From: owner-canslim-digest@lists.xmission.com (canslim-digest) To: canslim-digest@lists.xmission.com Subject: canslim-digest V2 #527 Reply-To: canslim Sender: owner-canslim-digest@lists.xmission.com Errors-To: owner-canslim-digest@lists.xmission.com Precedence: bulk Content-Transfer-Encoding: quoted-printable X-No-Archive: yes canslim-digest Tuesday, February 9 1999 Volume 02 : Number 527 In this issue: Re: [CANSLIM] Small caps underperformance due to liquidity problem? Navellier explains... [CANSLIM] ALKS - flag ? [CANSLIM] ERG [CANSLIM] Stay put? Re: [CANSLIM] Small caps underperformance due to liquidity problem? Navellier explains... Re: [CANSLIM] ALKS - flag ? Re: [CANSLIM] Small caps underperformance due to liquidity problem? Navellier explains... Re: [CANSLIM] ALKS - flag ? Re: [CANSLIM] ALKS - flag ? [CANSLIM] INDU triangles [Connie Mack] Re: [CANSLIM] ALKS - flag ? Re: [CANSLIM] INDU triangles [Connie Mack] Re: [CANSLIM] INDU triangles & Ed Malone [Connie Mack] [CANSLIM] Rally? [CANSLIM] Today's carnage ---------------------------------------------------------------------- Date: Mon, 8 Feb 1999 21:18:32 -0500 From: "Tom Worley" Subject: Re: [CANSLIM] Small caps underperformance due to liquidity problem? Navellier explains... Johan, While I agree in part with Navellier, esp concerning the part about the new Order Display rules tightening the spread, I disagree that it has reduced/eliminated inventory, and to that degree reduced/eliiminated liquidity. It is quite true that many firms have dropped their market making activities in the low volume Nasdaq small and micro caps since these rules were implemented. The simple fact of life is that there are certain fixed costs in making a market in a particular stock, and if the daily average volume is only 20,000 shares compared to another trading 150,000 a day, then making a 1/16 on the latter is clearly more attractive. On the other hand, liquidity is measured in more ways than inventory, it is also measured in a market maker's willingness to take in inventory, or to create a short position in times of demand. During my last year or so running a full service "back office" I dealt primarily with Knight Securities for Naz stock trades. Knight was and likely still is the second largest market maker in Naz stocks. They dropped very few stocks, rather reducing the "soft dollars compensation" they paid to firms like mine. But they still gave me instant execution on trades of up to 2000 shares if the order (mkt or limit) met the instant mkt quote. They would still "work an order" in the spread; they still gave price improvement even if the bid/ask hadn't changed should they be able to get better execution. From my personal experience, I have not noticed a sig drop in liquidity, measured in terms of avg daily volume, since the implementation of the Order Display rules. Rather, what I have noticed is some tightening of spreads, esp on the large cap highly liquid Naz stocks, combined with my ability as an individual investor to have my order represented, and often executed, when I am the high bid or low offer. I am able to make my own decisions on whether I want to absorb the size of the spread, or to try and shave it and gamble on not getting executed. The lack of liquidity on small float stocks is nothing new, it's been with us for decades. And because of the small float, a small to non-existent inventory has also been part of the process. OTOH, the relationship between the mkt maker and the company has often provided the MM with the protection of knowing he/they could acquire stock in volume from the insiders at the company should they need it to recover from an otherwise disasterous short position when a small/micro cap starts to run and they don't want to gamble on holding the short position any longer. Tom W stkguru@netside.net ICQ # 5568838 - -----Original Message----- From: Johan Van Houtven To: canslim@lists.xmission.com Date: Monday, February 08, 1999 12:20 PM Subject: [CANSLIM] Small caps underperformance due to liquidity problem? Navellier explains... Finally someone who explains this "liquidity" problem in understandable terms. Why the liquidity problem? Navellier: Under the new Nasdaq rules the spreads are so tight there=92s no inventory of stock. It all boils down to flow of funds. Can you explain these rules? Navellier: The new rules, imposed by the Justice Department last year, were designed to bring Instinet pricing to Nasdaq. Instinet is a