If you remained on the sidelines, then you probably were smarter than everyone else! All kidding aside, the market had a lot of opportunities, last week to take advantage of, and while I wasn't fully short on the market last week (on average 55-60% most of the time), I do feel that I did quite well.

However, I was disappointed in the market behavior that we didn't go lower than what we did. In my opinion, the market should have closed the week 30-40 points lower on the S&P than what it did. But give credit to the bulls they fought back against every sell-off to keep the markets from completely plummeting. This was definitely the case on Friday. As a result, I am a bit concerned that the S&P was unable to push below that 1040 on multiple occasions and stay there. So I'll be watching next week for whether the market wants to make a bottom for the time being.

In regards to the NYSE Reversal Indicator below, you can plainly see that the opportunity for further selling is definitely there, whether the bears take advantage of that or not is a mystery. I do believe that they will, as yesterday's rally did very little to change that from a technical perspecitve.

For those of you who are not familiar with this chart, here's quick tutorial...

The Indicator uses the advance/decline ratio with a stochastics overlay. The bottom half of the chart is the weekly candles of the S&P. The chart itself goes back two years. Some folks have criticized me for posting this chart in the past saying that it isn't 100% accurate - but if it was, as some think it must be, then I wouldn't be posting it - I'd save it all for myself and make an ungodly sum of money off of it. But it isn't perfect and there is always a level of error that you can expect from it. But overall, it is fairly accurate, and when the indicator hits certain extremes on the stochastics, it is often a good time to start hedging positions that are going against the direction of the indicators, or start loading up on short or long positions in-line with the direction that the indicator itself is pointing to.

Remember, the extremes are where you are wanting to pay the closest attention to, particularly where the %K & %D lines cross (i.e the red and green lines). This is typically where we begin to see changes in the behavior of the market - not always but quite often enough, to warrant our attention. What this tool is best for, in terms of what I use it for, is market timing and position building. When there is a crossover at one of the extremes that goes against the positions in my portfolio, I, often times, look to take profits in those positions or at least hedge against them

Here is the NYSE Reversal Indicator.