George, in my opinion, a high trin in conjunction with a low (and negative Tick) is indeed capitulating and selling exhaustion is setting up (as they call it "oversold"), but when you get a high trin (more volume on down ticks despite the fact that uptics outnumber downtics as indicated by positive and high positive ticks), it indicates that the volume of selling overwhelm the volume of buying despite the fact that the number of uptics far exceeds the number of downticks). If that happens here and there, well, maybe one or two big stocks are temporarily in the ditch. When it becomes a pattern as it has been since April 20th, I have to interpret this as failure of the leadership (the high volume stocks) in general. Failure of the leadership has a very good chance of bringing down with it the rest of the markets.
I mentioned a number of times here that the last attempt (in late May) to get a recovery was marked by reduction in new highs and in the A/D ratio, which is congruent with a resumption of the bear, IMHO. Failing breakouts (like KLAC last week and VECO two weeks ago) is also a sign of a failing advance. I don't know why Hays and Stack do not see that. Hays "signal" of a 10 DMA in the ARMS above 1.5 should be looked at in its historical context. Someone posted here part of that Hays call early in April with a list of 11 cases when it has happened, fully half of these (6 out of 11) where pairs separated by three to four months, where the second occasion was a retest of the first low or even a lower low. We had a reading very similar to these last May and it resulted in a 40-50% rally with a distributive double top ending in September, the following lows (thei early April), were much lower than those reached first last May (by almost 50%). To me, unlike Hays and Stack, the high trin with very positive tick is a sign of stealth distribution by the big players, an oversold condition which maybe come much more oversold (when very negative ticks will accompany very high trin) to come.
Maybe someone has Hays' early May note where these historical examples were given and can repost these here so we can all examine the historical record of this "unfailing" indicator.
Zeev |