Reuters system that we managers use to trade among each other. We usually pay a 16th over the bid and four-tenths of a cent commission. The bottom line is we=92ve always had a better deal =96 tighter spreads =96 than the public. Navellier: The new rules changed that so that today the retail public has the same prices that we managers have. Bid-ask spreads have been squeezed for the retail investor, which means you can buy at a better price. That=92s the good news. The problem is, when they squeeze spreads, they squeeze market makers. If you look at a lot of stocks, market makers have been abandoning Nasdaq because the spreads are too tight. Merrill (MER), for example, stopped making markets on 350 stocks last year. How does this affect small caps? Navellier: On a micro cap you might have four market makers =96 that is, people holding inventory of stock and making a market on it. On a small cap you might have seven or eight. A mid cap might have 15, and large cap, like Dell (DELL), might have 80. Because small caps have fewer market makers, when the market maker leaves it=92s more devastating. I think that=92s one of the main reasons small caps have done poorly. The full article can be found at: http://cbs.marketwatch.com/archive/19990208/news/current/mic rocap.htx Johan - - - - ------------------------------ Date: Mon, 8 Feb 1999 23:15:29 -0500 From: "Dave Wood" Subject: [CANSLIM] ALKS - flag ? Everybody, I have never had much luck with flag formations; I have bought two in my life, and been stopped out the next day on each. I am obviously doing something wrong with this type of formation. I need some advice; does anyone else see ALKS as a flag ? The pole started 12/27 ending 1/21 taking the stock up some 85 %. If this is right, we are in the second week of the actual flag. Dave - - ------------------------------ Date: Mon, 08 Feb 1999 22:17:03 -0800 From: "George W. Gregory" Subject: [CANSLIM] ERG While ERG stands for the items referred to by Mike; E EPS Rank, R Rel Strength and G Group Rank, this was strictly a theory conceived by Ian Woodward. It is not a WON term, and should not be used as such. Regards, George - - ------------------------------ Date: Tue, 09 Feb 1999 06:39:58 -0500 From: Jeffry White Subject: [CANSLIM] Stay put? > Nervous if it is a short, but a put? Nah....... (besides it's your money :-) > > Just remember, > The real winners have a way of breaking all the rules, technical or > fundamental. > > Regards, > > Frank Wolynski Points duly noted. I actually think we are due for a rally in the indices, particularly if we open near, or drop near or below the recent low (1235) on the SP500 Futures contract (SPH) this morning and reverse (volume increase or not). Sooooo....I closed the DELL put yesterday for a handsome little chunk. Will try the beast again. Took off the bulk of my OEX Febs, as well. Looking for a failed rally attempt to reopen with March Puts. Probably use the Connie Mack indicators team (3,7,10 EMA and slow stos for short entry on the indices, BTW). A short is a short, unless it's a put? ;) Regards, Frank - - ------------------------------ Date: Tue, 09 Feb 1999 10:00:05 +0100 From: Johan Van Houtven Subject: Re: [CANSLIM] Small caps underperformance due to liquidity problem? Navellier explains... Tom, A few comments and questions: Here's how I understand this liquidity problem. If you have a smaller number of market makers making a market in a stock, chances are you will have less liquidity and therefor higher risk in trading that particular stock. I agree with Navallier that all other factors being equal it is best to have as many market makers as possible.=20 Example: If you have only 4 market makers for a stock and one of them is the main market maker, that market maker essentially controls the stock. It is my observation (NOT a scientifically researched fact) that when I was trading stocks that had few market makers, these market makers or maybe just one of them, could bring the price down almost 20% and then close the stock at the same level again the same day or the day after. The chance of this happening decreases if you have more market makers for a stock. What in your opinion could be the reason that MER stopped making markets in 350 stocks last year and that a lot of others also stopped making markets in some NASDAQ stocks? Wouldn't it be unfair to take Knight as a representative market maker for all market makers? They are probably the biggest and the fastest