Project Freedom (12): Livermore Secret Market Key on Price Chart

Jesse Livermore (July 26, 1877 – November 28, 1940) is one of the most famous legendary traders in stock market.  His intriguing hero’s journey in the Wall Street was well recorded in the book – “Reminiscences of a Stock Operator” by American author Edwin Lefèvre.   And, this book is widely quoted in many trading books and recommended in many trading classes.

But, not many people know about his “Livermore Secret Market Key” which was written by himself and published in 1940.  This book can now being found in Wikipedia Link for free download.

Jesse Livermore spent up to 40% of his book in explaining the technical details of his operation in the stock market.  The challenge is for the reader to understand and implement it.

Unfortunately, it is not a simple task to understand the method in table form.  For there was no programming flow-chart during his time, he used a table and long procedures to go through how to fill it up.  Most beginners will lost his way in their first few attempts.

 

The objective of this article is to demonstrate that the 6-columns table can be programmed into 6-levels of band in modern price chart, and it would faciliate the readers to visualize the interaction of Jesse Livermore Secret Key and the stocks. 

Fig 1.  Transformation of Livermore Secret Market Key from Table to Price Chart. 

 

 

Fig 2. The Livermore  Secret Market Key in Action.

 

One of the famous quote from Jesse Liver more is:
"Wall Street never changes, the pockets change, the suckers change, the stocks change, but Wall Street never changes, because human nature never changes".


So, What do you think?   IF he is still around today and using the same method, written 70+ years ago, can he still make money?

The following are various charts using Livermore Secret Market Key and they clearly demonstrate that he is right.  For this method is advocating Trend Trading and ignore minor noise (which means do not run in and out of a stock too frequently).


A Minor Change in the Rule:

During his time, Jesse Livermore used fixed amount of dollar to define the "Levels of Band" as filter, similar to Point and Figure charting method using 3 point change.  But as of today, there are stocks trade more than hundreds or thousands of dollar, so two types of changes can be applied to the original method to see the effect.  The first change in the method is, logically, using the fixed percentage change, and second, using the fixed amount of Average True Range(ATR) for the band's level.


Fig 3. Livermoare Secret Market Key applied on SnP500 ETF(SPY) (Weekly)
In Figure 3, the upper chart shows the "Fix Percent Band" while the lower chart shows the "ATR Band".




Fig 4. Livermoare Secret Market Key applied on SnP Financial Sector ETF(SPY) (Weekly)


There are two points to be made in Figure 4 (Click and Zoom In).
1) It is Crystal Clear that if one were to follow the weekly chart religiously, he will not suffer from the 2008 financial crisis. For the chart shows a clear down trend.

2) Using "ATR Method"  is superior than "Fix Percentage Method", for every stock/commodity/ETF has its own characteristics in terms of Volatility.  Using ATR method help to adjust the band-level automatically for all vehicles.

So, from here on, the following charts will ONLY use ATR band (Dynamic Band that self-adjust to the stock volatility) as demonstration.



Fig 5. Some Hot stocks - Apple and Google (Weekly).







Yes.  Due to whatever reason, even till today, there are still people using "Buy and Hold" method in the market.  From the above Chart, there are two points we can learn:
1)  IF the Goal is to make profit from the market, follows the trend.  NEVER EVER ARGUE with the price chart.  IF the Goal is to PROVE he is right that the stock will eventually go up again some time in the future while the chart moving down, by all means, let him hold on as long as he like.

2) IF the market is on side-way, using Trend Trading Method would incur in lost, therefore, one need to learn to learn the master the skill of CUTTING LOST.  It would be so much better to acknowledge that was only a small error made in the market rather than let it continue to grow and eventually becomes a BIG MISTAKE.


The following are more charts to illustrate the points mentioned above.

Fig 6. Commodity - Silver and Gold ETFs (Weekly)
.
Fig 7. Commodity - Argriculture and Commodity Index (Weekly)

NOTE: If Argiculture commodity is moving down or in a side way, chances that those related companies are not performing too, even if whatever fundamental data of the stock are strong.  Use the money to invest someway else, and wait untill the relevant commodity to move up, then buy the related stocks.


