Monday, May 25, 2009
STAIRnario - what the heck does that mean
The above chart is not a stair-step chart. It is a a breadth momentum chart. FWIW.
Back to the STAIRnario. Back in the day, stable markets etc, etc, when a stock would be seen as a value, it would move up in "sawtooth" or "stair-step" fashion, sort of , 2 forward, 1 back, so that a trend be formed.
I do not consider the current situation to be stable. I do, however, consider that when the market opens down 100, and then flops and flips around it, so that it never goes up much, to be the REVERSE STAIRSTEP. I notice that on the down days, it goes down BANG, right at the open and never regains the ground. It happens often enuf that it feels like it is orchestrated, by whom I cant say. I can say that there are futures on indexes and critical stocks that would allow such an orchestration to take place. I can say further, that with some very broad indexes, there is great disparity as to what happens vis-a-vis the more senior indexes, so say, the DOW looks one way and the Russell 2000 looks completely different.
Now that the Other Guy is feeling "liberated" by living in subrubia, you can see that
his Guys did things different than the New Guys.
The New Guys are acting a bit more sophisticated, perhaps treading lightly using the STAIRnario to keep from panicing the markets, but equally trapping people IN the decline by taking it down SOOOO fast no one can sell out and start a cascade down.
Certainly watching markets open down inhibits potential sellers, as they see part of their potential proceeds stolen by the drop on the open.
Stepping back, like you would if you were carving Mt. Rushmore, looking at it from a distance, it is obvous, IMO, that the New Guys know the market must correct.
Not less obvious, is the pattern of two things: 1/ the market OPENED down 100 or so ; and 2/ the disparity btwn say the RUSSELL Indexes, and the DJ Indexes. The pattern is there for me, as I look from a distance.
What I like about the above pix is that it is, IMO, like looking at Mt.Rushmore from a distance. The dots are the cumulative index of the advances and declines run thru McClelland's Summation Index. The Green Line is a 4 day simple moving average.
It is clearly self explanatory. The gold line is the Momentum Index, again based on the McClelland's processing, somewhat like MACD, processing a shorter one against a longer one, to get the difference. It takes some observation to see how it works together but not a lot of interpretation. When the dots are BLACK and on top of the GREEN Line, then the Breadth is expanding positively and the market advancing.
When the Dots are RED and below the Green Line, the Breadth is shrinking negatively and the market declining. Yes they do flip flop some but not enuf to neutralize this kind of chart as an indicator. Certainly you'd done well to be LONG as soon as the DOTS turned BLACK and climbed atop the GREEN LINE. Not hard to interpret, just requires you keep your eye on the ball.