growing of the significant market makers. I quote: "Knight/Trimark group [NASDAQ: NITE] is the leading in Nasdaq securities and in the Third Market, which is the over-the-counter (OTC) market in exchange-listed equity securities, primarily on the New York Stock Exchange (NYSE). The Company attained this leadership position by providing the best execution services to broker-dealer and institutional customers through its sophisticated trading=20 systems and proprietary methods. The Company makes markets in approximately 6,700 equity securities in Nasdaq and on the OTC Bulletin Board of the National Association of Securities Dealers, Inc. (NASD). The company's customers include PaineWebber, Merrill Lynch, E*TRADE, and AmeriTrade, among others. A group of 27 broker-dealers owns 48% of the company. The company just registered to sell up to nine million Class A common shares. Of the total amount, 2,400,000 shares will be offered by the company and 6,600,000 shares will be sold by selling shareholders. At 09:18 PM 08-02-99 -0500, you wrote: >Johan, > >While I agree in part with Navellier, esp concerning the >part about the new Order Display rules tightening the >spread, I disagree that it has reduced/eliminated inventory, >and to that degree reduced/eliiminated liquidity. It is >quite true that many firms have dropped their market making >activities in the low volume Nasdaq small and micro caps >since these rules were implemented. The simple fact of life >is that there are certain fixed costs in making a market in >a particular stock, and if the daily average volume is only >20,000 shares compared to another trading 150,000 a day, >then making a 1/16 on the latter is clearly more attractive. > >On the other hand, liquidity is measured in more ways than >inventory, it is also measured in a market maker's >willingness to take in inventory, or to create a short >position in times of demand. During my last year or so >running a full service "back office" I dealt primarily with >Knight Securities for Naz stock trades. Knight was and >likely still is the second largest market maker in Naz >stocks. They dropped very few stocks, rather reducing the >"soft dollars compensation" they paid to firms like mine. > >But they still gave me instant execution on trades of up to >2000 shares if the order (mkt or limit) met the instant mkt >quote. They would still "work an order" in the spread; they >still gave price improvement even if the bid/ask hadn't >changed should they be able to get better execution. > >>From my personal experience, I have not noticed a sig drop >in liquidity, measured in terms of avg daily volume, since >the implementation of the Order Display rules. Rather, what >I have noticed is some tightening of spreads, esp on the >large cap highly liquid Naz stocks, combined with my ability >as an individual investor to have my order represented, and >often executed, when I am the high bid or low offer. I am >able to make my own decisions on whether I want to absorb >the size of the spread, or to try and shave it and gamble on >not getting executed. The lack of liquidity on small float >stocks is nothing new, it's been with us for decades. And >because of the small float, a small to non-existent >inventory has also been part of the process. OTOH, the >relationship between the mkt maker and the company has often >provided the MM with the protection of knowing he/they could >acquire stock in volume from the insiders at the company >should they need it to recover from an otherwise disasterous >short position when a small/micro cap starts to run and they >don't want to gamble on holding the short position any >longer. > >Tom W >stkguru@netside.net >ICQ # 5568838 > > >-----Original Message----- >From: Johan Van Houtven >To: canslim@lists.xmission.com >Date: Monday, February 08, 1999 12:20 PM >Subject: [CANSLIM] Small caps underperformance due to >liquidity problem? Navellier explains... > > >Finally someone who explains this "liquidity" problem in >understandable terms. > > >Why the liquidity problem? > >Navellier: Under the new Nasdaq rules the spreads are so >tight there=92s no >inventory of stock. It all boils down to flow of funds. > >Can you explain these rules? > >Navellier: The new rules, imposed by the Justice Department >last year, were >designed to bring Instinet pricing to Nasdaq. Instinet is a >Reuters system >that we managers use to trade among each other. We usually >pay a 16th over >the bid and four-tenths