.
Fig 8. Malaysia KLSE Index and Singapore STI (Weekly)


..
Fig 9. Hong Kong HSI and Japan Nikkei 225 Index (Weekly)

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It is very interesting to note that Malaysia market has performed so much better among her few Aisa peers since the 2008 global finacial crisis.  My guess is that the DID NOT lose so much money in that crisis in the US Banks as compare to the others. :-)

"There are many times when I have been completely in cash, especially when I was unsure of the direction of the

market and waiting for a confirmation

of the next move...."

Jesse Livermore

Personal Finance (11): Financial Self-Defense - A Critical Personal Skill to Live in This Modern World Economy

Let's go through some financial facts:

* On Governments' Investment:
 

Few weeks ago, I was wondering what is going on with the "World Islands" that build by Dubai as there is no news about it...  And found that these islands are sinking back to the sea!

 

Then, I wanted to figure out what was the development cost...  And found from the Wikipedia that: "The World's overall development costs were estimated at US$14billion in 2005".

 

Oh!  That's lot of money gone into the sea.

 

Then, I figure out that Government of Singapore Investment Corp. had lost USD41.6billion, or Three "World Islands", in US Market alone, during the 2008 financial crisis according to WSJ: http://online.wsj.com/article/SB125418236117447877.html

* On Personal Insurance and Investment Scheme:

Now let's look in to the price chart one of the global insurance company: AIG
(Yahoo Chart)

I AM curious how AIG is going to pay back all their clients long term life insurance and investment scheme, in long run, as the baby boomers are starting to collect their matured contracts now...


        

Others Ponzi Schemes: Such as Geneva Gold, The Gold Guarantee (TGG), etc...
 

Hundred of Investors at Hong Lim Park on The Gold Guarantee Scam (06 Mar 2013)

* On Taxes

Government can change rule for all kind of tax:  Example:  
(Here is the link )

 

*
*On Inflation:

The value of money(cash) is contine to be depreciated over time due to inflation.

 

 Source: - http://www.tradingeconomics.com/singapore/inflation-cpi
A very good source to check on many financial data from Money Supply, GDP, Debt, etc of various country worldwide.

Here is an Extreme case of Inflation...

This is what you can get for 100 billion zimbabwe dollars.

As many countries are increase their money supply today, and some call it as the age of "Currency War".  If thre is a war, there will be losers, and lot of time, there is no meaningful winner in the war as all public suffer.

 

 

*On Currency War:


A short interview with James Rickards - The author of the Book:
Currency Wars - The Making of the Next Global Crisis

 

 

 

 

 

*The Point of Finanical Self Defense is: DIY

The era of working hard in one job, save enough income to entrust a good fund manager to grow the money for retirement was over since the year 2000 tech bubble.  And, if someone has not started to educate him/herself to learn about managing his own investment account, please think again. 

 

Of course, Rome was not built in one day.  The road to learn/practise about investment involve risk of money and time committment. 

 

As Mark Twain said "Focus on the future, because that's where you going to spend the rest of your life."  So, if it is something very important and must be learned, start to read relevant books, start to attend seminars, including start to loose certain amount of money and gain experience...  While one still have the luxurious of time and money to do so.    See... A plane that take off from the same run way, just need to turn its direction a few degrees will alter its course by hundreds of miles...

 

 

 

"But trading and investing is like any other pursuit

—the longer you stay at it the more technique

you acquire, and anybody who thinks he

knows of a shortcut that will not

involve “sweat of the brow”

is sadly mistaken."

- Richard D. Wyckoff

 

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Self Development Idea (16): Individual Destiny Enrichment (IDE) Program

Few weeks ago, I had a Chinese New Year gathering session with some old colleagues and friends, and we were talking about the GOOD OLD TIME... of Motorola.

There were many programs and cultures that were great, and I particularly like the Individual Dignity Entitlement (IDE) Program. 

The frist time I saw the six questions (as shown in the following picture) on a notice board while I was a young engineer travelled to Boynton Beach Factory in Florida about 20 years ago.  I got a strange feeling after reading through these questione carefully.  I didn't know if the feeling was FEAR or EXCITEMENT for the heart beat raised while thinking about the answers! 

For the fear part, I thought: What if I were to answer "NO" to some of these questions, then why AM I here with the company?  Would I get fire for that?  And, If I were to answer "Yes" to all the questions, I must be fooling myself or not thinking hard enough.

