[pcabc]

Further work on Mansfield Relative Strength Based Market Breadth

I've increased my calculations from 1 year of historic data to nearly five and also plotted my corrected Mansfield Relative Strength based scoring system.

   

The main observations I see are:

1. I'm not sure that the theory about being more aggressive when the % stocks above the zero line (amber) and the % stocks with the zero line rising (blue) and being more cautious when these fall back works now.  In the year running up to the covid crash these two metrics were well below the 50% line and falling.

2. I suspect there is a glitch in the orange and blue graphs in late 2019.

3. Perhaps I should set a limit at 33% stocks (one third) having a Mansfield RS above the zero line as a bullish condition?

4. The % stocks with the Mansfield RS rising is calculated based on the slope of a 50 day SMA of the RS line.  Perhaps I should use a longer period? (noting each data point takes 2.5 mins to calculate.  5y = 5*260 (approx trading days = 1300.  1300 * 2.5 = 3260 mins = 54 hours = 2.25 days of calculation.

5. My Mansfield RS score for a stock is +2 or -2 depending on whether the RS is above or below the zero line, +- 1 for rising or falling zero line and +- 1 for rising or falling RS.  Maybe weighting of 2 for the Mansfield RS being above or below the zero line is too much?  The score seems to closely track the first (orange) plot.

6. Perhaps data on the left hand side of the chart is more sparse distorting the chart?  However, my calculations record how many stocks were included in the calculation for each data - so perhaps this is accounted for?

I've just added charts for the % stocks above their 20, 50 and 200 day EMAs (below, [2, 3 & 4]) and my estimates (below, [5]) of % stocks in Stages 2 and 4.  IF we again look at 2019 we find that generally there were more stocks in Stage 4 than 2, the % stocks above their 200 day EMA was between 30 and 60 - hovering around 50%.  So, the Mansfield based breadth stats for 2019 were lackluster because the underlying strength at that time was poor?  We can corroborate this by looking at a comparison of the S&P600 (small cap, red) plotted against the S&P500 (large cap, grey) for the same period.  The S&P600 lagged the S&P500 and the plot of their relative strength (blue) supports it being weaker.  So we have a market rising on weak breadth.

   
   


I'm still thinking about what this all means.  It seems the % stocks with their Mansfield RS being > 50% is a good sign of strong breadth, we just need to be wary of markets rising on poor breadth.  Perhaps it also means that if the underlying breaths is declining with a still rising index then:
 a. Be more careful,
 b. If using Stage analysis trawl strongest sector, SP500, SP5100 or NASDAQ 100 only?
 c. Track a still strong index, but be careful in setting stop losses.