Last Post 03/05/2013 04:26 AM by saltman (220) . 3 reply.

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02/26/2013 06:18 AM

The Critical "M" Factor
by saltman (220) Joined on 05/04/2010 Posts: 218

As I have read, and reread, the IBD investing books and investor corner columns, one thing keeps jumping out at me—3 of 4 stocks follow the market direction.  This is an incredible statistic—if market is in correction, even a well bought stock per canslim/IBD rules has only a 25% of success (of course by definition, there is no well bought stock when market is in correction, as there is no “M” present).  The M is therefore super critical to monitor.  I needed a way to track this more closely (beyond just the big picture column)—so market corrections don’t sneak up on me, and I am prepared with a good watchlist when we are getting close to confirmed uptrend.  I decided I needed something color coded (red = danger, green = looking better or good).  Also, I needed to watch/track volume and price on each index.  So, here is what I do (and typed version is for your benefit, I just handwrite these on blank excel spreadsheet with colored pens.  I can then quickly glance and see if there is a lot of red or a lot of green over last few weeks).

The method I use to track the overall market factor is to just keep a running list of market action each day (both closing price action and volume), and put key negative events in red—distribution days, up days on down volume, and down days on increasing volume but not distribution.  Each index gets a (+), (-) or (dist) each day.  And I note any big market influencing events on line above that day’s closing info.  So recently, it looks like this (and market closing numbers are in columns in order of Nas, SP5, NYSE, and Dow—since Marketsmith treats NAS and SP as primary indicators.). 

So below are recent entries, and for example—on 2-15-2013, Nas was down and volume was down, so it got a (+), SP was down and volume was up, but percentage down was low so not a dist day, so it got a   (-), NY was distribution day so noted in red, and Dow was up and volume was up, so (+) for that index.  Overall Dist count increased one for the day, so that was noted just above the date.  If all 4 indexes are down on volume increase, all numbers show in red, and if all 4 up on increasing volume, all would show in green.

Dist count NYSE = 5, NAS = 3, SP + 2 (+1 for NYSE)

2-15-2013: -6.6, -1.5,-19, 8, NDVD(+),SPDVU(-),NYDVU(DIST),DUVU(+)

2-18:  Monday, Mkt Closed

 

 

2-19-2013: 21,11,71,53, NUVD(-),SPUVD(-)NYUVD(-),DUVD(-)

 

Dist Count NYSE=6, NAS&SP+3 (All 4 +1 but  -1 for NAS due to age), IBD to Uptrend under Pressure, Fed Minutes out and indicate may back off QE3 sooner—spooks markets

2-20-2013: -49,-18,-120,-108, NDVU(DIST),SPDVU(DIST),NYDVU(DIST),DDVU(DIST)

 

NYSE=7, NAS&SP=4 (+1 for all)

2-21-2013: -32,-9.5,-73,-46, NDVU(DIST),SPDVU(DIST),NYDVU(DIST),DDVU(DIST)

 

NYSE=6, Nas&SP+4 (-1 for NYSE due to age)

2-22-2013: 30,13,84,120, NUVD(-), SPUVD(-),NYUVD(-),DUVD(-)

 

NYSE=7, NAS&SP=5 (+1 for all, IBD to Market in Correction), Italy election news drives mkts down, Negative reversal on all markets-- Dow was up over 80 early, closed down 216—almost 300 point intraday swing

2-25-2013: -45,-28,-175,-216, NDVU(DIST),SPDVU(DIST),NYDVU(DIST),DDVU(DIST)

 

 

Any thoughts, comments, improvements, suggestions are welcome.  I find it interesting that all four indexes have moved in tandem for 5 trading days now, and I classify all five days as negative days:  On Feb 19, all indexes up but volume down on all , On 2-20—distribution days on all four, On 2-21—distribution days on all four,  On 2-22, all up but volume down on all and actually below average daily volume, On 2-25, negative daily reversal on all 4 and distribution on all 4.



02/26/2013 02:52 PM

Re: The Critical "M" Factor
by saltman (220) Joined on 05/04/2010 Posts: 218

Well, make that now 6 days the market indices have all moved in tandem in a negative manner, counting today (Tuesday 2-26-2013).  All markets were up today on down volume--that like last Friday, was once again also below the average daily volume for each index.

Also, listened to the webinar live today by Scott O'Neil.  Certainly confirmed what I hope to learn/reinforce/apply/not stray from/etc by participating in this community--Number 1 rule, you have to follow the rules.  Key points today:

"The rules compensate for when we are not sure about what the market is doing" (which occurs regularly)

"Go with facts, not opinions"

"You get hurt the most when you buy wrong due to the "left behind" fear."

"Capital Preservation is rule number 1, it is more important than chasing the one that got away"

Also, if market does return to uptrend, the rules for buying back into positions you may have sold are same as normal buying rules--need uptrend to resume and have to follow the normal IBD buy rules.

Webinar was certainly worth listening to if you have a chance.