For the excitement part, I felt that there must be something I can learn and benefit from it as these questions ask something that I'd never seriously thought about.

Yes!  Under the Ex-CEO, Chris Galvin, the IDE program was launched world-wide, including new factories in China down to the operator level.

Of course, this program did not exist in the company for long time already, but the profound impact to many individual still exsit.

Be still, and think.
Why would we need to have an immediate boss to has a dialogue with us every three months in order to discover our very own problems and opportunities for improvement?

Why Not change only a few word*, as shown in the below diagram, and make it a very personal IDE (Individual Destiny Enrichment) Program and do personal review?

The good culture should continue to stay with the individual regardless the company continue to exist or not.

 

"If you don't put in effort to control your own destiny,

someone else will most willingly do it for you."

- unknown

By the way...
I read about some articles long time ago, mainly from WSJ, commented Chris Galvin was not living in a realistic world and took this program as an example.
And, I don't think so.  It must had taken extremely great courage for him to launch and roll out this program world-wide.  For many companies which only main goal is profits, the management would be ashamed to read through the original questions.

And, only until the people are tired of all those scandals, from big financial scandals to the milk powder scandals, and recent horse meat scandals...world-wide, people will eventually realize the vision of such profound program.





-----------------------------------------  Added on 28 Feb 2013  --------------------------------------------

[From the Harvard's Famous Success Principle]
The difference between the success and failure of a person is based on how he uses his after working hours. And his destiny is decided by how he use the time between 8.00pm to 10.00pm.

Every night, take 2 hours to read, study, think or involve in meaningful discussion or debate. You will discover that your life starting to change. Continue to persist this for years..... And Success will wave it's hand to you.













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Project Freedom (11): What's "Project Freedom".

Good day,

 

Let's start with some questions:

Do you play Chess?  Any kind of Chess...

How long does it take to train a person to be a World Chess Champion?



Well, the answer to the latter question would not be simply a matter of time to learn.  Just like if everyone were given a chance for education, and not everyone would pass the exams within a given period of time.

 

Now, anyone who uses computer likely has heard of the real story that the long-term world chess champion, Garry Kasparov, was beaten by Deep Blue (a chess-playing computer developed by IBM) in 1997.

  

And, here are some benchmark information on the Deep Blue Computer in 1997 and today's computer technology:

"In June 1997, Deep Blue was the 259th most powerful supercomputer according to the TOP500 list, achieving 11.38 GFLOPS on the High-Performance LINPACK benchmark."

http://en.wikipedia.org/wiki/Deep_Blue_%28chess_computer%29

"As of 2010[update], the fastest PC processors six-core has a theoretical peak performance of 107.55 GFLOPS (Intel Core i7 980 XE) in double precision calculations."

http://en.wikipedia.org/wiki/FLOPS

And, from the "CPU Benchmark site", I found that my current laptop (i7 3632QM) can run about 78% of the i7 980X. Which is 7 times the execution speed of the Deep Blue!!!

Now, lets look at another scenario, if everyone were to carry the same program that was in the Deep Blue on their latest notebook PC today and play chess, who would win???

If the CPU power is the same, then the outcome would be a draw over many games.


Now...
With the above metaphor, lets look into other questions:

If there is a Computer-Aided-Trading Software that can consistently beat the market, and it is made available to the general public at some extremely low cost.  What would happen to the stock market?  Would it bring more positive impacts or negative impact?

My guess is that the software would lost it's effectiveness in making the amount of money as when eveyone has the edge means no one has an edge.

As of today's market, over long run, more than 95% of the general public are making a lost in the market.  So, if and when there is such thing available, it would benefit more than 95% of the people while disappoint the few...


So...
The next question would be: Is it possible for human being to workout such a program that can automatically adapt itself to all kind of market fluctuation and yet continue to make profits even at current environment?

For the previous chess example, it can be computerized because the chess has finite chess pieces and each chess piece has finite moves.  So, even the number would ended up as an enormous huge over many steps into the future move, it can be easily handle with today's computing technology.

And, if one were to go through all the trading books and courses, he would most likely be conditioned by them to believe that success of trading is and art which consists of roughly 30% Trading system, 30% Risk/Reward Management, and 40% Psychology.

