RE: Stan Weinstein's Stage Analysis and Market Breadth - Technical Analysis
Searching for warnings of the recent drop programatically
I've been looking at my breadth charts to see if there have been any hints that could be picked up on programmatically in the time preceding the recent drop. The chart is really busy, too busy perhaps, as I've added SMAs to various curves and also indicator bars below each curve so I can see the status of the logic on whether there is potential danger. Really this is work in progress, but the takeout for anyone who is interested is which parameters seem to be more useful as that may give pointers for anyone else digging into this.
There is a real danger here of trying to create a meta indicator that is so tuned for recent conditions that it is only relevent for this specific set of circumstances.
The chart has been annotated with black numbers.
1. This is my aggregate breadth position with black being DANGER. On this timescale it looks like I could have given myself two weeks warning of the market move. However, on a longer timescale there are things that might be false alarms. This needs more work, it is not a magic bullet.
2. Comparison of % stocks above their 200 day EMAs, when compared to the 20 and 80 day SMA of this curve looks to be useful.
3. As above, but for the % stocks above their 50 day EMAs looks to be less useful as it gives a lot of flase alarms used on its own. Here I am using the postion of the 10 day SMA to the 20 day SMA and the slope of the 20 day SMA as a warning.
4. New highs minus new lows does not appear to provide much of use. I've averaged the new highs minus new lows to give an idea of direction, but it only confirms what is already happening. The same appears true when comparing cumulative new highs minus new lows against its averages.
5. I've not used the advance / decline line yet. Spotting divergences is hard. Comparing the A/D line against its moving averages only appears to confirm a move that is already happening. Comparing it against a faster average such as a 20 day will create a lot of noise. Perhaps I can do something with channels? Or perhaps the relative strength between price and A/D? Needs work.
6. Advancing / declining volume, comments against 5 apply.
RE: Stan Weinstein's Stage Analysis and Market Breadth - Technical Analysis
(2020-03-15, 10:04 PM)pcabc Wrote: Searching for warnings of the recent drop programatically
Ha. I've missed my most important conclusion so far. The blue line, just below halfway up the image, is miss-labled and is Weinstein's momentum curve. The position of this relative to its MAs, appears to be really useful.
RE: Stan Weinstein's Stage Analysis and Market Breadth - Technical Analysis
Maroon alert!
As discussed in my earlier post in this thread I'm trying to come up with a system to alert me when there are serious breadth warning signs. My previous short / longer term breadth without these warnings is OK for a trader but not stern enough for an investor. I've recently moved to an investor position with an aim to hold on to positions that I simply would have got out of as a trader long before then. That has meant that I have ridden a few positions and funds down.
I've made some further progress on my alert system. Its not a magic bullet, it is work in progress and I'm putting it up here to see if sharing the ideas are useful to anyone.
Now:
1. Is the aggregate breadth indication.
Green=Buy
Grey = hold
Yellow=Sell/hold short term (tight stops if hold).
Red=Sell/hold long term (tight stops if hold).
Maroon=DANGER - price still high - divergence.
Black=DANGER - price has declined.
2. Maroon alert two weeks before the drop. This is mainly due to the position of the Weinstein momentum relative to its 20 and 50 day MAs , 3, and the behavior of the % stocks above their 200 day EMAs, and the averages of that line, 4. Other parameters are less useful, e.g. New Highs minus new lows, 5 only seems to act as confirmation. The bars below each line show amber and red for danger. The lower bars have the signals stretched out to give them more overlap so that when they are combined there is more change of overlap and multiple short signals are not missed.
I've been working on the advance / decline line as both now and in 1987 there was a divergence from price. I've been trying to measure the time since price and the a/d line touched the top of their respective 120 day channels. But the differing time scales of the divergances means picking up a useful signal is tricky.
1987:
Again I picked up black and maroon danger warnings about 3-4 weeks before the precipitous drop, 1. Again Weinstein momentum and the % stocks above their 200 day EMA diverged, 2 & 3. There was a divergance in the A/D line too, but the time period was too long for my code to pick it up.
I am trying to work up code that picks up the breadth decline signs for both these drops. Whilst I could produce code that might pick up each separately and then AND the results together that would be fine tuning for specific circumstances and miss the next one. The other challenge is not to pick up too many false alarms, as false alarms devalue the system leading to it being ignored.