of a cent commission. The bottom >line is we=92ve >always had a better deal =96 tighter spreads =96 than the >public. > >Navellier: The new rules changed that so that today the >retail public has >the same prices that we managers have. Bid-ask spreads have >been squeezed >for the retail investor, which means you can buy at a better >price. That=92s >the good news. The problem is, when they squeeze spreads, >they squeeze >market makers. If you look at a lot of stocks, market makers >have been >abandoning Nasdaq because the spreads are too tight. Merrill >(MER), for >example, stopped making markets on 350 stocks last year. > >How does this affect small caps? > >Navellier: On a micro cap you might have four market >makers =96 that is, >people holding inventory of stock and making a market on it. >On a small cap >you might have seven or eight. A mid cap might have 15, and >large cap, like >Dell (DELL), might have 80. Because small caps have fewer >market makers, >when the market maker leaves it=92s more devastating. I think >that=92s one of >the main reasons small caps have done poorly. > > >The full article can be found at: > >http://cbs.marketwatch.com/archive/19990208/news/current/mic >rocap.htx > > > >Johan > > > > > > >- > > > >- > > Johan - - ------------------------------ Date: Tue, 9 Feb 1999 07:14:07 -0500 From: "Tom Worley" Subject: Re: [CANSLIM] ALKS - flag ? Dave, Doesn't look like a flag to me, but I admit I'm not good at these type of formations. To me, it just looks like a nice consolidation and basing action. On the other hand, it's definitely not a CANSLIM stock with an EPS of 8, losses increasing and expected to be double for the year ending March compared to the prior year, and almost as bad for the new year. Tom W stkguru@netside.net ICQ # 5568838 - -----Original Message----- From: Dave Wood To: canslim-digest Date: Monday, February 08, 1999 11:14 PM Subject: [CANSLIM] ALKS - flag ? Everybody, I have never had much luck with flag formations; I have bought two in my life, and been stopped out the next day on each. I am obviously doing something wrong with this type of formation. I need some advice; does anyone else see ALKS as a flag ? The pole started 12/27 ending 1/21 taking the stock up some 85 %. If this is right, we are in the second week of the actual flag. Dave - - - - ------------------------------ Date: Tue, 9 Feb 1999 07:56:30 -0500 From: "Tom Worley" Subject: Re: [CANSLIM] Small caps underperformance due to liquidity problem? Navellier explains... Johan, I think Knight is a very valid comparison to Merrill Lynch. Merrill dropped 350 Naz stocks in which it did little if any business or volume. They were probably costing Merrill money even before the spread tightened and all of us got to compete by having our bids and offers represented to the marketplace. Far more important than the number of MMers is how significant they are to a particular stock. I have seen no reports or evidence that there has been a mass exodus of significant market makers from any stock. Like any business that suffered a contraction in any form, a company must look to cut out the least valuable part of the operation. Market making for Merrill in Naz stocks never was a big part of their business, and cutting out the ones that were not meaningful to them, and laying off a few traders, saves money and makes sense. But just because they were a MM on 350 stocks, and departed, likely had little effect on most of those 350 stocks. Tom W stkguru@netside.net ICQ # 5568838 - -----Original Message----- From: Johan Van Houtven To: canslim@lists.xmission.com Date: Tuesday, February 09, 1999 7:17 AM Subject: Re: [CANSLIM] Small caps underperformance due to liquidity problem? Navellier explains... Tom, A few comments and questions: Here's how I understand this liquidity problem. If you have a smaller number of market makers making a market in a stock, chances are you will have less liquidity and therefor higher risk in trading that particular stock. I agree with Navallier that all other factors being equal it is best to have as many market makers as possible. Example: If you have only 4 market makers for a stock and one of them is the main market maker, that market maker essentially controls the stock. It is my observation (NOT a scientifically researched fact) that when I was trading stocks that had few market makers, these market makers or maybe just one of them, could bring the price down almost 20% and then