Personally, I know that anything had been logically done by a human brian, it had gone through certian processes and can be programmed into software.  In order to write the software, a model of the stockmarket chess board has to be built first....

Take for example.... 
The following diagram shows a Stock Market Chess Model.
Note: Those item marked with "*" was posted in previous articles.  (Click and Zoom In)

And the following shows the OUTPUTs from the model.

Genting Singapore Chart (Click and Zoom In)

 

Google Chart(Click and Zoom In)

 

Apple Chart(Click and Zoom In)

 

.
The Galaxy Chart with Dow Jones Industrial Average and it's components:(How it works) <-- link="" p="">

Of course, the model is not perfect, as no model will be as stock market is a living things projected by the mass consciousness of human minds.

On the other hand, as illustrated from the outputs from the model, using it to protect personal financial wealth can be easily achieveable.

And, this is what I mean by "Project Freedom".


Bless You
KH Tang

"Whatever I desire for me,
I desire for all humanity"
- Barrie Konicov

 

Self Development Idea (15): The Template for Your Journey

Recently, I have come across a very interesting book with profound insight – “The Hero with a Thousand Faces” – released in 1949, by Joseph Campbell.

Since then, it became the "Bible" of movie script writers.  And, the stages of the hero's journey outlined in the book had influenced a number flimmakers...  Such as George Lucas's Star Wars, Disney's The Lion King, etc...
 






The.
There are many articles on the internet wrote about the details on each step on the template, and I found an excellent short video clip in Youtube that illustrate the points clearly:
Here is the link if you cannot see it below: -> LINK

Now, I AM curious... 
Is there any metaphor that we can learn something from this?

Of course.  Since the Hollywood script writers can use it so successfully over and over, again and again to create movies that can resonate with the audience, meaning that there is something within the viewers even the viewers themselves may not consciously aware of it...

See, I believe that the Author, Joseph Campbell did not write this book to with the intention to inspire filmmakers or story writers.  He wrote this to inspire all his readers and gave them many examples of how Hero in the past had acheive their success and what stages (challenges) they had been through. 

There is a Chinese saying, "人生如戏 戏如人生"  - "A Life is just like a Movie, a Movie is just like a Life."   So true! 
Then, isn't it a good idea to use the template to recognize what stage are we in the journey of life right now, and then continue to write the scripts for our own magnificent journey?

 

 

Life is without meaning.  You bring the

meaning to it.  The meaning of life

is whatever you ascribe it to be. 

Being alive is the meaning.

- Joseph Campbell

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Personal Finance (10): The Biggest Leaking Hole in the Personal Financial Bucket

Imagine that every one has a personal financial bucket as a preparation for their retirement. And, they would go out to work as hard as the bee in order to fill them up.  But, what happen in reality is that there is a Big Leaking Hole at the bottom of their bucket that most might not be aware of or did not take it seriously yet…

For this, I AM refering to the Global Public Debt, and here is the link:

http://www.economist.com/content/global_debt_clock

Now, there are few projects that can be done with these data.

Example one: What's the Growth Rate of the Global Public Debt?

Here are some other Inconvenient Questions for individual who has the interest to Ponder and Find out:

* What is the Public Growth Rate of your own country? (One can take down the data on the right hand corner year by year to workout the chart.)

* On the right column of the Global Public Debt Clock, there is a item "Public Debt vs GDP" by country.  What does it mean when it is approaching 100% or some even go over the 100% mark?
Think in terms of a public company, what would happen if it keep lossing money year over year?

* On the "Public Debt per Person"...  That is the Leaking Hole in individual financial bucket...  Even you don't spend it, it is the load you have to carry, which include newly born babies and 90 years old senior citizens.  Why is it continue to grow, and some even with exponetial rate?

* With the current debt rate, there are already so much trouble with the economy.  What would the economy outlook with a higher debt rate future (as predicted by the trend of the chart.)?  Would there be more financial crisis such as the fiscal cliff event?

Of course,  as the exact data would not be easily available to the public, these data are good for reference and benchmark purposes,

One may be FEAR to find out the answer by himself...
And, when one facing  FEAR, he has two choices:
1. Forget Everything And Run.
2. Face Evidence And Rise!

