Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market, What's Next? Another Leg Down, or Rally?

Stock-Markets / US Stock Markets Jan 23, 2009 - 05:39 PM GMT

By: Marty_Chenard

Stock-Markets

Best Financial Markets Analysis ArticleMost investors only look at what is happening to the "Broad Market".  

For instance, tracking the action of an index such as the S&P or the NASDAQ is an observation of broad-market action because you are looking at the composite action of all the  stocks within each index.


But, within an index there are many things stirring around ... not seen by the average investor. 

Let's create 4 categories of stocks for any index based on Relative Strength. 

Those categories will be:

1.  Very Strong Stocks
2.  Very Weak Stocks
3.  Strong Stocks, and ...
4.  Weak Stocks.

The key distinction for these categories is the " Very " Strong/Weak categories because they measure what is happening on the "extreme ends" of a "universe of stocks".   What's in the middle behaves as the "average behaviour" of the group. 

How can you predict the future change of "an average" if you are measuring the "change of the average" itself.   In observing a "change", are you not really observing a change that was induced by another "element or subset" within the original group?

A better question is, "What moves the average of a group in a different direction?"

Is it not the change of the leaders within the group?

Imagine that you have a rope pulling contest with 50 men on each side.  There are 4 groups of men on each side.  The Strong and Weak men offset each other.   So there are only the Very Strong and Very Weak men left to make the difference in deciding which side has the advantage ... and which side will win.

All it would take for all 50 men on one side to lose the battle, is for the other side to have 1 more Very Strong man than the other side. 

So why not measure the change of balance of the Very Strong vs. Very Weak stocks on an index to see how the average will end up changing? 

So that is what we will look at today ...

Everyday, we measure the trend of how many stocks are reaching Very Strong or Very Weak status on a daily basis.   Then, to see which group has the upper hand, we measure the Difference between them.   To get the difference, we divide how many Very Strongs there are relative to how many Very Weaks there are ... so we subtract the Very Weaks from the Very Strongs and post that number and call that number the Net Daily Difference in the chart below.

How to read the chart: 
1.  When the number is Positive, there are more Very Strong Leaders than Very Weak Stocks. 
2.  When the number is Negative, there are more Very Weak Stocks than Very Strong Stocks.

Also, take the trend direction into consideration.  If the indicator is in Negative territory but moving up on higher/highs and higher/lows than that up trending will have a positive bias on the S&P.

So, below is the data going back to last March.  Observe what happened to the S&P when the Lead/Lag Indicatory was positive.  Observe what happened to the S&P when the Lead/Lag Indicator was Negative ... BUT trending higher toward positive territory.  The observe the opposite conditions.

Two things should be apparent ... that a Positive or Negative status is important, and that the directional trend is important.

Okay ... so, where are we now?

Not a simple answer, is it?  

We have two short term negative conditions, but one longer term positive condition. 

*** Bias is short term negative, but longer term, the Major Support is still holding.   As long as the Major Support holds, the market will avert taking another downside leg.

What's ahead ... another leg down, or a possible Rally?

Remember that an up trend is defined as a condition where higher/highs and higher/lows are being made.  Now look at numbers 1 to 4 in the boxed in areas.

They fit the definition of an up trend.  If the current box with a question mark holds and moves up, it will become a higher/low and the trend will continue with the added advantage of the Lead/Lag indicator being in positive territory by that time.

So, that is what is happening behind the noise in the stock market .   Unknown and unseen by most investors, there is a basing foundation trying to be established that has positive implications just down the road ... if this indicator can continue on its journey of making higher/highs and higher/lows.

[Today's chart is posted as a courtesy.  It is posted daily on our paid subscriber site and out of fairness to our paid members, we will only post this chart occasionally on this free site.]

*** Feel free to share this page with others by using the "Send this Page to a Friend" link below.

Send This Page To a Friend

By Marty Chenard
http://www.stocktiming.com/

Please Note: We do not issue Buy or Sell timing recommendations on these Free daily update pages . I hope you understand, that in fairness, our Buy/Sell recommendations and advanced market Models are only available to our paid subscribers on a password required basis. Membership information

Marty Chenard is the Author and Teacher of two Seminar Courses on "Advanced Technical Analysis Investing", Mr. Chenard has been investing for over 30 years. In 2001 when the NASDAQ dropped 24.5%, his personal investment performance for the year was a gain of 57.428%. He is an Advanced Stock Market Technical Analyst that has developed his own proprietary analytical tools.  As a result, he was out of the market two weeks before the 1987 Crash in the most recent Bear Market he faxed his Members in March 2000 telling them all to SELL.  He is an advanced technical analyst and not an investment advisor, nor a securities broker.

Marty Chenard Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in