Ian Woodward's Investing Blog

Stock Market: Bollinger’s “Bandwidth” Rules the Roost Right Now

May 3rd, 2015

My good friend Paul Reiche made an astute observation when comparing %B versus %B x BW and wondered why the colors are not in “Sync” as shown in chart 7 below.  The value of the Woody Indicator (%B x BW) is to give a faster look at the market movement as he rightly says and at such times it pays to turn your attention to what the Bandwidth is doing!  I will cover this scenario in charts 7 to 10 below.

2015-05-03 Blog Fodder

Let’s first look at the Market Indexes to show the lay of the land and as you would expect it has been a choppy market to say the least for the past month:

2015-05-03 Blog Fodder2

The Canaries haven’t faired much better though NFLX and PCLN have been the stars with LNKD just taking a wallop:

2015-05-03 Blog Fodder3

Note that the Internals of the Market as viewed by the Accum. vs. Dist. Ratio also show that we are at Stalemate:

2015-05-03 Blog Fodder4

The choppiness we have had to put up with is quickly evident in this next favorite chart of ours:

2015-05-03 Blog Fodder5

…And here is the Drummers Chart which also shows the signs of a Choppy Market:

2015-05-03 Blog Fodder6

Now for Paul Reiche’s astute observation below:

2015-05-03 Blog Fodder7

So let’s go back in time and then bring us forward to date to see what happened in a similar situation:

2015-05-03 Blog Fodder8

…And here is the follow on chart which shows how everything got back in sync!

2015-05-03 Blog Fodder9

Lastly, we are back up to date and so we keep a beady eye on the behavior of the Bandwidth to ultimately bring us back into sync:

2015-05-03 Blog Fodder10

Let’s see what transpires over the next week or so.  Hopefully things will right themselves in the fullness of time!

Best Regards,

Ian.

The Stock Market Indexes are back to a “Rounded Top”

March 8th, 2015

This Market is very similar to that we had back at the Start of the Year in early January…a Rounded Top:

Rounded Picture

…And here is the picture to prove it:

Rounded Indexes

The Canaries are pausing to Refresh, but are holding up nicely with AAPL, FB, GOOGL and PCLN leading the way:

Rounded Canaries

The Drummers Drumming Chart shows that we are 6 Days into a down move, and we should expect the Markets to continue down:

RoundedDrummers

…And this chart shows that the odds are still to the downside for %B to come down through the Bandwidth before going up again:

Rounded Bandwidth

The Market took a Major Hit on Friday with the S&P 1500 down 3.7 buckets and should still head down early next week:

Rounded Pat

If you didn’t feel the bias for the Markets is downwards, then hopefully this chart will convince you:

Rounded abcde

Now for the Jobs Report for February which is still showing improvement at around the 300,000 mark:

Rounded Jobs 1

Rounded Jobs 2

Keep your powder dry and have a good week.

Best Regards,

Ian.

Stock Market: “Deflated” Choppy Market!

February 1st, 2015

Thank you for your patience while I suffered a crashed Computer Hard Drive this past week, but hopefully I am back up and running. Today is Superbowl Sunday, and I am sure we all understand this “deflated” Choppy Market we are in.  I feel you all will understand the frustration of seeing the Market Indexes rise and fall over more than 100 points intra-day to say nothing about the daily swings we have endured the past month as I show in many of the charts in this Blog Note.

Fortunately the Canaries have provided excellent Earnings Reports, including AAPL, AMZN and NFLX, so I am hoping for a small new rally with the Canaries leading the charge:

Choppy Picture

Just look at what we have had to put up with this last month, and Investors and Traders must be very nimble:

Choppy Indexes

However, with the recent Earnings Reports on some of the Canaries being excellent, the Leaders are holding up:

Choppy Canaries

It goes without saying that the %Accumulation vs. Distribution Ratio is at Stalemate at ~1, i.e, 33% for each:

Choppy abcdes

Even the Drummers Drumming Chart shows how choppy this market has been with change in direction every few days:

Choppy drummers

%B for the S&P 1500 is below 0.20 and therefore in the doldrums and close to breaking down below the Bandwidth:

Choppy 1500

The signal to re-engage the Market is when the %B for Bucket 0.2 to 0.3 exceeds 17% and we are flailing around:

Choppy B

This next favorite chart tells it all in a nut-shell…until this yin-yang stops we will stay in oscillation:

Choppy Pat

This last chart should convince you to stay out or be very nimble if you take trades when this market is so choppy.

