Bear With Me. Final Episode to the Series.
Pun in title intended. This chart has a lot going on now. I've been playing off of the same chart with the same long-trend lines drawn on it, so we'll just call this one Part III of the saga. What I've discovered today feels like some serious implications, and I have hardened reasons to believe that the Dow rally on this leg is over.
Here we go...
So, I've pulled up the Volume Oscillator indicator because it does a great job at allowing you to pair long term volume with short term volume, converts them into different moving averages, gives you a difference between the two to provide you with an index that gives us a relative point of view as to what's going on in with the market sentiment now VS this 200-day moving average of volume data.
Why did I select 200 days?
200 days is arbitrary. It gives me a little more than half a year and a little less than a whole year of trading information, and from what I've seen in the world of commerce, years are compartmentalized in terms of major milestones on a semi-annual basis. So, for the big stuff like capex, investment projects and debt issuance, a lot of that goal-seeking has an overall semi-annual consequence. The reason I put in a little bit over 6 months, however, is because it reflects a lot of major turning points in the market that I want to make my charting relevant to.
...I'll explain more on that later. There's quite a bit of evidence in previous versions of this chart that I'll have to cover, and it could not play into my theory any more perfectly. As a hint, Just before Donald Trump was elected, this market was seeking direction, and just as soon as we were gearing up for the November election, something happened in the financial seas that made unmistakable history with breaking the "line 1" trend line I depicted in my 1st and 2nd chart. Volume Oscillator Ticked and boomed us right through that resistance line that anchors waaay back into the 2008 recession to about 2016, where we took off at that breakout and blew out our engines, thrusting into altitudes we'd never seen before.
Anyhow, 200 days is a great MA on this one. So, what does this have to do with this very moment?
Relax, I'm getting to that.
The short MA of the oscillator is set for 3 days because I'm trying to get an idea of turning points relative to a whole broad-scope of data, and this has worked so far in showing me where the trends run out of gas, pick up momentum in the other direction and dump volume into another leg of a new trend.
The area I've circled is just after we drove 3-day volumes right into the December pit, where CNBC stated was "the bottom". And as we know, that's fake news. Not CNBC necessarily but "the bottom" indicated. We see the crest of the volume indicator moving up, coming to a point, and just as quickly, tapering off as the market decides to take us on this drastic upswing that started in the beginning of January.
That's the part that is important. We took a massive rally in this past month, and if I'm using a 3-day short MA paired to a 200-day MA, that's a clear indication that this rally happened while a lot of folks were holding onto their positions or just plain holding out altogether. This doesn't imply that people sitting on the side-lines didn't have skin in the game. No, quite the opposite. It means the people on the side-lines were doing just that...taking a seat for a while.
But as we could already see, they were active at one point, so we know that they are certainly there. I cannot stress enough that this indicator trips against 200 days of volume averages, so we're seeing statistically significant behavior here. That's huge.
Another thing I NEED to point out is how the volume indicator reads just like any other chart pattern otherwise. Look at the bounces where it finds support, notice also that is finds levels of resistance as well. After some time, it will move in either direction when caught outside of its support/resistance range. Right now, we are drifting right back up passed the red line, which is the average overlayed by the Bollinger bands on that same indicator.
While it is moving along this average, it is seeking a break point. Oh, and I almost forgot to tell you; the average used on the Bollinger band is also a 200-day MA. Meaning that the oscillator line skirting along that MA is simply looking for its relative breakpoint.
So, here's what we do now... Stay with me folks, we're almost there...Let's jump over the ChandeMO, which is our momentum indicator. This is going to move with the chart on uptrends and downtrends fairly similarly to the RSI, though it's much more tuned to reflect the competition between up and down movements while also keeping the average-differences accumulated for that 9-day average. I know that sounds like a mouthful, but it's very literally what shows us if we're running out of convincing room to move further down or running out of gas in moving further up, while maintaining within that -100 to +100 bounds, and we are CAPPED OUT.
What I'm saying is that it can hold on the high-end for a while, but look also where the actual candle sticks are relative to that white resistance line. It cannot give us this plateauing momentum configuration and read as though the candlestick trends will continue moving higher - past the resistance line. That's not going to happen. So, we've got a solid read on the market with 2 things here:
1) Bears are literally waiting for confirmation to dump on this market, and they are sitting on the edge of their bench, waiting at the side-lines.
2) The fervor behind this month's upswing is puttering out of fuel.
What is even more concerning is that we're just on the tail-end of very narrowed volume oscillation and already on the other side of the
thinnest point relative to that 200-day average. To me, this reads that those Bollinger bands are going to fatten up, and we're going to see a lot of activity here REALLY shortly because even volume has its trend.
