Tuesday, November 10, 2009

Chart of Chart Midweek Update

This is a first ever midweek update.

It takes less than 10 minutes for me to review counts of bullish and bearish charts, but takes quite a bit of time to create the multichart compilation I call Chart of Charts.

After my quick review I decided to publish today, since any unusual event happened today.  The 20 Day Moving Average of Bulls and Bears did a crossover today, to the Bearish.  Somewhat odd, since today a large number of bear and bull chart both brokeout.  However, a prior 20 day ago larger bullish count fell off the moving average, and since the bear average was low, the number of bear breakouts today pushed the average up, thus creating the crossover.

So don't get too all excited for the bearish case.  Particularly since the 5DMA and the 10DMA have both outperformed the 20DMA.   From memory, the 5DMA had a 58% annualized rate of return on betting the crossovers, and the 10DMA about 52%.   The 20DMA, because of the whipsaw nature of the market and in particular a slow reaction to the V bottom in March performed at more like 28%.

The 10DMA still says bear.

Refer to my previous chart a few days prior that has more annotations to help you understand the 3 layer heatmap which is intended to not just provided bear bull signals, but levels of how to scale into and out of bullish to bearish position and vice-versa.

The IHS pattern mentioned last week has been satisfied on it's measured move.  All that says is don't expect more upward movement BASED ON the IHS.  Other factors will NOW determine up or down.

Volatility remains high.  The number of stocks ready to breakout is a relatively large number.

The thesis is lack fast money is jumping from sector to sector as a topping process occurs.  This is causing many bearish and bullish breakouts at the same time.

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Insightful and Useful Comment!