(YouTube Link)
This 59 second video explains the concept & situation clearly!

“The world is not a problem; the problem

is your unawareness”

-Bhagwan Shree Rajneesh

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Season Greeting (3) : About Time...

Wishing you a Merry Christmas and Happy New Year 2013!

I thought it is a good idea to write an Early Season Greeting message this year...  At least a few days before 21 Dec 2012. 

 

See... 

There are so many versions of 21 Dec 2012 prediction with hundred (if not in thousand) of books around.  These stories are from thousand years Mayan Calander, hundread years Nostradamus Prophecy, modern Channels, Scientists,  NASA and even Hollywood... 

And, what's more exiting than we are going to test them in two days time! :-)

 

 

Anyway, here is version with more positive outcome...  It says that the mass public is going to have higher consciousness spiritually after the 3 days event.

(click here if you don't see the following video clip)

 

And...

What if NOTHING strange happen AT ALL?

Can we learn anything from it?

 

I think so.

 

"Work expands so as to fill the time available

for its completion."

- Parkinson's law

 

“Somebody should tell us, right at the start of our lives,

that we are dying. Then we might live life to the limit,

every minute of every day.  Do it!  I say.  Whatever

you want to do, do it now!   There are only so

many tomorrows.”

- a spiritual teacher

At least we can use it as a metaphor and learn to think better in how to spend our time more effectively, and doing it according to our highest joys.  There used to have dinosaurs and Atlantis Civilization on this same earth and they were all disappeared long ago... 

 

Here are some planning tools that you may be interested:
Big Picture; Weekly Planner; Yearly Planner; Long Term Planner; Instructions


 

 

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Self Development Idea (14) - There are Pattern of Cycles in Life

A week ago, I attended a Trading Seminar on CFD (a kind of leveraged derivative product).  And, I was surprised to notice something interesting, there is some kind of a pattern, that worth the while to write it down.

Just like the products in the market, everything that lives has a pattern of cycle in their life, and it goes through the phases of birth, growth, fruitage, and decline.

Isn't it true that when a baby is born, he will have to go through some patterns that designed for him.

Such as go through the kindergarten, primary school, secondary school, college and university, then start to work, .... , retire and then die.

So, back to the subject that I want to write about, and here is the "Pattern" that I noticed in the seminar:

It was held in a big lecture theatre.  There are three columns of seats and each column has about 30 rows of seats.  Though it was not full-house, I figured out that there was about 350 participants.  I paid attention on the age of the participants in the recess time.  I can divide them into three age group of participants.

1) The age group of 30-45 (25%) 

2) The age group of 45-55 (50%)

3) The age group of 55-60 (25%)

And, when the seminar start, the speaker asked: "How many of you are the first time to attend such seminar?"  I saw about 50% of the people in the room put up their hands.

Do you noticed that most of the people, at least in this place, wait until they are retired or about to retire, then they start to learn about the stock market.

It was quite a "happy" seminar, because the speaker flipped through a couple of historical charts and showed the audience that how money can be easily made with some very simple strategies.  Also, with the leverage, a few ten of thousands dollars is all you need to make more than the averaged pay worker in the country.  

A few rounds of applause had gone round the theatre when the speakers shown some strategies to handle the historical charts and emphasis that it can be easily done with very little training - where to buy and when to sell.

Since, the speaker had mentioned that no one can take any audio recording nor video, or he will sue the person...

Then... I saw many hard working participants taking tons of notes while the speaker delivering the presentation.

And, me too...  make my own note after the seminar.  Just a few words with a picture, and it is attached below.

Well, this is NOT to make joke of the beginner participants for believing that there is easy money out there for them to pick,  for I'd been there, done that ten over years ago...   RATHER, the intention is to alert all to take time to know about this stuffs... 

 

Personally, I view this as a failure of the public education system (worldwide) that there is no syllabus in educating students on the area of personal finance and stock market in their early stage of life.

 

 

See.  If we can know some kind of challenges (pattern of cycles) that we will have to face years down the road.  Wouldn't it be good to spend time in learning more about it and be prepared first before we need to handle it face-to-face?   As sooner or later, most likely one will come to a point where he need to handle his personal finance as saving in the banks is not getting any yield, and fund managers are not reliable nowadays.

