Saturday, July 09, 2005 9:44:22 AM
OTC BB As a Market Indicator
FinancialAdvisor- Looking at that table, I just realized that I left out the Total Issues for 7/6/2005. Thanks for pasting that table again with your message. Actually, thanks for getting me interested in looking into the OTC BB market. Trading between commodities, options, bonds, and equities, I’ve never really paid much attention to the OTC BB segment until you brought up the question about its correlation with the rest of the market.
Here’s the improved version of that same TRIN table.
As I had mentioned in After the Market on 7/5/2005, both AMEX & OTC were way overbought. And then the correction came swiftly the very next day. OTC TRIN Index rose to the opposite oversold extreme of 1.95. You can tell from the contrast of the volume data between 7/5 and 7/6. By the way, TRIN is a non-trending index. It doesn’t stay range bound for long. When it reaches the extreme low or high, the next move tends to run all the way to the other side.
In any case, OTC has been improving steadily since. If this trend continues, OTC could go up further. For the time being, I would consider OTC to be in a bullish mode. And, this chart that I found on one of the BB websites confirmed that. Both the volume and the “Pulse Index” were above their respective 10-day SMA. This chart was updated through Thursday, but we know that Friday’s action had further improved the technical picture.
So, now we have OTC BB standing alone on the oversold side while AMEX continued to stay in the “overbought” territory, NASDAQ was getting close to the extreme overbought area due to its big surge on Friday, and NYSE took another step towards the overbought territory. What does this tell us?
I’d look at OTC traders as the options traders except that the options traders use more hedging strategies than the OTC traders. And, as I’ve mentioned before, option traders (including yours truly) are not necessarily smarter than other traders. They’re just faster traders simply due to the high risk associated with the financial leverage used in the option trading.
(To be revised)...Hence, let’s assume that we can use OTC TRIN reading as a contrarian indicator. When everyone’s selling OTC shares, then it’d be the time to buy them....(If I couldn't get the revision of this paragraph in time, I'd post a new message as a supplement.)
As for the parabolic surge on Friday, my technical analysis indicated that as more of a secondary reaction than the norm. For that reason, I would not be surprised if the market reverts back to the range bound status next week.
Have a nice weekend, FA. By the way, do you at least have a first name that we can use? Thanks.
FinancialAdvisor- Looking at that table, I just realized that I left out the Total Issues for 7/6/2005. Thanks for pasting that table again with your message. Actually, thanks for getting me interested in looking into the OTC BB market. Trading between commodities, options, bonds, and equities, I’ve never really paid much attention to the OTC BB segment until you brought up the question about its correlation with the rest of the market.
Here’s the improved version of that same TRIN table.
As I had mentioned in After the Market on 7/5/2005, both AMEX & OTC were way overbought. And then the correction came swiftly the very next day. OTC TRIN Index rose to the opposite oversold extreme of 1.95. You can tell from the contrast of the volume data between 7/5 and 7/6. By the way, TRIN is a non-trending index. It doesn’t stay range bound for long. When it reaches the extreme low or high, the next move tends to run all the way to the other side.
In any case, OTC has been improving steadily since. If this trend continues, OTC could go up further. For the time being, I would consider OTC to be in a bullish mode. And, this chart that I found on one of the BB websites confirmed that. Both the volume and the “Pulse Index” were above their respective 10-day SMA. This chart was updated through Thursday, but we know that Friday’s action had further improved the technical picture.
So, now we have OTC BB standing alone on the oversold side while AMEX continued to stay in the “overbought” territory, NASDAQ was getting close to the extreme overbought area due to its big surge on Friday, and NYSE took another step towards the overbought territory. What does this tell us?
I’d look at OTC traders as the options traders except that the options traders use more hedging strategies than the OTC traders. And, as I’ve mentioned before, option traders (including yours truly) are not necessarily smarter than other traders. They’re just faster traders simply due to the high risk associated with the financial leverage used in the option trading.
(To be revised)...Hence, let’s assume that we can use OTC TRIN reading as a contrarian indicator. When everyone’s selling OTC shares, then it’d be the time to buy them....(If I couldn't get the revision of this paragraph in time, I'd post a new message as a supplement.)
As for the parabolic surge on Friday, my technical analysis indicated that as more of a secondary reaction than the norm. For that reason, I would not be surprised if the market reverts back to the range bound status next week.
Have a nice weekend, FA. By the way, do you at least have a first name that we can use? Thanks.
David
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