close the stock at the same level again the same day or the day after. The chance of this happening decreases if you have more market makers for a stock. What in your opinion could be the reason that MER stopped making markets in 350 stocks last year and that a lot of others also stopped making markets in some NASDAQ stocks? Wouldn't it be unfair to take Knight as a representative market maker for all market makers? They are probably the biggest and the fastest growing of the significant market makers. - - ------------------------------ Date: Tue, 9 Feb 1999 08:45:11 -0800 From: "Peter Newell" Subject: Re: [CANSLIM] ALKS - flag ? - -----Original Message----- From: Dave Wood To: canslim-digest Date: Monday, February 08, 1999 8:14 PM Subject: [CANSLIM] ALKS - flag ? >Everybody, > I have never had much luck with flag formations; I have bought two in my >life, and been stopped out the next day on each. I am obviously doing >something wrong with this type of formation. > I need some advice; does anyone else see ALKS as a flag ? The pole started >12/27 ending 1/21 taking the stock up some 85 %. If this is right, we are in >the second week of the actual flag. > >Dave > > >- > - - ------------------------------ Date: Tue, 9 Feb 1999 08:49:40 -0800 From: "Peter Newell" Subject: Re: [CANSLIM] ALKS - flag ? Dave, IMHO, way to much down volume and too much volume period. On the plus side still staying on the upper end of the 1/26 surge. I'd wait for it to move on volume to the up side and hopefully calm down some. Use the 1/26 high for a stop. Peter Newell - -----Original Message----- From: Dave Wood To: canslim-digest Date: Monday, February 08, 1999 8:14 PM Subject: [CANSLIM] ALKS - flag ? >Everybody, > I have never had much luck with flag formations; I have bought two in my >life, and been stopped out the next day on each. I am obviously doing >something wrong with this type of formation. > I need some advice; does anyone else see ALKS as a flag ? The pole started >12/27 ending 1/21 taking the stock up some 85 %. If this is right, we are in >the second week of the actual flag. > >Dave > > >- > - - ------------------------------ Date: Tue, 09 Feb 1999 11:07:00 -0500 From: Connie Mack Rea Subject: [CANSLIM] INDU triangles [Connie Mack] You have a chance today to do a bit of charting that may give some indication as to the condition of INDU. On BigCharts, 3-mos, originate a trend line at the 12-20 close of 9320. Extend it through the 2-3 close of 9366--a pretty flat line that tops off the congestion of the middle of January and will form the top of a triangle. Originate a line at the 12-14 of 8695. Extend the line through the 1-22 low of 9120. Call this Triangle A. Originate a trend line on 1-8 of 9623. Extend it through 2-3 of 9366. This will form a second triangle with the top of Triangle A as its bottom. Call it Triangle B. The top of Triangle B and the bottom of Triangle A form a third triangle. Call it Triangle C. What is relevant about the three triangles is that the apex of each intersects at yesterday's close. The usual reading of the intersection of the flat top of A is that a change of price direction is about to take place. The same may be said of B. The complex triangle composed of the bottom of A and top of B [Triangle C] is similarly read: A change of price direction is near at hand. Another standard reading of any of the triangles is that the further the price advances on the apex there is less assurance of determining which way price will go. The preference for the investor or trader would be that price would breakout from two thirds to three fourths of the way to the apex. The present context, all three triangles' apex filled right out to the further most point, is the worst possible conjunction of price and triangle. To make an inference about the next direction of the price, you'll have to look elsewhere. The SloSto has been down for the last few days. The MACD is flat but slightly positive [both lines above the marker line [0]]. No help here. The Volume+ indicator is not helpful and is slightly negative. The 3/7/10 EMA is to be read as are the converging lines at the apex of Triangles A, B, and C. The EMA is as congested as it can be and therefore to be read as marking a dangerous, short term period. When you don't know what to do, do nothing. My response to this context is to be out of the market. Before yesterday's close, I closed the only two positions I held: NOVL and IAD. Once I decide which