PS--how do you insert space line between paragraphs on this forum??  Worked in first post above when copied from Word, but does not work when type directly



03/01/2013 05:29 AM

Re: The Critical "M" Factor
by saltman (220) Joined on 05/04/2010 Posts: 218

Update--Here is the above information repeated and updated through Thur 2-28-2013.  It has now been 8 consecutive trading days (starting with 2-19-2013) where all 4 indexes have been negative every day--meaning either a distribution day on all 4, all four up in down volume, or all 4 down in up volume.  This seems to me to be a sign of significant weakness.  Anyway, here is data:

Dist count NYSE = 5, NAS = 3, SP + 2 (+1 for NYSE)

2-15-2013 (Fri): -6.6, -1.5,-19, 8, NDVD(+),SPDVU(-),NYDVU(DIST),DUVU(+)

 

2-18-2013, Monday Holiday, Mkt Closed

 

2-19-2013 (Tues): 21,11,71,53, NUVD(-),SPUVD(-)NYUVD(-),DUVD(-)

 

Dist Count NYSE=6, NAS&SP+3 (All 4 +1 but  -1 for NAS due to age), IBD to Uptrend under Pressure, Fed Minutes out and indicate may back off QE3 sooner—spooks markets

2-20-2013 (Wed): -49,-18,-120,-108, NDVU(DIST),SPDVU(DIST),NYDVU(DIST),DDVU(DIST)

 

NYSE=7, NAS&SP=4 (+1 for all)

2-21-2013 (Thur): -32,-9.5,-73,-46, NDVU(DIST),SPDVU(DIST),NYDVU(DIST),DDVU(DIST)

 

NYSE=6, Nas&SP+4 (-1 for NYSE due to age)

2-22-2013(Fri): 30,13,84,120, NUVD(-), SPUVD(-),NYUVD(-),DUVD(-)

 

NYSE=7, NAS&SP=5 (+1 for all, IBD to Market in Correction), Italy election news drives mkts down, Negative reversal on all markets-- Dow was up over 80 early, closed down 216—almost 300 point intraday swing

2-25-2013(Mon): -45,-28,-175,-216, NDVU(DIST),SPDVU(DIST),NYDVU(DIST),DDVU(DIST)

 

All indexes up, but volume down

2-26-2013(Tues): 13,9,47,117, NUVD(-),SPUVD(-),NYUVD(-),DUVD(-)

 

All indexes up but volume down and below average on all indexes, Bernanke testifies stimulus to stay in place

2-27-2013(wed):32,19,109,176, NUVD(-),SPUVD(-),NYUVD(-),DUVD(-)

 

Negative reversal day, and volume up and 35% above average on SP and 8% above average on NAS, small percentage loss would not be Dist. Day but IBD not counting anyway since in correction

2-28-2013(Thur):-2, -1,-6,-21,NDVU(-),SPDVU(-),NYDVU(-),DDVU(-)

 

 



03/05/2013 04:26 AM

Re: The Critical "M" Factor
by saltman (220) Joined on 05/04/2010 Posts: 218

Just updating above information to add last two trading days.  It has now been 10 consectuive trading days where all indexes have moved the same, and all days have shown weakness (distribution, up on down volume, or down on increasing volume--but there have been a couple of positive reveresal days as noted).  As noted in IBD, several leaders have continued to perform well during this correction over last week.  Very difficult to determine whether next 5% is in up direction or down direction.  Here is updated data chain:

 

Dist count NYSE = 5, NAS = 3, SP + 2 (+1 for NYSE)

2-15-2013 (Fri): -6.6, -1.5,-19, 8, NDVD(+),SPDVU(-),NYDVU(DIST),DUVU(+)

 

2-18-2013, Monday Holiday, Mkt Closed

 

2-19-2013 (Tues): 21,11,71,53, NUVD(-),SPUVD(-)NYUVD(-),DUVD(-)

 

Dist Count NYSE=6, NAS&SP+3 (All 4 +1 but  -1 for NAS due to age), IBD to Uptrend under Pressure, Fed Minutes out and indicate may back off QE3 sooner—spooks markets

2-20-2013 (Wed): -49,-18,-120,-108, NDVU(DIST),SPDVU(DIST),NYDVU(DIST),DDVU(DIST)

 

NYSE=7, NAS&SP=4 (+1 for all)

2-21-2013 (Thur): -32,-9.5,-73,-46, NDVU(DIST),SPDVU(DIST),NYDVU(DIST),DDVU(DIST)

 

NYSE=6, Nas&SP+4 (-1 for NYSE due to age)

2-22-2013(Fri): 30,13,84,120, NUVD(-), SPUVD(-),NYUVD(-),DUVD(-)

 

NYSE=7, NAS&SP=5 (+1 for all, IBD to Market in Correction), Italy election news drives mkts down, Negative reversal on all markets-- Dow was up over 80 early, closed down 216—almost 300 point intraday swing

2-25-2013(Mon): -45,-28,-175,-216, NDVU(DIST),SPDVU(DIST),NYDVU(DIST),DDVU(DIST)

 

All indexes up, but volume down

2-26-2013(Tues): 13,9,47,117, NUVD(-),SPUVD(-),NYUVD(-),DUVD(-)

 

All indexes up but volume down and below average on all indexes, Bernanke testifies stimulus to stay in place

2-27-2013(wed):32,19,109,176, NUVD(-),SPUVD(-),NYUVD(-),DUVD(-)

 

Negative reversal day, and volume 35% above average on SP and 8% above average on NAS, small percentage loss would not be dist. Day but IBD not counting anyway since in correction

2-28-2013(Thur):-2, -1,-6,-21,NDVU(-),SPDVU(-),NYDVU(-),DDVU(-)

 

All markets up but volume down for the day, volume was above average and this was a positive reversal day

3-1-2013 (Fri):  10,4,5,36,NUVD(-),SPUVD(-),NYUVD(-),DUVD(-)

 

All indexes up but volume down for the day and volume below average, but was another positive reversal day

3-2-2013(Mon):12,7,26,38,NUVD(-),SPUVD(-),NYUVD(-),DUVD(-)