Life is Imperfect & so was the Complex $NASI Top

In a prior post I pointed out that the $NASI turned down but the Kagi still had to go up a bit more and give us a little black cap, suggesting that the Complex Top still had a little more playing out. Two down days both ending in just a final blip up at the end of today told me to pay attention to a pearl that teddy taught us yesterday on Oil Trader's Blog...he suggested, at least yesterday, that the bears really still have taken control. The Ultimate Oscillator also turned down, so I decided that I better start looking for a Completed Complex $NASI Top that never developed the thick black line (it is called the yang and is laid down when the prior peak price is exceeded). This "imperfect" Complex $NASI top, that we seem to be experiencing now, would just keep the thin red yin lines throughout (i.e. the prior peak price was never reached). I found another one in June 2007.
Four points:
1. The Imperfect Top that we have just probably completed has similar technical indicator values (orange lines) as the June 2007 Imperfect Top.
2. The SPX ultimately did drop 8.28% from the price associated with the 2nd complex top peak in June 2007.
3. However there was a third yin top (see Blue arrow on Kagi chart & Green arrow on other chart). The SPX first went down 2.29%, then up 3.69% to the third peak, and then down 9.47%. The third yin peak took another month past the second peak to unfold.
4. The percentage changes from the 1st peak to the 1st nadir to the 2nd peak was 2-3X greater for the 2009 vs. 2007 Complex Top. Of course this can be further amplified with leveraged ETF's.
I plan to get rid of the few long positions that I have left, but I will only short cautiously for now until I'm sure that we will not have a third peak. If the SPX MFI does not go back up over 50 (see lavender arrow), it should be "safe" to short.

Ron Walker is a Worthwhile Watch

NASI & NYSI explained

The McClellan Summation Index is a market breadth indicator that is ultimately derived from the number of advancing and declining stocks in a given market. Usually, a small number of stocks making large gains characterizes a weakening bull market. This gives the perception that the overall market is healthy, but in reality it isn't, as rising prices are being driven by a small number of stocks. Many people regard the McClellan Summation Index as an excellent indicator of the overall "health" of the market and the market's current trend. The McClellan Summation Index is derived from the McClellan Oscillator by tracking its daily accumulation or "summation". The McClellan Oscillator is a breadth indicator derived from each day's net advances, the number of advancing issues less the number of declining issues. Subtracting the 39-day exponential moving average from the 19-day exponential moving average of net advances forms the oscillator. When the 19-day EMA (shorter moving average) moves above the 39-day (longer moving average) EMA, it signals that advances are gaining the upper hand. Conversely, when the 19-day EMA declines below the 39-day EMA, it signals that declining issues are dominant. As a momentum indicator, the McClellan Oscillator attempts to anticipate positive and negative changes in the AD statistics for market timing. The Summation Index = 1000 + (10%Trend - 5%Trend) - [(10 x 10%Trend) + (20 x 5%Trend)] where: 5%Trend = 39-day EMA of (Advancers-Decliners) & 10%Trend = 19-day EMA of (Advancers-Decliners).
The $NASI is the McClellan Summation Index for the NASDAQ and the $NYSI is the McClellan Summation Index for the New York Stock Exchange. The McClellan Summation index generally oscillates between 0 and 2000 although it can move outside of this range during extreme or unusual market conditions. Historically, major market bottoms occur after the index falls below -1000. Readings above +1600 often indicate a major top is near. Top and bottom signals carry more significance if the index is also diverging from the associated market average. According to the McClellans, the beginning of a new bull market is signaled if the NYSE-based Summation index first moves below the -1200 level and then quickly rises above +2500.

Chevy Racing Stern Steerer in 1930s

Before the airplane, the iceboat was the fastest mode of transportation. Iceboats routinely beat trains racing down the Hudson River. DNs will go over 60mph. Attitude will go 50 mph in 5 mph winds and over 90 mph when it's blowing like stink.

Another $NASI Nut looking at the Current Bearish Divergence with Stock Market Prices

Check out Frank Barbera's article at http://www.financialsense.com/Market/barbera/2009/0623.html

DN iceboat Designed in the 1930's as a Poor Man's Alternative to those large Stern Steerers

After all the stock market was crazy back then as well.

