I bring in data from Yahoo and Worden, transfer what I need to Excel spreadsheets and look at the resulting charts each market day. I start at around 7 PM ET and finish around 10:30 PM ET. Then, after dinner I spend another 3 hours writing and posting my newsletter. Fortunately I live on the West Coast.
I use the morning hours to analyze economic data released that day and trade for my account and those I manage for clients.
Obviously you have to really love the stock market to do this, and you must have a wonderful spouse.
Re: Great Information
mInvestor
9/29/2011 12:17:18 PM
Fred,
That's very helpful.
In terms of historical data, I was wondering the same thing. Yes, it's not easy to extract all those data.
You said you were monitering almost 50 indicators everyday. How did you do that? Do you calculate all those indicators by yourself everyday? Or you find sources soemwhere else. That's not a easy task.
The formula is incredibly simple, but the collection of back data is difficult, which is why I only have the last 14 years.
You note the Dow at 10 AM and at 3 PM and then subtract yesterday's close from 10 AM and subtract 3 PM from today's close. You then take the morning figure and subtract it from the afternoon calculation. Therefore, prior close - 10 AM + today's close - 3 PM.
That gives you the figure for the current day. So For example on Wednesday the Dow was at 11302.17 at 10 AM according to the Wall Street Journal which prints the hourly figures every day. If you subtract Tuesdsay's close of 11190.89 from it you get 111.28.
Wednesday's close was 11015.10 and it traded at 11131.31 at 3 PM, so the afternoon number was -116.21. Then subtracting the AM figure of 111.28 from the PM figure of -116.21 gives you -227.49 for the day.
I like to add today's number to the cumulated totals of all the previous days so my cumulated total yesterday was 3797.67, but this will depend on when you start and isn't important, it is simply a relative number so its absolute value doesn't matter.
My final number is the average of the cumulated numbers from the last 10 days, and again it is a relative number so the absolute value is not important.
I did not invent this indicator so if you Google "Smart Money Index" you will find other references and data streams that go back further than mine. However, I think you will find the use of the 10-day cumulative average to be unique to me as well as another version I developed that incorporates the volume traded in the first 30 minutes and the last hour.
I must emphasize that no single indicator is right all the time and sometimes every indicator will be wrong. This is why I look at at least 50 indicators every day and try to make sense of the market from observing them and careful study of dozens of economic indicators released by the government and other organizations.
Re: Great Information
mInvestor
9/28/2011 11:31:27 PM
Fred,
Thank you for this interesting artical. Can you show me the exact equation to calculate this index? Or if you can point me a resource link.
You metioned 14 years history, what happens if you apply this index to a longer period, such as 50 years.
I agree more rallies and declines coming in the next several months. It's good we can have a useful tool to predict or guess the bottoms and peaks.
Well Scott, I see the mother-of-all stock market (rallies/declines) starting on November 6, 2012 when ( blank ) wins the election. I leave it to you to check off and fill in the appropriate blank. The country is so divided that there is likely to be a very big reaction to the outcome.
In the meantime I am anticipating a volatile 13 months with several highs and lows.
Yes, in agreement Fred. I like to do fundamental research and use technical analysis to either confirm or deny the trend.
Your indicators are great, I love them. I will be looking for them to confirm some sort of bottom in 2012.
It's also interesting that I have seen many "mega-trend" indicators that all converge on 2012. In addition, that represents 12 years of a bear market. When it does finally form, it could be the most significant stock-market bottom since the 1970s. Do you see it that way?
Your view of fundamentals and mine calls for further market weakness, we have no differences there. I am looking for much lower prices ahead. However, if it happens on a straight line it would be the first time in history.
Rather, I am looking for several pretty substantial rallies to break up the decline to the eventual final low. It is the job of technical analysis to attempt to profit from the bounces.
The "Smart Money" Indicator has had an ability in the past 14 years to locate important bottoms within a few weeks of the lows, but it says nothing about the time that will elapse before the next decline or how far the interim rally will carry.
In my view, fundamental and technical analysis is like love and marriage, you can't have one without the other.
My primary concern is that Wall Street strategists/analysts have only recently started lowering earnings for 2012 in the last three months. Given all the bad macro data (ECRI shows we're now in recession), it's likely that earnings estimates will continue to be lowered through Q1 2012. Market has started to price this in, but it is likely not done yet. That's just my opinion, of course. (Disclosure: hedged short via S&P futures, puts, e.t.c.)
Interestingly the market opened up 258 points on Tuesday and lost 141 in the final hour for a net decline of 399 points. This was enough to move the 10-day cumulative average down 1 point to 4089. We'll see how we close today, but the the market rallied 120 points in the opening 30 minutes that contribute to another drop in the indicator.
The indicator decline Tuesday was probably caused by day-trader bargain hunters buying in the morning and selling before the close and is part of the bottoming process.
I am looking for the market to bottom, as most traders are, but I expect it will be more of a bottoming area than a bottoming point so we should expect this inticator to have more ups and downs before it moves definitively lower to signal the end of the decline.
Re: Binary Events
Dex
9/28/2011 12:50:21 PM
Aw comeon Scott! Let us have our moment here. Fred says things are looking up. I don't want to find reasons to disbelieve.
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