No. of Recommendations: 22
Back in the following post -
https://www.shrewdm.com/MB?pid=430752207 - musselmant wrote / quoted the following:
"When we see days like these, where 90% of the volume on the NYSE is higher, and 90% of all stocks are in the green, it tends to be bullish for the next 12 months of gains....
The last 90/90 day was April 9th of this year, when we had a 90-day pause on Tariffs. The S&P 500 is up 29.8% since then; the Nasdaq 100 has gained 37.5%.
Since 1982, we have seen one negative, one flattish, and 12 positive sets of returns over the 12 months that followed a 90/90 day. It’s not a guarantee, but it suggests favorable odds for remaining constructive." Barry RitholzWithin the data collected for calculating the Extremely Simple Bottom Detector (ESBD) is [NYSE advn], [NYSE decln] & [NYSE unchn] and so could [%advn] (of stocks) be used to help determine re-entries into the market following corrections & bear markets?
In general it's difficult to determine when to re-enter. Frequently a bottom detector can fire multiple times at various levels of distress as the market makes its way towards the ultimate low. And in a fully fledged 'full panic' bear market this may exhibit itself in multiple waves of bottom signals (of various strengths) between which the market takes a bit of a 'breather' before further concern / panic sets in leading to further declines. As a result I've frequently suggested that one looks for an 'up day on increasing volume'. But how strong an 'up day'? musselmant's quote may suggest a possible measure of 'up day' strength.
After some additional work I propose that a good potential 'pay attention as the decline may be over' indicator is …
[NYSE advn] / [NYSE total] > 86.48% [AND] [^GSPC volume today] > [^GSPC volume yesterday]
… where the 86.48% is the mean - 2 standard deviations of the [NYSE %advn]. This combines a representation of the quoted idea that '90% of all stocks are in the green' combined with an 'up day on increasing volume' (that is a 86.5% green day will result in the S&P500 being positive and so combining that with increasing volume).
It seems to work pretty well. If you combine this with a MajorBot or ExtrmBot from the ESBD the only time this re-entry signal failed to fire is during the 2011 correction (the advance criteria was met but not the increasing volume) - so you might still want some sort of back-up entry criteria. Remove the 'up volume' criteria & there are far more interim signals and the re-entry indicator will fire during 'breather' periods. However generally speaking if one sees an 86.5%-90% advance day on increased volume (from the prior day) the worst is likely over for the current (bear market) decline.
For the visually inclined, this is how it looks when combined with the ESBD -
https://ibb.co/V004nBYG - through to the end of the prior week.
Platy