NASI off today, but Kagi confirms Complex Top still playing out

The word "Kagi" comes from the Japanese art of woodblock printing. A kagi or "key" is the L-shaped guide in a woodblock that a printer used to line up the paper for printing. Kagi charts are price charts with thick and thin vertical lines connected by short horizontal lines. Kagi charts only add a new vertical line when prices have reversed enough to cancel the current uptrend or downtrend. Until such a reversal occurs, a Kagi chart will only move up (or down) in its current column. The thickness of the Kagi line changes depending on price action.The Kagi line will continue to move up (or down) until prices reverse by a specified amount. When that happens, a short horizontal line is added as well as a new vertical line which extends to the new closing price. There are several ways to specify the reversal amount - in absolute points, as a percentage, or by using the Average True Range of recent price.
The top chart demonstrates 5 completed complex tops in the past two years. Each tops consists of 1st segment, which is up in black, a 2nd segment, which is down in red, & then the last segment which is up in black). Each vertical yellow line signifies the completion of a top, and is followed by a leg down in the $SPX (red line). The bottom chart demonstrates the same 5 tops using Kagi. We are undergoing a sixth top that is similar to the third complex top. The maximum NASI value achieved in the 1st up segment of the 3rd top (to the left of the 1st green arrow) didn't exceed the maximum value of the 1st and 3rd segments of the prior NASI top. This was followed by the big drop in October 2008 (long red line). Are we in for another biggie?

Reliving 1938 with Stern Steerer Mary B

Mary B tanks at 5:17 on the video

Feels & looks like 1938

The DJIA chart for 1938 is on the left, and a Dow chart of the run starting on March 9th, 2009 is on the right. I couldn't locate $NASI data for the 1930's, but RSI(9) peaks correlated very well with complex $NASI tops in 2009. The similarities between the two bear market rallies are eery. The second chart suggests what we are to expect over the next four years.

Aroon & MFI are setting up for fall in Silver Prices

ZSL double shorts silver. It's getting ready to shine.

$NASI Adds a 2nd Up Brick to Complex Top

See older post on prior page for implications...

Aroon & CCI are setting up for rise in U.S. Dollar

No wonder why Faber & Prechter say go long on the dollar.  I started nibbling at DRR, which is a double short on the Euro.

BGU has been a good stock to hold or trade during this complex $NASI Top

I've had success trading BGU during the current unwinding of the $NASI Complex top.  The overall market will continue to trend up until the end of next week.  The ADX in the lower right section of the chart went up over 20 (the lavender line is now 36.75), which tells us that BGU is trending (in this case up).  The Chi Oscillator also goes up when  stock is trending up.  The Chi Osc seems to have an up leg & then a flat leg during complex $NASI tops.  I generally hold BGU overnight and sell out after the AM pop in price.  I pick up more shares when the fat cats are digesting their lunch (myself included).  I only expect BGU to go up about another 6-8% over the coming week, so it's more rewarding to trade than to hold.  I expect the market to tank (red lines) after the complex $NASI top plays out, and then will mainly hold BGZ, FAZ, DRV & DRR.

Favorite books on how to Buy High & Sell Higher

Two of my favorites... by Steve Nison & Michael Covel

$NASI top suggests that for the next month Nasdaq NOT going much higher

The McClellan Summation Index is a popular market breadth indicator that is ultimately derived from the number of advancing and declining stocks in a given market.  The $NASI tracks the Nasdaq.  We are undergoing a complex top in the $NASI.  Raff Regression of the current unfolding top  suggests that for the next 7-10 days  the Nasdaq ($SPX) will NOT go up much. The central line is the linear regression line.  It then looks like the Nasdaq will fall, at an unknown rate, for the following month. Turquoise line is where we stand now, compared with past $NASI tops.  Yellow line was when to go short.  Orange line was when to sell short positions.

Of course you can hold FAS long term (when the market is trending up)

Don't believe 'em, when they tell you not to hold FAS over-night.  You can hold it weeks at a time if the market is trending up and you have a steel stomach.

Both uptrends are outlined in the blue boxes.  You want the Green (up) Aroon (25) to remain high with an Aroon (25) oscillator over 25.  The Wilder ADX trended up over 20 during the second rise.  You would have made 50-60% each time.  The current trend will probably last one more week until the $NASI completes it's complex top.

Complex NASI Top adds an Up Renko Brick today

A renko chart is constructed by placing a brick in the next column once the price surpasses the top or bottom of the previous brick by a predefined amount.  It was developed by a Japanese Rice Trader in the 1600's.  He was so successful that the Japanese beheaded him & his family.  The NASI added an up Brick today.  Based on recent history, after we add 3 more, the Nasdaq will begin its slide down.

Complex $NASI's Aroon(25) setting up for $SPX Fall

Aroon was developed by Tushar Chande in 1995, Aroon is an indicator system that can be used to determine whether a stock is trending or not and how strong the trend is. "Aroon" means "Dawn's Early Light" in Sanskrit and Chande chose that name for this indicator since it is designed to reveal the beginning of a new trend.  As you can see we are setting up for another $SPX fall (prior ones outlined in red).