[z_CharlieMiller]

I'm still learning my way around stockcharts.com but have begun to assemble a view of breadth that gives a high level (perhaps only useful for long term trends) perspective. The metrics I'm charting are pretty standard stuff. Old brother Stan talked a lot about ADL in his book and seemed to be saying that you really want ADL in an uptrend and as long as that's true it is a good sign that an ongoing bull trend should continue. The corollary being that when ADL starts to flatten on you or go the wrong way, that's a sign to be on high alert, start pulling stops in tight, etc... I've drawn some trend and channel lines around ADL and BP lines, and would like to share those and hear thoughts from the group regarding meaning and interpretation related to the current environment. 

       


The trend lines I've drawn are certainly up for debate but what I take from these charts and those trend lines is that: 

- The Nasdaq ADL turned the wrong way about a year ago, and kicked into a much higher rate of deterioration more recently (early Dec 2021) 
- The Nasdaq BP seems to have formed a channel, and it is currently near the upper end of this channel, so I figure it'll be interesting to see in the next week or two whether it breaks out of that channel, or rolls back over to stay in it. 
 - NYSE ADL and BP are similar to the Nasdaq although for NYSE both the ADL and BP rolled over quite a bit more gently (very flat top of about 4-5 months duration), and only became clearly discernible as downtrends more recently (say, Nov 2021 or so vs Feb 2021 for Nasdaq ADL breaking trend). Yet the overall slope and dimension of the current/recent NYSE BP channel is not very different from that of the Nasdaq BP. 

My take on all this is that despite an overall negative environment recently (since say Dec) it has recently (past few weeks) been possible to make money long in some pockets ( setting aside for the moment energy and to some degree life insurance where that opportunity has been fairly robust). The current position of both NYSE and Nasdaq BP in their respective channels makes me wonder:  Was that recent opportunity simply a countertrend move, or does it have legs? I figure the success or failure of the BP lines to break out of their channels might be useful in sussing that out. 

Along this same line, in recent months (since about Nov or so) the VIX and BP trends seem to be correlated. In the chart below I've hand-drawn what I imagine to be a reasonable approximation to a regression line for the Vix and the BP metrics. Supposing for the moment that the correlation is not coincidental over the span of months, it seems natural to wonder if the fact that the vix had been trending down from late Jan to a couple days ago is connected with the the movement of BP metrics to the upper end of their channels in that same time frame. If so, does the uptick in the vix the past couple days tilt the odds in favor of the BP lines staying in their channel vs. breaking out?  

Of course we don't know what the future holds, but this seemed an interesting question to me, from the point of view of probabilities. 

Thoughts?