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Mungofitch

You have been my hero on calling bottoms. Do you have any signals on when we have topped?

Regards

Lockbox
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Nope! More's the pity.
Tops are harder to spot than bottoms, as a rule.
Zee can do it sometimes, but not me.
I have a top detector I built, but it is usually wrong (too early) 3 times out of 4.
You don't want to see NH-NL negative at almost the same day as a fresh market high.

So I merely follow my rules of thumb.

(1)
If there has been a fresh recent high recently, you're almost certainly in a still-ongoing bull market.
The more recent it was, the more reliable the rule.

(2)
And don't own anything that you yourself have concluded is overvalued.
If you don't know how to value what you own that's a bummer, but if you DO have an idea then follow it.
For any given stream of future earnings, the higher the price today, the lower the forward return and the higher the risk.
As prices rise, a smaller position size makes sense.
If real returns look like they'll be negative, as with almost any bond right now, don't own it at all.

Jim
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You don't want to see NH-NL negative at almost the same day as a fresh market high.

This is a moving average? Not for a single day?
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No. of Recommendations: 12
You don't want to see NH-NL negative at almost the same day as a fresh market high.
...
This is a moving average? Not for a single day?


Either : )
But usually a moving average.

Even if the two things happen (top and bad breadth) within a week of each other it's usually a very bad sign.
It means that, though the index is hitting fresh highs, breadth has narrowed so much that the advance is relying on fewer and fewer stocks.
In effect, more stocks are closer to their lows than to their highs.
That's pretty typical at the end of a bull market, though it also happens at intermediate waypoints during the bull.
This is one omen that would have saved you in 1987, for example. One of the few.

Here is my weak attempt at a top detector.
Red dots show the dates it gave health warnings.
http://stonewellfunds.com/TopDetector_2012-09.jpg
(that graph ends in 2012)

It has triggered 6 times since 2015, most recently February 27.
As mentioned, it's not very good at its job.
But they weren't totally random...average six-month forward return in that stretch has been +10.6%/year rate.
But the average five week forward those six signal dates was -33%/year rate.

The signal 2018-10-05 was not too bad.
It was 1.5% lower and 11 trading days after the temporary top...not so late that it was worthless.
It didn't turn out to be a major or lasting top, but I count that as success.
The lowest point in that slide was 18.5% lower, 54 trading days later on Christmas eve.

Conveniently, my "major bottom detector" then triggered.
Following my usual rules you'd have got back into the market at close on December 27th, 5.8% off the bottom and 13.7% below the October "top" signal.
I didn't use the top signal, but I did do some buying on that bottom signal. Many bucks worth...

Jim
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Thanks. Good discussion
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Lowery's has an an indicator for Buying and Selling pressure. Proprietary - used to be $20k a year per user. It was great, it had two linear measures showing buying pressure and selling pressure.

Started in the 1970s I think, and they reversed engineered the indicator to some super early date in the market. I believe prior to the '29 crash/bear.

The commentary was always that tops were a process. And as the selling pressure rose, and buying pressure fell, the gap could only get so wide. Yet there was not defined top call. Combined with NHNL and relative performance of small, medium, and large caps, it was possible to reduce exposure to equities as the indicator widened.

One primary component of the indicator was NYSE NHNL of ONLY OPERATING COMPANIES. Lowery's filtered out all the closed end funds, ETFs, etc. Unfortunately I cannot find a brokerage that has an operating only indicator. :(

Caddman
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No. of Recommendations: 7
The GTR1 Bear Catcher NHNLDiff uses Ordinary Common Shares and REITs, listed on NASDAQ. ETFs and CEFs are not included.

excd.a = 3
styp.a = 10!11!18!48
http://gtr1.net/2013/?~BearCatcher_NHNLDiff:f0.4::iflt%28lin...

------------------------------------
styp.a [Security Type]
Share Type - Digit #1 - Security Traded
Code Definition
1 Ordinary Common Shares
2 Certificates
3 ADRs (American Depository Receipts)
4 SBIs (Shares Of Beneficial Interest)
7 Units (Depository Units, Units Of Beneficial Interest, Units Of Limited Partnership Interest, Depository Receipts, Etc.)

Share Type - Digit #2 - Type of Security
Code Definition
0 Securities Which Have Not Been Further Defined.
1 Securities Which Need Not Be Further Defined.
2 Companies Incorporated Outside The US
3 Americus Trust Components (Primes And Scores)
4 Closed-End Funds
5 Closed-End Fund Companies Incorporated Outside The US
8 REIT's (Real Estate Investment Trusts)

Exclude ADRs styp.a != 30!31
Exclude ETFs styp.a != 14!15!44!74!75
Exclude CEFs styp.a != 73
Exclude CEFs&ETFs styp.a != 14!15!44!73!74!75
Exclude LPs styp.a != 71!72
Exclude SPACs styp.a != 16!17

----------------------------------------
excd.a [Exchange Code]
Code Definition
-2 Halted by the NYSE, NYSE MKT, NASDAQ, or Arca
-1 Suspended by the NYSE, NYSE MKT, NASDAQ, or Arca
0 Not listed on exchange of current file
1 NYSE
2 NYSE MKT (AMEX in SIP)
3 NASDAQ
4 NYSE Arca
5 Mutual Funds (as quoted by NASDAQ)
10 Boston Stock Exchange
13 Chicago Stock Exchange
16 Pacific Stock Exchange
17 Philadelphia Stock Exchange
19 Toronto Stock Exchange
20 Over-The-Counter (Non-NASDAQ Dealer Quotations)
31 When-issued trading on NYSE
32 When-issued trading on NYSE MKT
33 When-issued trading on NASDAQ
34 When-issued trading on Arca
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