way I think the market is going, I will again watch NOVL, IAD, and MU. Too, I will watch CIEN. I have switched some money over to my margin account, just in case. This reading is a short term reading. To look longer range, use a 1-year weekly chart. It is only modestly different from the short term. Almost any lower trend line will have its apex near yesterday's close. The present market context is a good time to decide just how good CS is as a prognosticator of market direction. How much price will you give up before you want to loosen up on some of your holdings should the market decline? Connie Mack - - ------------------------------ Date: Tue, 09 Feb 1999 10:56:02 -0600 From: DS Subject: Re: [CANSLIM] ALKS - flag ? Dave Wood wrote: > > Everybody, > I have never had much luck with flag formations; I have bought two in my > life, and been stopped out the next day on each. I am obviously doing > something wrong with this type of formation. > I need some advice; does anyone else see ALKS as a flag ? The pole started > 12/27 ending 1/21 taking the stock up some 85 %. If this is right, we are in > the second week of the actual flag. > > Dave > > - Hi Dave, I certainly see this as a flag.......not a high tight flag........more like a falling flag in a rising trend. I don't see any kind of poll....just a rising trend. To me this looks like a perfect buy point if you are given to buying strongly trending stocks on pullbacks. ADX is 44 with DM+ above DM- and the stock is in the bottom of its trend channel. Also, the stock has tightened up in the last few days with volume declining. If the the M wind wasn't blowing in my face I would consider going long this stock.....it seems to be acting good. DSquires - - ------------------------------ Date: Tue, 9 Feb 1999 15:55:59 -0800 (PST) From: TM Subject: Re: [CANSLIM] INDU triangles [Connie Mack] "The EMA is as congested as it can be and therefore to be read as marking a dangerous, short term period." I've been scouring charts looking for this congestion because it seems like a fresh start especially if it has been there awhile. I try to correlate it with MF and OBV as you have taught. Recently, I have started watching stochastics (QP default is %K14,%k slow 4, %d slow 3). Big charts has the values (5,5) on the chart for slow stochastics. Could you explain the difference? Also, QP allows entry of values in OBV and MF, the default is 90 MA periods. Do you like this default? Thanks, I am catching on. TM > You have a chance today to do a bit of charting that may give some > indication as to the condition of INDU. > > On BigCharts, 3-mos, originate a trend line at the 12-20 close of > 9320. Extend it through the 2-3 close of 9366--a pretty flat line that > tops off the congestion of the middle of January and will form the top > of a triangle. > > Originate a line at the 12-14 of 8695. Extend the line through the 1-22 > low of 9120. Call this Triangle A. > > Originate a trend line on 1-8 of 9623. Extend it through 2-3 of 9366. > This will form a second triangle with the top of Triangle A as its > bottom. Call it Triangle B. The top of Triangle B and the bottom of > Triangle A form a third triangle. Call it Triangle C. > > What is relevant about the three triangles is that the apex of each > intersects at yesterday's close. The usual reading of the intersection > of the flat top of A is that a change of price direction is about to > take place. The same may be said of B. The complex triangle composed > of the bottom of A and top of B [Triangle C] is similarly read: A > change of price direction is near at hand. > > Another standard reading of any of the triangles is that the further the > price advances on the apex there is less assurance of determining which > way price will go. The preference for the investor or trader would be > that price would breakout from two thirds to three fourths of the way to > the apex. > > The present context, all three triangles' apex filled right out to the > further most point, is the worst possible conjunction of price and > triangle. To make an inference about the next direction of the price, > you'll have to look elsewhere. The SloSto has been down for the last > few days. The MACD is flat but slightly positive [both lines above the > marker line [0]]. No help here. > > The Volume+ indicator is not helpful and is slightly negative. > > The 3/7/10 EMA is to be read as are the converging lines at the apex of > Triangles A, B, and