I'm not even sure who I'm stealing this from. I find it fascinating, like a manuscript in a previously unseen language.
geocities.com
Care to comment?
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O’Neil Confirmation Watch
As of the close 4-25-01:
Today was day 23 of the current DOW rally.
3-27-01 was a confirmation day (day 3).
4-10-01 was a confirmation day (day 13).
4-18-01 was a confirmation day (day 18)
The intra-day low of 9338.15 (3-23-01) needs to hold for the rally process to proceed.
Today was day 12 of the current NAQ rally.
4-10-01 was a confirmation day (day 2).
4-11-01 was a confirmation day (day 3).
4-18-01 was a confirmation day (day 7)
The intra-day low of 1710.76 (4-9-01) needs to hold for the rally process to proceed.
Today was day 14 of the current S&P rally.
4-10-01 was a confirmation day (day 4).
4-17-01 was a confirmation day (day 8).
4-18-01 was a confirmation day (day 9).
The intra-day low of 1103.25 (4-5-01) needs to hold for the rally process to proceed.
Quote from “How To Make Money In Stocks” by William O’Neil:
“Just because the market corrects the day after a follow-through, however, does not mean the upward follow-through was false. When the general market bottoms, it frequently backs and fills (testing) near the lows made during the previous few weeks. It is usually more constructive if these pullbacks or tests hold up at least a little above the absolute intraday lows made recently in the market averages.”
Slightly lower volume today on the NYSE and NAQ. Will we follow the recent past trends of rebounding on lower volume, and selling off on higher volume (distribution)? I think it could go either way. It feels like it wants to rally, but…?? Congrats on some very nice TA calls by Rocket and Rich!!
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Bullish sentiment is 44.7%, UP from 44.5%. As we live through this bear, this indicator looms large to me as a roadblock to upward movement. It will be interesting to see what the figures are at “THE bottom”.
Bearish sentiment is 42.5%, UP from 37.0%. We’re getting there.
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Quote from IBD (3-2-01)
“No new bull market has ever started without a follow-through, although the market’s volatility generates more false positives than in previous years.”
VTO Report
The VTO Report shows short term NAQ support at 1850-1890, and short term resistance at 2230-2330.
DISTRIBUTION DAYS
DOW most recent distribution days:
2-16-01, 2-21-01, 2-28-01, 3-1-01, 3-12-01, 3-14-01, 3-16-01, 3-20-01, 3-21-01, 3-22-01, 4-3-01, 4-24-01
DOW most recent churn days:
1-31-01, 2-22-01, 2-27-01, 3-2-01, 3-9-01, 3-28-01, 4-04-01
NAQ most recent distribution days:
2-28-01, 3-2-01, 3-9-01, 3-12-01, 3-14-01, 3-16-01, 3-20-01, 3-21-01, 3-28-01, 3-29-01, 4-3-01, 4-24-01
NAQ most recent churn days:
1-30-01, 2-5-01, 2-13-01, 2-20-01, 2-27-01, 3-8-01, 4-04-01
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This O’Neil Confirmation Watch is simply one tool to look at to try to find the real bottom. There have been plenty of false rallies. I am simply studying it, and putting it up for analysis. I think this is a tool to be used in
addition to other tools. I have noticed that even though we have had several false confirmations, the IBD
general market page has normally been defensive, with a “yeah but” attitude about the chances of the success f these confirmations.
“Yeah but” is my attitude, but even if I am right, that does not mean we can’t have a short or intermediate term
rally.
Summary of the basics of O’Neil’s Confirmation method in identifying the bottom of a correction or bear market.
The first day of an attempted rally is simply a day where the close is up from the previous down day. That day is
the start of the count = day 1. The intra-day low on that first day is the support level, and if it is undercut on any following day, the rally fails, and you start over with the count.
We then look for a confirmation (follow-through) day, which is where an index is up 1% or more on increased volume from the day before. This usually occurs on the fourth through the seventh day of the rally, but sometimes works as early as the third day, or as late as the tenth day. Confirmations “after the tenth day may be acceptable, but somewhat weaker”.
Quotes from O’Neil (“24 Essential Lessons for Investment Success”)…”I have never missed the very beginning of a new bull market with this method of tracking the general market
indices carefully.
About 20% of the time they can give a false buy signal, which is fairly easy to recognize after a few days, because
the market will usually and noticeably fail on large volume.”
“Markets usually discount news items and look ahead of the economy—up to six months in advance. Don’t make your decisions based on your opinion of the news. Make it on the objective observation of when and how the general market indices finally change direction from their downward trend. Markets are rarely wrong; people’s opinions and fears are frequently wrong.” |