 

"Most people tip-toe through life, hoping

they’ll make it safely to death."

– Bob Proctor

 

 

-----------------------Add on 13 Dec 12----------------------

 

This is a typical chart from advertisement. 

Unfortunately, they do not supply with a time machine to take full advantage of it.

 

 

 

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Project Freedom (10): Trading with the BBC Breadth Indicator

What is a Market Breadth Indicator?
In short, a Market Breadth Indicator is a kind of Technical Analysis(TA) that design with the intention to gauge the direction of the overall market. 

Unlike most indicators in TA, which use only the information from a single stock to workout the indicator, Market Breadth Indicators are generated by analyzing the total number of companies in a given market. 

In general, it compares the advancing and declining issues in the market and uses specific formula to generate the ratio, such as TRIN (Arms Index),  and some use other filtering technique to smooth it out like various kind of McClellan Oscillators and Summation Index.

Actually, think about it, the price chart of SPY(S&P 500) and many other indices can also be viewed as a kind of Market Breadth Indicator too.

If those who want to know more about Market Breadth Indicators, there is an excellent book with good coverage and detail formula on this area: The Complete Guide to Market Breadth Indictors: How to Analyze and Evaluate market Direction and Strength by Gregory L. Morris (Sep 21,2005)


Why using Market Breadth Indicator?
For all classical Technical Analysis text books, they emphasis on buying the strongest stocks in the strongest sectors when the overall market is bullish, and selling the weakest stocks in the weakest sectors when the overall market is bearish. 

So, the very first step is to have a reliable indicator to know how is the overall market is performing. And, the best tool would be the market breath indicators - because they are calculated based on all components in the market.

The following picture using the school of fish as an analogy to illustrate the importance of Market Breadth Indicator...  It would be interesting to note that when the market is bullish, on various time from minute, day, week, to month...  most of the stocks would be up and vice versa in bearish market.  Of course, the market is formed by individual stock anyway. 

So, here are the two key important point for using Market Breadth Indicators:
1) using the Market Breadth Indicators is the very first step that can help traders/investors operations to be in sync with the market movement/ direction and have higher probability in winning!

 2) Market Breadth Indicators are less subected to noise and market manipulation.
In a previous blog entry on BACK TESTING...  The results have CLEARLY shown that Market Breadth Iindicators can withstand the test of time.



Why introducing the BBC Breadth Indicator?
Of all the Market Breadth Indicators in the public domain, all are calculated based on the one period advance and decline issues of the market.

Whereas the BBC (Bullish-Bearish-Consolidation) Breadth Indicator can used more advanced formulas and provide even simpler presentation for the user to understand the states of the market.

Take for examples, it can workout a Multiple-Time-Frames BBC indicators and display in the daily chart (or basically any time frame).



Charting Examples of BBC Indicator:(Note: click on each chart to ZOOM IN)

The following charts show various examples for the BBC Breadth Indicator.
In the following chart:

1) the top pane shows a tri-states (Bull, Bear & Consolidation) momentum indicator of SPY.

2) the second pane shows a tri-states Trend Indicator.(These Tri-states indicators were introduced in the previous blog entries).

3) the third pane shows the price chart of SPY.

4) the forth pane shows the Momentum BBC Breadth Indicator of SPY.  It was workout according the the above attached formula.  It calculates the total number of of Bullish, Bearish and Consolidation ticker, in Momentum wise, for the SPY (in this case, a total of 500).   Then it groups the number into Percentage of  BULL (Green Line), BEAR (Red Line) and Consolidation (Blue Line).

5) the last pane in the bottom shows the Trending BBC Breadth Indicator of SPY.    It calculates the total number of of Bullish, Bearish and Consolidation ticker, in Tredning wise, for the SPY (in this case, a total of 500). Then it groups the number into Percentage of BULL (Green Line), BEAR (Red Line) and Consolidation (Blue Line).

This can provide the user to have the winning probability in mind.  The best opportunities are when both Momentum and Trending Windows are opened and in Sync on one direction!
 