C. The EMA is as congested as it can be and > therefore to be read as marking a dangerous, short term period. > > When you don't know what to do, do nothing. My response to this context > is to be out of the market. Before yesterday's close, I closed the only > two positions I held: NOVL and IAD. > > Once I decide which way I think the market is going, I will again watch > NOVL, IAD, and MU. Too, I will watch CIEN. I have switched some money > over to my margin account, just in case. > > This reading is a short term reading. To look longer range, use a > 1-year weekly chart. It is only modestly different from the short term. > Almost any lower trend line will have its apex near yesterday's close. > > The present market context is a good time to decide just how good CS is > as a prognosticator of market direction. How much price will you give > up before you want to loosen up on some of your holdings should the > market decline? > > Connie Mack > > > > > - > > _________________________________________________________ DO YOU YAHOO!? Get your free @yahoo.com address at http://mail.yahoo.com - - ------------------------------ Date: Tue, 09 Feb 1999 20:22:48 -0500 From: Connie Mack Rea Subject: Re: [CANSLIM] INDU triangles & Ed Malone [Connie Mack] Evening Ed-- I've queried BC twice about their stochastics, but heard nothing. I use a 5,5,3 and 5,3,3 which is a bit quicker. You may find that the MACD is as good or better for signalling. I use 8/17/9 for buying and 12/28/9 for selling. These are standard settings, and you need not defer to either. E.g., today I trade AMAT four times. The MACD was right on; the SloSto was near useless. Remember, I am using a Time & Sales chart and the 3/7/10 EMA overlaid on 5-minute and 10-minute charts also. I would have done better had I just followed the MACD. As for the 90-day default, sounds fine to me. That is what I use with my initial scan. I may turn to a 10-day period just for a different perspective. Remember that the last 10 days are probably the most relevant, for you can never know how 20 days prior to the first day of the 10 day period is to be read. I.e., once the Positive Divergence is broken, you can never be sure if it is ever to be relevant again. I, therefore, put heavy emphasis on the last ten days. If there has been a long period of PD, say, for 30 or more unbroken days, then that is obviously of more significance than a final 10-day PD. The influence of MF and OBV is imprecise; they are gross indicators. And they frequently differ from software to software. Sounds to me like you are doing just fine, Ed. Now, let's decide what the hell to handle today's bust. What do you suggest? Connie Mack TM wrote: > "The EMA is as congested as it can be and > therefore to be read as marking a dangerous, short term period." > I've been scouring charts looking for this congestion because it seems > like a fresh start especially if it has been there awhile. I try to > correlate it with MF and OBV as you have taught. Recently, I have > started watching stochastics (QP default is %K14,%k slow 4, %d slow > 3). Big charts has the values (5,5) on the chart for slow > stochastics. Could you explain the difference? Also, QP allows entry > of values in OBV and MF, the default is 90 MA periods. Do you like > this default? > > Thanks, I am catching on. > > TM > > > You have a chance today to do a bit of charting that may give some > > indication as to the condition of INDU. > > > > On BigCharts, 3-mos, originate a trend line at the 12-20 close of > > 9320. Extend it through the 2-3 close of 9366--a pretty flat line > that > > tops off the congestion of the middle of January and will form the top > > of a triangle. > > > > Originate a line at the 12-14 of 8695. Extend the line through the > 1-22 > > low of 9120. Call this Triangle A. > > > > Originate a trend line on 1-8 of 9623. Extend it through 2-3 of 9366. > > This will form a second triangle with the top of Triangle A as its > > bottom. Call it Triangle B. The top of Triangle B and the bottom of > > Triangle A form a third triangle. Call it Triangle C. > > > > What is relevant about the three triangles is that the apex of each > > intersects at yesterday's close. The usual reading of the > intersection > > of the flat top of A is that a change of price direction is about to > > take place. The same may be said of B. The complex triangle composed > > of the bottom of A and top of B [Triangle C] is similarly read: A > > change of