Protege, please explain. i have seen the definition of dml vary quite a bit since it was first introduced.
This is an on-going study. We are still learning how to read DMLs and they have been one of the most useful indicators we've had on predicting moves, during the past 3 or 4 months. But the definition has not "changed". . . though the whole concept has certainly become more defined and clear.
Clearest definition we have so far. . . .
A 4DML begins with a sharp gap up. Followed by at least 2 [generally 3] closes at near-term lows. . . .with the low of day being reached sometime between 1:30pm and closing. There is most often a break day on either the 2nd or 3rd day of the 4DML, where the indices may even end higher. But the confirmation that 4DML has occurred can only come when the low of day is hit hard on either the 3rd or 4th day. . . .those are typically the most powerful squeeze days. If a hard squeeze occurs on the 3rd day, the 4th may be lighter. . . .and if the 3rd day does not squeeze as much as is expected, as in the case we have currently, then the 4th day is typically quite severe. Margin Liquidation Squeezes may occur on the Nasdaq COMPX, the NDX, the Dow or even be isolated to the high-fliers or some sector. If you want to get technical about it, it could occur on a single stock. And then there are the variations, which include the rare 5DML, the more common Compounded 4DML and the S-4DML, which is the whole thing upside down, where shorts are squeezed.
I am saying that we should be on the alert for a severe decline on Monday. . . .and a big buying op to boot. . .because Friday's decline did not culminate in a severe squeeze. So based on the definition of the 4DML, if that is what we are in, which it sure appears to be. . . .then the major brokerages will likely manipulate the markets into a late day selloff for the purpose of liquidating as many assets as possible from those who have not covered margin calls.
When the markets are being manipulated so severely, we must concentrate more on studying the manipulation, since the market is no longer moving "on its own" . . .which is the basis for all technical analysis.
So when choosing the right tool for the job, you must first ask yourself whether you think the markets are currently free to move based on the trading or if they are being manipulated by the major brokerage houses. Applying either discipline incorrectly can bring misleading results.
Rande Is |
