Trade Secrets 1, Part 2: Market Direction

Adaptive Trading

Make Consistent Gains no matter what the market is doing!

Part 2: Market Direction; Interpreting Events & Clues

Determining Market Direction

1) Visual Clues

2) Market Breadth

3) Scan Counts

5 Major Patterns to Look For

Short Term Trend Line Breaks 4-8 per year Long Term Trend Line Breaks 2-4 per year Volume Climax Reversals 1-3 per year Consolidation Breaks 1-3 per year Well Formed Saucers 0-1 per year

Short Term Line Breaks

Break Bar

Pattern Duration: 2 Weeks to 1 Month

Long Term Line Breaks

Break Bar

Volume Climax Reversals

False Reversal

You Know on This Bar

Consolidation Breaks

Saucers

Signal Bar

Signal Bar

Saucers are rare patterns, but highly effective when identified.

Confirmation occurs at the right side of the curve.

Pattern Summary

Market Breadth

Market Breadth Indicators

The MktValue Indicator provides 47 End of Day Market Breadth indicators. Indicator: MktValue(ID)

case 1: s = "$AX150.N" ' Above Moving Average (150 days) (AMEX) case 2: s = "$150.N" ' Above Moving Average (150 days) (Global) case 3: s = "$NQ150.N" ' Above Moving Average (150 days) (NASDAQ) case 4: s = "$NY150.N" ' Above Moving Average (150 days) (NYSE) case 5: s = "$AX200.N" ' Above Moving Average (200 days) (AMEX) case 6: s = "$200.N" ' Above Moving Average (200 days) (Global) case 7: s = "$NQ200.N" ' Above Moving Average (200 days) (NASDAQ) case 8: s = "$NY200.N" ' Above Moving Average (200 days) (NYSE) case 9: s = "$AX50.N" ' Above Moving Average (50 days) (AMEX) case 10: s = "$50.N" ' Above Moving Average (50 days) (Global) case 11: s = "$NQ50.N" ' Above Moving Average (50 days) (NASDAQ) case 12: s = "$NY50.N" ' Above Moving Average (50 days) (NYSE) case 13: s = "$AXAD.N" ' Advance-Decline (AMEX) case 14: s = "$AD.N" ' Advance-Decline (Global) case 15: s = "$NQAD.N" ' Advance-Decline (NASDAQ) case 16: s = "$NYAD.N" ' Advance-Decline (NYSE)

case 17: s = "$AXAR.N" ' ARMS Index (AMEX) case 18: s = "$AR.N" ' ARMS Index (Global) case 19: s = "$NQAR.N" ' ARMS Index (NASDAQ) case 20: s = "$NYAR.N" ' ARMS Index (NYSE) case 21: s = "$AXBP.N" ' Bullish Percent Index (AMEX) case 22: s = "$BP.N" ' Bullish Percent Index (Global) case 23: s = "$NQBP.N" ' Bullish Percent Index (NASDAQ) case 24: s = "$NYBP.N" ' Bullish Percent Index (NYSE) case 25: s = "$VXD.N" ' CBOE DJIA Volatility Index case 26: s = "$VXN.N" ' CBOE NDX Volatility Index case 27: s = "$VXO.N" ' CBOE OEX Volatility Index case 28: s = "$VIX.N" ' CBOE SPX Volatility Index case 29: s = "$AXMO.N" ' McClellan Oscillator (AMEX) case 30: s = "$MO.N" ' McClellan Oscillator (Global) case 31: s = "$NQMO.N" ' McClellan Oscillator (NASDAQ) case 32: s = "$NYMO.N" ' McClellan Oscillator (NYSE) case 33: s = "$AXMI.N" ' McClellan Summation Index (AMEX) case 34: s = "$MI.N" ' McClellan Summation Index (Global) case 35: s = "$NQMI.N" ' McClellan Summation Index (NASDAQ) case 36: s = "$NYMI.N" ' McClellan Summation Index (NYSE) case 37: s = "$AX2W.N" ' New Highs-New Lows (2 Weeks) (AMEX) case 38: s = "$2W.N" ' New Highs-New Lows (2 weeks) (Global) case 39: s = "$NQ2W.N" ' New Highs-New Lows (2 Weeks) (NASDAQ) case 40: s = "$NY2W.N" ' New Highs-New Lows (2 Weeks) (NYSE) case 41: s = "$AX4W.N" ' New Highs-New Lows (4 Weeks) (AMEX) case 42: s = "$4W.N" ' New Highs-New Lows (4 weeks) (Global) case 43: s = "$NQ4W.N" ' New Highs-New Lows (4 Weeks) (NASDAQ) case 44: s = "$NY4W.N" ' New Highs-New Lows (4 Weeks) (NYSE) case 45: s = "$PCRE.N" ' Put/Call Ratio (Equity) case 46: s = "$PCRI.N" ' Put/Call Ratio (Index) case 47: s = "$PCRT.N" ' Put/Call Ratio (Total)

