Monday March 7, 2011
I have made the point usually using the Summation index for the New York Stock Exchange Index, which is $NYSI, that somehow magically, the market manages to rebound at just the right point to prevent a real collapse. That failed to happen during the flash crash of last May so let's take a look.
This is a daily graph of the NYSE with the PAR SAR on it. I left out comments or arrows or such to make it easier to see the graph. The market in March rallied right up to 7700, NOtice the PAR SAR had one buy bullet about April 26.Then when the market reversed and went thru 7750, bingo, all the stop sell orders, apparently using a system like this, were triggered. There were no buyers until 6700, 800 points later. Now it is easy to see why using an eyeball formula, that was the last support level in February.
It is then readily apparent that 6800 became the buy and sell level for quant generated programs for the next few months. There was no human reasoning or Warren Buffet this is value thinking going on here, just mindless quant generated HAL (Remember the movie 2001?) is in charge computer generated buying and selling.
The summation index is in the bottom panel, If one puts it in the center panel with the PAR SAR on it, one gets the same signal.
In our update yesterday we recommended that all longs sell out of the stock market. It looks like today is up, fine you will be selling into strength. Our point being that anyone thinking there will be time to get out, when we have apparently finished five of five up from March 9, 2009 in the count we showed this weekend, is likely to be seriously disappointed.
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