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Monday, February 15, 2016 9:55:22 AM
By Brett Steenbarger, Ph.D.
* February 15, 2016
* We tested the January lows this past week, but--as noted in previous postings--breadth divergences were striking. Specifically, we registered 1226 fresh three-month lows across all exchanges on Thursday and 1353 new lows on Monday. At the January bottom, we saw 2663 stocks make fresh three-month lows. Since that test, we've moved smartly higher on Friday and then again in overnight trading. My short-term trend model is solidly in buy mode and has been since Friday morning.
* An ongoing research project has been assessing market cycles by tracking the performance of all NYSE stocks across a variety of technical indicators. (Raw data from stockcharts.com). The measure below takes a volatility-weighted composite of buy versus sell signals for two technical systems: Bollinger Bands and Parabolic SAR. Note that we closed Friday at levels close to those seen at intermediate-term bottoms and have quite a way to go before we see overbought levels.
* Here is yet another cycle based measure derived from breadth data (Raw data from indexindicators.com). Note that it is in oversold territory, but not at levels seen at most intermediate-term lows and well off overbought levels. If indeed we have seen a successful retest of January lows, I would expect market firmness to take these cycle measures higher.
* I would identify the greatest improvement to my trading as coming from focusing away from trends and directional movement and instead thinking of cycles and the transitions from trending to mean-reverting behavior and back again. A cycle includes phases of upward and downward trending, as well as range behavior near highs and lows. Identifying these transitions--and not getting caught up in any one phase of market behavior--is very helpful to short-term trading.
http://traderfeed.blogspot.com/2016/02/trading-notes-for-week-of-february-15.html
• George.
Click on "In reply to", for Authors past commentaries.
Information posted to this board is not meant to suggest any specific action, but to point out the technical signs that can help our readers make their own specific decisions. Your Due Dilegence is a must!
• gtsourdinis
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