Breadth For Monday, April 16th

By : April 14, 2012 at 2:09 pm

Hello all,

As a reminder there will not be a morning digest on Monday or Tuesday as I am out of town. I do want to do a quick email however on breadth and where we stand.

 

On Monday we are starting Day 3 of watching for a potential Zweig Breadth Thrust, that is a 10 day journey from oversold,  ZBT reading of less than 40, to overbought, a reading above 61.5.  The ZBT is simply the 10 day average of the NYSE advance/decline ratio.   This breadth indicator event has been highly predictive in the past (>90%) of a 12 month bull cycle and happens either at the end of bear cycles or as a continuation signal in up moves like we had from the last quarter of 2012.

 

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The last big move was in October of 2011.  Note that there was a false crossing in September and it wasn’t until October we really started the strong thrust up to the oversold area.  Even then we had a move down with December 20th being perhaps the best buying opportunity since March 9th, 2009.

 

We are there now again with our countdown. Doubt and volatility have re-entered the market and it might be a while before trenders start cashing in again.  Friday’s selling was a little disappointing, but as of now the ZBT has not failed.   A move back to below 40 would have us resetting the counters.

 

Here are some other breadth charts to watch for the overall market signaling weakness or gathering strength.

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On the new high/low ratio we want to see that higher high now telling us the market breadthwise is backfilling.

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Same message as above on the 40 DPI.

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This chart above was the chart we used to call the XYZ top with a bearish divergence.  Now we are looking for signs that a bottom is in place and that needs to be a higher high over the next couple of days without putting in a lower low. image

This is our slow-boat trending chart that I wanted to see as green on Friday.  It didn’t happen. 

 

There is no rule in place that we can’t go lower, right now the directional trend remains down-sided and sell the rips is the current trading mode.

 

Don’t forget to follow us @topticktrader