Thursday, March 1, 2012

More Evidence For A Top

The absolute breadth indicator has been quite reliable over the past few years at signaling tops and bottoms in the stock market with few false signals.  Extremes in the indicator point to significant imbalances between the number of new highs and new lows.  These imbalances tend to occur at market turning points.  Today the absolute breadth indicator reached a low level that has marked several prior tops and one bottom.

Several other breadth indicators have been signalling that a top is imminent as well including the McClellan Summation Index.  This doesn't mean that the top need be greater than minor degree, but a top is likely nonetheless.

Though there are few good setups, I am looking for shorting opportunities in stocks and a reversal in the E-mini futures.


Anonymous said...

Hi, The ABI indicator you show does not marry up to mine. I thought ABI was NYSE Adv issues - NYSE Dec issues. What is the formula for your ABI ??

Anonymous said...

Good question. I use Worden Brother's T2101 indicator which normalizes the absolute breadth as a percentage. Without normalizing the difference it would be difficult to find typical high and low levels, but you might try using a long period PPO or stochastic to find extreme highs and lows.

Anonymous said...

Correction. The absolute breadth index measures the difference between the number of new highs and new lows NOT Adv issues less Decl issues. You can look at NYSE New Highs - New Lows, but without normalizing it, it doesn't really work.

onewaypockets said...

Hi Craig,

If I may go slightly off topic here, what charting program are you using here? I need to get some real time charting. Thanx

Anonymous said...

For end of day work I use Worden Brothers Stockfinder. It has its pros and cons, but it's what I'm used to. For realtime intraday work I use my broker's platform, which does not have the T2 indicators that Worden Brother's provides.

I use for charts for the blog most of the time. They are free, but I don't have access to screening and sorting functionality.

Overall though, I think the Stockfinder charting has a lot of versatility for the money compared to other software. It has most of the indicators that I use, and it has some backtesting functionality as well.

onewaypockets said...

Thanks Craig for that. Worden does seem to have more indicators that just about anyone that I can see (maybe TradeStation only would equal).

Very clean looking charts.