In my experience, people are much more easily excitable into selling off than they are when it comes to buying in, and that just goes to show that risk-aversion is hardcoding in our DNA.
More charts to follow soon.
Here we go...
So, I've pulled up the Volume Oscillator indicator because it does a great job at allowing you to pair long term volume with short term volume, converts them into different moving averages, gives you a difference between the two to provide you with an index that gives us a relative point of view as to what's going on in with the market sentiment now VS this 200-day moving average of volume data.
200 days is arbitrary. It gives me a little more than half a year and a little less than a whole year of trading information, and from what I've seen in the world of commerce, years are compartmentalized in terms of major milestones on a semi-annual basis. So, for the big stuff like capex, investment projects and debt issuance, a lot of that goal-seeking has an overall semi-annual consequence. The reason I put in a little bit over 6 months, however, is because it reflects a lot of major turning points in the market that I want to make my charting relevant to.
...I'll explain more on that later. There's quite a bit of evidence in previous versions of this chart that I'll have to cover, and it could not play into my theory any more perfectly. As a hint, Just before Donald Trump was elected, this market was seeking direction, and just as soon as we were gearing up for the November election, something happened in the financial seas that made unmistakable history with breaking the "line 1" trend line I depicted in my 1st and 2nd chart. Volume Oscillator Ticked and boomed us right through that resistance line that anchors waaay back into the 2008 recession to about 2016, where we took off at that breakout and blew out our engines, thrusting into altitudes we'd never seen before.
Anyhow, 200 days is a great MA on this one. So, what does this have to do with this very moment?
Relax, I'm getting to that.
The short MA of the oscillator is set for 3 days because I'm trying to get an idea of turning points relative to a whole broad-scope of data, and this has worked so far in showing me where the trends run out of gas, pick up momentum in the other direction and dump volume into another leg of a new trend.
The area I've circled is just after we drove 3-day volumes right into the December pit, where CNBC stated was "the bottom". And as we know, that's fake news. Not CNBC necessarily but "the bottom" indicated. We see the crest of the volume indicator moving up, coming to a point, and just as quickly, tapering off as the market decides to take us on this drastic upswing that started in the beginning of January.
That's the part that is important. We took a massive rally in this past month, and if I'm using a 3-day short MA paired to a 200-day MA, that's a clear indication that this rally happened while a lot of folks were holding onto their positions or just plain holding out altogether. This doesn't imply that people sitting on the side-lines didn't have skin in the game. No, quite the opposite. It means the people on the side-lines were doing just that...taking a seat for a while.
But as we could already see, they were active at one point, so we know that they are certainly there. I cannot stress enough that this indicator trips against 200 days of volume averages, so we're seeing statistically significant behavior here. That's huge.
Another thing I NEED to point out is how the volume indicator reads just like any other chart pattern otherwise. Look at the bounces where it finds support, notice also that is finds levels of resistance as well. After some time, it will move in either direction when caught outside of its support/resistance range. Right now, we are drifting right back up passed the red line, which is the average overlayed by the Bollinger bands on that same indicator.
While it is moving along this average, it is seeking a break point. Oh, and I almost forgot to tell you; the average used on the Bollinger band is also a 200-day MA. Meaning that the oscillator line skirting along that MA is simply looking for its relative breakpoint.
So, here's what we do now... Stay with me folks, we're almost there...Let's jump over the ChandeMO, which is our momentum indicator. This is going to move with the chart on uptrends and downtrends fairly similarly to the RSI, though it's much more tuned to reflect the competition between up and down movements while also keeping the average-differences accumulated for that 9-day average. I know that sounds like a mouthful, but it's very literally what shows us if we're running out of convincing room to move further down or running out of gas in moving further up, while maintaining within that -100 to +100 bounds, and we are CAPPED OUT.
What I'm saying is that it can hold on the high-end for a while, but look also where the actual candle sticks are relative to that white resistance line. It cannot give us this plateauing momentum configuration and read as though the candlestick trends will continue moving higher - past the resistance line. That's not going to happen. So, we've got a solid read on the market with 2 things here:
1) Bears are literally waiting for confirmation to dump on this market, and they are sitting on the edge of their bench, waiting at the side-lines.
2) The fervor behind this month's upswing is puttering out of fuel.
What is even more concerning is that we're just on the tail-end of very narrowed volume oscillation and already on the other side of the
thinnest point relative to that 200-day average. To me, this reads that those Bollinger bands are going to fatten up, and we're going to see a lot of activity here REALLY shortly because even volume has its trend.
In my experience, people are much more easily excitable into selling off than they are when it comes to buying in, and that just goes to show that risk-aversion is hardcoding in our DNA.
The momentum on the uptrend is down from the plateau, spoken by the ChandeMO, and I think we are going to see a great move from the turnaround point below that top resistance line. This is where it begins folks.