SPY Chart with BBC Indicators:




^STI Chart with BBC Indicators:







Sector Chart (XHB) with BBC Indicators:

China SSE 380 index (000009.SS) with BBC Indicator

QQQ Chart: Using BBC indicators as the Galaxy Chart's Companion: 
One way to use the BBC indicators is to put them in work together with the Galaxy Chart.  For example, the BBC chart can show the overall strength of the market (in this case, the QQQ), while the Galaxy Chart can pinpoint down to which particular stock within the QQQ is leading or lagging the overall ETF perfromance.  This works in ANY TIME FRAME in run-time.

Other Points to Considers:
* Most market breadth indicator are equal-weighted.  BUT, most index are Capital Weigthed.  Some are Dollar Weighted, Dow Jones Industrial Average and Nikkei 225.  And, most ETF are Portfolio Weighted with component changing in quarters.  These are the factors that need to take into consideration when working with Breadth Indicators.

By the way, here is a link for the Typical Market Breadth Indicator and it covers most ETFs that are having USA companies too.



Wish that it has inspired you and good luck.
KH Tang



And, if it doesn't, never mind... the follow quote from "Edgar Cayce Handbook for creating your future" may....

"Are we to live only for ourselves, using others to our advantage, or are we to care

about someone or something beyond ourselves?  The first choice may lead to

greater comfort and convenience, at least temporarily.  The secand calls

for the definite inconvenience of taking on the burdens of others. 

-- Only the second choice leads to happiness!"

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Project Freedom (9): Trading with the Mutiple-Time-Frames Moving Distribution Charts

I had a tug of war in my mind for some time whether it is the right time to post this new concept of trading in the public domain which I'd developed.  I tossed the coins and my subconscious mind replied: "Go Ahead and post it."

Above are few distribution charts that some financial analyists borrow from statisticians.  Usually, it is shown as a monthly, quarterly or yearly chart to describe the market performance over the state periods in terms of it percentage changes.  So, it is purely a statistic chart and has not much meaning for trading purposes.  For example, as shown in the chart, that a stock "WXYZ" is out perform the market over the last period of time, but it does not show the momentum and trending direction it is continue to move.


The following chart with New indicators - The Moving Distribution Curves, show a NEW way to trade the market.  Take for example, the following chart shows the XLE - Energy Sector ETF.  It's short term Momentum, mid-term Swing and long-term Trend are benchmarked within the whole database (in this case, all ETFs except leveraged ETFs). 

The Brownline show the Current Ticker Relative Strength, in this case is XLE, against all other ETFs in the database.  The Blackline shows the Market Reference Relative Strength, in this case is SPY (S&P500).  And, the Greyline shows the unchanged USD1 Cash Reference Relative Strength.

See...  In Bull market, stocks go up and cash reference line move down.  And, in Bear market, stocks go down and cash reference line move up. 

 

Now, here is a better way to interpret the three color lines in the follow chart.  It shows the same chart, and added the distribution chart on the indicators.  View it as the ditribution charts are moving under the price chart over time, the Brownline shows the the ticker percentile in the database at the point of time.  One would like to BUY the ticker with 1, Stronger than the market reference, and 2, above 80 percentile.  Similar interpretation goes with the Blackline and Greyline.

See.  Stocks/ETFs don't move randomly...  if there is no special demand, it would not move above the 80 percentile.   Similarly, if without special supply, it would not move below the 20% either.

 








Attached are just a few more daily chart with Moving Distribution Curve as examples: KOL, SLV, BRK-A, GLD and QQQ.

Attached are some Weekly Chart examples on: QQQ and BAL.

Note: 
* All the Charts can be Zoom to fit in 24 inch monitor for clearer display.

* The distribution shape illustrated here is for explanation purposes only, as the stock distribution over time does not necessary fit into this kind of shapes and varies over time.  And, some one had recommended me to see this article:  http://hanwangquant.blogspot.sg/2011/09/
And, I found that it helps to explain this concept, and also can be easily implemented in the moving distribution curve.

* This is a new kind of Market Breadth Indicator can be applied on single stock or ETF.

* At any one time, there are tickers fill up the full range from 0 to 100.  Choose to long or short according to th reference line position to have the edge.

* A much better way to "occupy the Wall Street" is to have the public to understand exactly how the game is played.

"Man belongs wherever man wants to go. 

He goes where his vision is!"

- Joseph Murphy

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