price direction is near at hand. > > > > Another standard reading of any of the triangles is that the further > the > > price advances on the apex there is less assurance of determining > which > > way price will go. The preference for the investor or trader would be > > that price would breakout from two thirds to three fourths of the > way to > > the apex. > > > > The present context, all three triangles' apex filled right out to the > > further most point, is the worst possible conjunction of price and > > triangle. To make an inference about the next direction of the price, > > you'll have to look elsewhere. The SloSto has been down for the last > > few days. The MACD is flat but slightly positive [both lines above > the > > marker line [0]]. No help here. > > > > The Volume+ indicator is not helpful and is slightly negative. > > > > The 3/7/10 EMA is to be read as are the converging lines at the apex > of > > Triangles A, B, and C. The EMA is as congested as it can be and > > therefore to be read as marking a dangerous, short term period. > > > > When you don't know what to do, do nothing. My response to this > context > > is to be out of the market. Before yesterday's close, I closed the > only > > two positions I held: NOVL and IAD. > > > > Once I decide which way I think the market is going, I will again > watch > > NOVL, IAD, and MU. Too, I will watch CIEN. I have switched some > money > > over to my margin account, just in case. > > > > This reading is a short term reading. To look longer range, use a > > 1-year weekly chart. It is only modestly different from the short > term. > > Almost any lower trend line will have its apex near yesterday's close. > > > > The present market context is a good time to decide just how good CS > is > > as a prognosticator of market direction. How much price will you give > > up before you want to loosen up on some of your holdings should the > > market decline? > > > > Connie Mack > > > > > > > > > > - > > > > > > _________________________________________________________ > DO YOU YAHOO!? > Get your free @yahoo.com address at http://mail.yahoo.com > > - - - ------------------------------ Date: Tue, 09 Feb 1999 20:46:10 -0500 From: Jeffry White Subject: [CANSLIM] Rally? Watching for and expecting a viscious gap down on the open tomorrow, and hoping for a reversal showing us the first rally attempt in this down turn that began at the end of last month. I will open more shorts on the first sign of a rally failure. There's nothing on the long side that appeals to me, except, perhaps a daredevil long on a gap down opening of a few throw away DELL Feb. Calls in hopes of a run to earnings, bolstered by a short rally attempt in the market. For those who remain long and are longer term than I, the worst thing to see tomorrow would be a flat to higher open, IMHO. As painful as it may be, a gigantic flushing gap is the only sure sign that a chance to get out of those longs may come soon. Watch the sentiment numbers for signs of the wake up call being answered, and note the A/D on any rally for signs of likely continuing problems. The internet leaders are dead, the frenzy is over, the large cap leaders are struggling. Volume going down has been deceptively light, don't be fooled. Watch for a distribution day after several days run in any rally attempt. Read Chapter 7 of HTMMIS, again...and again. Good luck out there. Lambs coming soon to the White home. JW - - ------------------------------ Date: Tue, 9 Feb 1999 19:06:19 -0800 (PST) From: rolatzi Subject: [CANSLIM] Today's carnage Hi, I just browsed through the qp2 charts of the e-commerce list that some of our members (Frank?) put up a few weeks ago and noticed some significant breakdowns today. Namely, the following stocks broke through their 50d MA's: AMZN BEST CDNW CLNIC DRIV EBAY NSOL MSPG SPW SEEK TFSM YHOO closed at the 50d MA. It will be interesting to see what happens over the next few weeks. Ciao, rolatzi _________________________________________________________ DO YOU YAHOO!? Get your free @yahoo.com address at http://mail.yahoo.com - - ------------------------------ End of canslim-digest V2 #527 ***************************** To unsubscribe to canslim-digest, send an email to "majordomo@xmission.com" with "unsubscribe canslim-digest" in the body of the message. For information on digests or retrieving files and old messages send "help" to the same address. 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