Market Breadth Interpretations

ID Symbol Name (All Global) Interpretation

14 $AD.N Advance-Decline MACD (2 Moving Avgs)

18 $AR.N ARMS Index Trending (ABOVE EMA)

22 $BP.N Bullish Percent Index Trending (ABOVE EMA)

30 $MO.N McClellan Oscillator Zero Crossover

34 $MI.N McClellan Summation Index Trending (ABOVE EMA)

47 $PCRT.N Put/Call Ratio (Total) Extreme Values (90%)

Code Examples:

MACD: EMA(indicator,12) > EMA(indicator,26)

Trending: Indicator > EMA(indicator,7)

Zero Crossover: Indicator > 0 and Indicator[2] < 0 ‘ Over 2 bars

Extreme Values: Indicator > (0.9*HHV(Indicator,250)) ‘ 90% and above recent data

Market Breadth ColorCharts

The Market Scan Template can be used to show the Bullish Zone for each Market Breadth Indicator using the Color Chart feature of OmniTrader.

Market Breadth Indicators with Bullish zone marked.

Market Breadth Composite

We can use a Scoring Function to combines all 6 Indicators into a single value. Weights are assigned to each Indicator to create the Composite. Definition: MktBreadth(A,B,C,D,E,F) A = Put/Call Ratio (90%+ Peaks) B = Bullish Percent Index (Trend) C = ARMS Index (Trend) D = McClellan Oscillator (Zero XOver) E = McClellan Summation (Trend) F = Advance/Decline (MACD)

Plot of MktBreadth(5,3,2,1,4,1)

ColorChart Above/Below Zero

OmniScan Counts

ScanCount() Indicator

The Indicator ScanCount(Scan,Bars)

...shows the count of symbols passing a Scan, over a given number of bars. Note: The first time ScanCount runs it has to perform an OmniScan to build the indicator. The data is saved.

OmniScan Interface... Now, any OmniScan can be used as a “Count” Indicator.

Keltner Channel Crossover

The Keltner Channel Crossover System is great at detecting KEY REVERSALS in charts. What if we COUNTED all Stocks with this Signal each day?

Keltner Channel Crossover Signals on XOM

Keltner Scan Counts

The Keltner Long Scan counts Stocks that are turning up through the lower Keltner Channel. The Keltner Short Scan counts Stocks that are turning down through the upper Keltner Channel. In the Keltner Scan Chart Termplate, we highlight those Long/Short values that are large, OPPOSITE to the Trend. Indicators plotted: ScanCount(“Keltner Longs”,350) ScanCount(“Keltner Longs”,350)

The Keltner Scans were VERY predictive in December 2018!

Donchian Channel Up/Down

Donchian Channels can be used to determine trend. When price is near or touching one side of the channel or the other, the trend is likely to continue in that direction.

Donchian Scan Counts

The Donchian Scan is based on the count of symbols that are close to either side of the channel. Visual Interpretation: When one side is very large and “deflates” (goes down), a strong signal is generated when the other side gains momentum (starts up).

Confirmation is Key

Confirm with all 3 Techniques: Visible Pattern Breaks Market Breadth Change Scan Counts This will give you the best and most accurate read on what the market is most likely to do next! ALL SYSTEMS GO!

with Jeff Drake & Ed Downs