Best Regards,

Ian

Stock Market: Rounded Top Action for the Festive Season

January 10th, 2015

After a long Rally for Thanksgiving, the Stock Market has been a nightmare to trade in, up down and round about!

Picture Rounded

…And to prove it, here is the action of the Major Market Indexes over the last 20 Days:

Picture Indexes

Likewise, the Canaries have been trotting around doing nothing spectacular:

Picture Canaries

The S&P 1500 %B shot up with the Thanksgiving period and then has wobbled around with a weak Rally:

Picture S&P1500

This next chart demonstrates the various phases we have suffered after the strong period prior to Thanksgiving:

Picture Pat

The Twelve Drummers Drumming chart shows the periods of up, down and sideways very well, and we see recent turmoil:

Picture Drummers

This chart shows clearly the Stalemate we are in with %A+B below %D+E stocks under Accumulation/Distribution:

Picture abcde

As I have taught you in previous recent charts, the biggest clue as to when the Market has completed correction is when the % of Stocks in Bucket 0.2 to 0.3 is >17.5%.  We are currently at ~11.0% so we are not there yet and we need to be patient…hence, the market can go in either direction starting next week:

Picture Percent B

…And, as you would expect, when we examine a higher Range of %B, such as Buckets >0.6 and <0.8, the Rally is very weak:

Picture Percent B2

Net-Net, the January Effect was delayed and essentially fizzled, so we shall see if the Small Cap stocks pick up from here.  Be patient and remember the stake in the ground at this point in time between the Bulls vs. Bears is Stalemate:

Happy New Year!

Ian.

Stock Market: January Effect and Types of Investors

January 1st, 2015

 

A long term follower and supporter of my work wrote me a note about the January Effect and here is my response which I felt I should share with you all to explain our different definitions, especially to help new readers:

Ian – always appreciated. However, please straighten me out.

Effect Picture

I have worked on the definition of January Effect of small cap buying years ago starting in first to middle of December and then buying started running earlier into November and even October. If you look at the 3 month chart the Russ 2k outperformed the other 3 main indexes and the same if you go from 1 December. Here is the link to the 3 mo chart (+ 11%) and can easily be read for 1 month with the same comparison.

I have never subscribed to Santa (folks said he didn’t exist when I was a kid) as some of my best gains have been after 12/25. However, the market then usually sells the January effect the first week (sometimes the first trading day but more like end of the first week) and then January is positive by the end of the month.  Tell me where I have been going wrong all these years?

Thanks,  Bruce

Thank you Bruce and for your contributions to this bb over time.  We go back almost 25 years, and you have always been the “guru” of small cap stock investing, so your insights are always valuable, and you are not wrong over these many years…only different. 
 
As you well know in my book, our audience consists of 4 Types of Investor.  Types 1&2 are essentially short term Traders, while Types 3&4 are longer term Investors.  The majority of our clientele are Type 3 who look for opportunities over a few weeks to a few months.  I’m assuming your bias is towards Type 4 and therefore longer than most.  So your comments are very well put.
 
As time has passed us by since 20 years ago with the progress of the Internet in real time and High Frequency Traders (HFTs), they have also seen that until there is a Clean Out ala March 2003 and 2009 when a Fresh Rally truly begins, many have also realized that they must dabble as Type 2 shorter term traders if they are to engage the market 
 
My comments around the festive season are always with this in mind and I use the standard definition of the first week in the New Year as the January Effect.  It’s aimed at trying to accommodate the Types 1 and 2’s at such times.  My Blog Notes over the years reflect that.
 
Here then in a nutshell is what I have suggested with my recent Blog Notes.  Some 35 new supporters from Vietnam have found some nuggets in the last couple of posts, and I wish you all a Happy New Year with the following gift to you all:
Effect Pat
Best Regards, and Happy New Year to you all.
Ian

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Disclaimer: Commentaries on this Blog are not to be construed as recommendations to buy or sell the market and/or specific securites. The consumer of the information is responsible for their own investment decisions.