RE: Stan Weinstein's Stage Analysis and Market Breadth - Technical Analysis
[quote pid='15463' dateline='1584483164']
1987:
Again I picked up black and maroon danger warnings about 3-4 weeks before the precipitous drop, 1. Again Weinstein momentum and the % stocks above their 200 day EMA diverged, 2 & 3. There was a divergance in the A/D line too, but the time period was too long for my code to pick it up.
I am trying to work up code that picks up the breadth decline signs for both these drops. Whilst I could produce code that might pick up each separately and then AND the results together that would be fine tuning for specific circumstances and miss the next one. The other challenge is not to pick up too many false alarms, as false alarms devalue the system leading to it being ignored.
[/quote]
Longer term chart for 1987:
This 2 year chart shows the divergence between advance and decline and price via points 1, 2, 3 and 4. The bars below the A/D line show my indicator picking up the divergence. However, even by stretching the signal it finishes just as the danger signs are indicated at 5.
If we look after points 2 and 4 the two lines, price and A/D follow each other approximately. But the time scale is about the same as the recent divergence. So it is hard to make something detect one without ignoring the other.
RE: Stan Weinstein's Stage Analysis and Market Breadth - Technical Analysis
Maroon alert! 20+ year plot!
Warning, very large image.
I hope no one minds the major departure from the usual limit of 800 pixel wide images on this site, as I have just plotted my work on a breadth indicator to warn of large drops in sentiment such as we have experienced now and in 1987, over a 20+ year period. This chart encompasses both 1987 and 2008. It is based on NYSE data. Hopefully your browser will allow you to scroll though this image at full size, or you can download it into an application that can. Or if you have a 4k display you might see it all at once, but might have to sit pretty close to see the detail.
The chart shows the breadth curves I usually plot for myself. I have a colour coded bar plotted below the price which I described a few posts back. Recently I have tried to plot major deteriorations in breadth to hopefully only trigger on major deterioration such as now or 1987, something to give me a clear hit to get out.
I have added 'ticks' to the bar so that it is easier to see these danger warnings, 'Maroon' and 'Black'. 'Maroon' means that there is serious market breadth deterioration but prices are still high whereas 'Black' means that the price has started to drop. The decider between these two colours is whether price in the index used in the breadth chart is above or below the 50% retracement line. The 50% retracement line is taken from the TrendAdvisor method, it is the line halfway between the top and bottom of a 60 day price channel.
I could have ignored splitting my indicator into Maroon and Black stages and just plotted the deterioration in breath. However, I figured that this breadth indicator would be persistent in a stage 4 market and might trigger occasionally in stages 1 and 4. So I set up the Maroon indication to show a breadth deterioration when price was strong, a rare but significant event.
The strongly deteriorating breadth is mainly based on the Weinstein Momentum and the percentage of stocks above their 200 day EMA. These really are the significant triggers. I don't see the faster percentage of stocks above the 50 day EMA being so useful. New highs minus new lows seems to confirm current price action rather than predict. Limited account is taken of the advance / decline line. It is hard to do anything to simply spot divergences in price. I have a scheme in place but with limited capability and it is weighted as such. These lesser contributions have lead to me lightly greying out these curves.
At present I see no obvious contribution for the advancing / declining volume line. So this is greyed out with a darker shade. Note, I am looking for catching rapid deteriorations like now and 1987. So comparing A/D and A/D volume against slower MAs has little or no value as slower MAs are crossed after the event and faster ones trigger all the time.
I believe I have given notice of deterioration, programmatically for current events and those in 1987. For 2008 and the dotcom boom end I this is really unnecessary. YOu were well into a clear stage 4 on the index charts before the worst happened.
What I need to do now is zoom in on the warnings raised not at major crashes. Are they false alarms, or are they forgotten pullback events that people following stage analysis would have got out from?
RE: Stan Weinstein's Stage Analysis and Market Breadth - Technical Analysis
Hmm. My image file shrinking software has compressed the colours a bit too far. I'm not sure it matters unless I zoom in. The ticks on the breadth summary bar are visible and are more important if I zoom in. I could repost but uncompressed the image is 857k as opposed to 175k. So I will leave as is unless there is good reason.
