Hoop, recent breaches of the EMA50 having been decent buying opportunities. Why not this time? What are the other 3 indicators?
What confirmations would you look at to go long again?
Always appreciate you input, noodles.
Hi Noodles..
Last question first..confirmations to long ..the usual charted stuff + TA indicators....My sentiment indicator is built for one purpose ...to reliably forecast corrections...It does not and not designed to forecast recovery..
The sentiment indicator is not really mine..A dude who's name escapes me for the moment wrote an article on Seeking Alpha back in 2011 about some sentiment indicators having an excellent record at forecasting weaknesses. He mentioned the percentage of companies on the indexes e.g S&P500 with MA200 below their priceline (bulls) and those with MA200 above their pricelines (bears)..the forever changing state of flux conditions (changing uncertainty) was deemed by the Author as a way to measure investor sentiment. The easiest way to measure a charted history of investor sentiment is applying relevant TA indicators ..
After reading that article I surfed the net studied many (50ish in number) sentiment indicators, trialed a few, and narrowed it down to one which by coincidence happened to be one of the most simplest there were...Just goes to show..KISS works the best ..huh?........With this one I started 30 months ago trialing it with the S&P500 on ST under this thread for all to see how it resulted... I have tweaked the indicators a little bit and made it more sensitive using EMA rather than MA..
So far the indicator has not failed...Actual fact its success is its failing. It picks up corrections (sometimes days before they actually happen) that can turn out to be very shallow. During the last stage of the bull cycle most corrections are very shallow..This to many investors it may see it as a cry wolf indicator.. but this is a common problem with most TA indicators during the last stages of a cycle as they trigger an event that quickly peters out due to investor irrationality (increasing greed [complacency] or fear [panic])..This perceived "cry wolf failure" is a mirage...but it does convince many to change their thinking into presuming that it is now a new world order and that it is all different this time..(or so my kids keep telling me)....
Us old timers know that when this "Its all different now" scenario is operating, you don't throw away all the old tried and true TA indicators you abide by them even more, as the cycle is in its last rites, the only problem is the timing of when it will happen as the Mr Market stays irrational longer than we all think....
The newer investors and some old hands always say they will exit when the cycle turns or get out close to the top....but when the time comes they don't!! because they have learn't to ignore the obvious...We all know this cycle looks toppy..and a "normal" correction is due to happen but after a series of cry wolf and continuous steep upward climb without a decent correction for 34 months now, no one is willing to leave the market in fear of missing out...it is in these types of scenarios when the next warning does arrive it will ignored..Even if some don't ignore, that fear of missing out will tempt them to dip buy during the correction as they assume its still party time..When the correction or reversal keeps happening, the rosy glasses are put on, denial sets in and the excuses flow out.
Noodles...This breed of Sentiment indicator posted here is made up of 2 charts the NYA200r using 3 TA indicators (KST know sure thing ROC rate of change and EMA50) and the SPX using just the EMA50.. Have a look at yesterdays post#1629 those 2 charts is it......the vertical dotted lines are the previous times the indicator has triggered all 4 and triggered a correction warning..There's been 4 and now 5 counting todays... if still interested to see how well it works, go back and reread the posts on this thread This indicator I have posted has been trialed on this thread for 2.5 years now and the indicator has proven its self as reliable... so when I get time and learn how to automatically colour code a chart program I will probably just produce one simple chart similar to that of P's MSI chart
Is today's warning going to show another unhealthy shallow correction as been the case for 34 months now...or is it going to be a normal 10-15% type ....or a cyclic reversal?
Hoop, do you have an advance/decline chart for the us markets
Would say an increasing number of stocks going down?
Ummm...Of the top of my head I would yes there is an increasing number of stocks going down (started beginning of July before the records started toppling)..The volume figures forcing up the overall number of company's prices to that high point (late June, early July) would be interesting too..I don't think the volume was that flash..
I will look in amongst my digital junk to see if I can find anything of relevance..Winner
PS..
Winner you didn't paste the chart of the Day (30th July).......Using historical odds...August doesn't look great ..eh?
<a href="http://www.chartoftheday.com/">Chart of the Day</a>
Is today's warning going to show another unhealthy shallow correction as been the case for 34 months now...or is it going to be a normal 10-15% type ....or a cyclic reversal?
Thanks for the detailed response.
Of course no one can predict what the outcome of the current correction will be. It is really just down to probabilities. Assuming we are still in a secular bear, I think we can start to guess some probabilities.
Scenario.1 We have already seen the high on the S&P500 for the next 2-3 years. Expect a long painful pe contraction for the next 18 months. Probability 15%
Scenario.2 10-15% correction. A bit of a shake out and pain for 3 month before a new high in late 2014. Probability 35%
Scenario.3 A shallow 5% correction at most. The market reaches 2000 before October. Probability 50%
You can easily profit from your conviction by shorting the S&P500. For me that is a much better option than exiting the market completely.
On the NZX, it is the larger companies that have been most affected by the recent bout of nervousness. Think FBU, AIR, and SKT. There has been no fundamental reason to justify these declines. I suspect it is overseas funds bringing their money home. The smaller end of the NZX50 has remained relatively unscathed.
Originally Posted by noodles
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.....Using historical odds...August doesn't look great ..eh? 
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