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We are financial market enthusiasts using methods expressed by the William Gann, Jim Hurst and Richard Wyckoff, add to this market fundamentals and with a few proprietary tools. allows members to create and save online stock charts, text and media. We are not brokers, bankers,... More
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  • Psss, Its Not Going To Be Different This Time

    Market trends that you should be knowledgeable about.

    First, markets act like fishing rods. They go up nice and smooth and collapse in a straight line.

    (click to enlarge)

    Second. Major stock indexes rally into the recession. Everything is happy, then very quickly the whole world is falling apart. As the chart below shows only two instances where price did not rally into a recession. (note: A few instances were price did not fall during a recession as well).

    Gray zones are official recessions.

    Click for popup.
    (click to enlarge)

    Third. Inflated prices tend to peak during or before a recession period. Crude oil is a huge part of PPI/CPI prices.

    Click for popup.
    (click to enlarge)

    Point: Keep and eye on crude oil.

    Disclosure: I am long SPY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Jan 28 6:06 PM | Link | Comment!
  • Beware when markets enter irrational exuberance.
    Thank god markets are emotional, how else would we get fantastic over bought and under bought prices. The only trick for the investor is to know when prices are considered to be within a period 'irrational exuberance'. Some use RSI and Stochastic, others use sentiment readings of confidence, option call put ratios and standard deviations from a long term moving average. Many of these tools have false readings and hence a combination is preferred when forming an opinion and unfortunately that normally end in a confused state of mind for the investor.

    It is amazing what you can calculate when you keep it simple stupid. The best tool we could find was simply taking a fast moving average away from a slow moving in percentage terms. The indicator you see below requires explanation of the color coding.

    vExUp (Dark Blue): Very Extended upwards trend
    ExUp (Blue): Extend upwards trend.
    Up (Green): Up trend.
    Test (Gray): Trend in test mode.
    Dwn (Red): Down trend.
    ExDwn (Purple): Extended downwards trend.
    vExDwn (Dark Purple): Very extended downwards trend.

    Changes in color give adequate warning to you when price action requires your close attention. The dotted blue lines highlight when price will begin to test the trend, or as we call it entering the 'trend testing zone'.

    Interpretation Points:
    1) If the immediate presentation of indicator shows NO RED then the trend is bullish. This is inclusive of the indicator pulling back as far to the lower dotted blue line.
    2) If the immediate presentation of indicator shows NO GREEN then the trend is bearish. This is inclusive of the indicator pulling back as far to the upper dotted blue line.
    3) Changes in color require your attention to price action.
    4) The more infrequent the appearance of an extended color the more likely that the reading is significant.

    On this chart I have circled on the indicator were it has changed color, I have also circled on price where they match up. As you can see taking a position in the market at wrong time proves to be unwise.

    I should make you aware that you best financial decisions will be born while the indicator is in a test mode or gray.

    Currently, the SP500 is in a 'extended up' period of price action (blue), price are so high you need an oxygen mask. The most recent five times before price fell anywhere between 3% to 16%. But as we all know many of those was before the Jackson Hole speech by USA Fed Chairman Ben Bernanke. So we will have to see what Mr Market has in store for us. Going short may not be the solution, buying puts (just like everyone else has on the SPY) maybe the best course of action.

    Of course we cant wait until we see gray again, our holiday plans rely on it(ha).

    Jan 30 10:01 PM | Link | Comment!
  • What phase is the stock market in now?
    If you are a fan of Wyckoffian logic then you will understand that the stock market has four major phases: Accumulation, Markup, Distribution and Markdown. The $64,000 question is what phase are we in now ? 

    Quickly, I will define each phase.

    Accumulation: In short, an area where Informed forces buy stocks or futures with the intention to mark-up prices. At the same time less informed forces tend to sell in that area.

    MarkeUp: Normally appears after a accumulation period. The stock float supply has been soaked up during accumulation, and for market players to acquire stock float then they can do so by only paying higher prices.

    Distribution: In short, an area where informed forces sell stocks or futures with the intention to mark-down prices. At the same time less informed forces tend to buy in that area. 

    MarkeDown: Normally appears after a distribution period. The stock float supply has overcome demand, and for market players to distribute stock float then they can do so by only paying lower prices.

    Let's review NYSE stock market index.

    NYSE Volume Swings

    I believe between the swings 1 to 3 the market under went accumulation. This is clearly evident by the massive volume increase on swing 3 and the swing up volume of 3 is greater than the swing down volume of 2. Market players acquired stock float under the belief that prices will be marked up in the future. The minor sell off tagged at swing 4, established that stock float supply was tight when demand is great, and the only way for market players to acquire more stock float was to pay higher prices.

    Swing 5 clearly can be labeled as a markup period. Volume was consistent and prices rose moderately.

    Between swing 6 and 10 the stock market suffered distribution at marked up prices. This is easy to conclude as swings 6, 8 and more so 10 the down swing volume is greater than the upswings (7,9,11). 

    So what is going on since Oct 2010. We know that Fed Chairman speech at Jackson Hole set up the current trend and now prices have broken resistance at 7743 and have gained nearly 6% beyond 7743.  Are we undergoing a new price mark up phase? We could be. However I suggest that this could also be a fake price markup. Why fake, well at the moment until further evidence to the contrary the upswing at 13 has been completed on very low volume, and so far volume has not accelerated. This (possible) false break maybe their to attract the less informed into the market for the better informed to sell into. We will change our mind if after a minor sell off price holds above 7743 and the following push back up is on rising volume greater than swing 13.

    What to do! Wait for a sell off to 7743 (at least). Then wait for the expected recovery after this sell off. Measure the recovery for strength, and then if all is well enter the market as this may be a true break out. If it lacks strength and is unsupported by good volume or sound fundamentals, stand aside. For now stay on the couch and do nothing! Believe it or not doing NOTHING is an option in a successful investment plan.

    The material is presented for educational purposes only and may contain errors or omissions and are subject to change without notice. (or 'RTT') members and or  associates are NOT responsible for any actions you may take on any comments, advice,
    annotations or advertisement presented in this content. This material is not presented to be a recommendation to buy or sell any financial instrument (including but not limited to stocks, forex, options, bonds or futures, on any exchange in the world) or as 'investment advice'. This article content may be reproduced or excerpted online provided full attribution is given and the original article source is linked members may or may not have a position in any company or security mentioned herein.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Tags: NYC
    Jan 26 4:51 PM | Link | Comment!
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