My interpretation of the SPY (S&P500 proxy) chart (see figure 1) is as follows: resistance remains at 86.78, and in the current market climate (i.e., neutral sentiment picture plus short term overbought -see below), this would be the ideal low risk spot to bet against the market on any spike in prices. The November lows were tested last week, and so far they have held.
Figure 1. SPY/ weekly
Figure 2 is a weekly chart of the Dow Jones Industrial ETF proxy, the Diamond Trusts (symbol: DIA). The break of the maroon trend line is bearish and typically such trend line breaks should lead to an acceleration lower in prices. A spike into the trend line at $85 would be the place to bet against the market.
Figure 3 is a weekly chart of the Power Shares QQQQ Trust (symbol: QQQQ). 29.36 to 29.72 is the key resistance that the QQQQ is struggling with.
Figure 4 is a weekly chart of the i-Shares Russell 2000 Index (symbol: IWM). IWM is no man's land as prices remain in the middle of the channel.
Figure 4. IWM/ weekly
Lastly, Figure 5 is a daily bar chart of the PowerShares QQQ Trust (symbol: QQQQ); the indicator in the lower panel is our short term oscillator constructed from breadth and sentiment data. The indicator remains in over bought territory.
Lastly, Figure 5 is a daily bar chart of the PowerShares QQQ Trust (symbol: QQQQ); the indicator in the lower panel is our short term oscillator constructed from breadth and sentiment data. The indicator remains in over bought territory.
Figure 5. QQQQ/ daily
4 comments:
Guy - great oscillator - can you share any of the components?
I will be happy too...we are digging out an ice storm here in the midwest that is a doozy....I will post tonite
The data used in the short term indicator/ oscillator is the following: advance decline, vix, up vol total volume ratio, put call ratio, trin. If it is the QQQQ then I use NASDAQ related data; if it is the SPY then I use NYSE data.
The indicator is short term; with each data point I take a 5 day average; I then look for statistically significant extremes in that value over the last 20 trading days; I then normalize the each value within these bands and then I sum the normalize values; I then apply another set of bands to this value (with a 20 day look back) and normalize again (this is why the value is between 0 and 1).
The reality is that the indicator works like most oscillators -it doesn't tell you when things get more overbought or oversold; it isn't not good at identifying trends. However, divergences between price and the indicator appear to be more predictive
Guy - thanks for the explanation; I'll do some homework this weekend.
By the way - didn't mean to leave the comment as Anonymous, I hate it when folks do that.
Steve FTW
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