11-26-12 Comments

I have been cogitating for a while on the novel follow-through day call on the partial trading day Friday.
The Market School exposure model kept the buy switch off. That model is a complete mechanical model and FTDs on partial trading days are too rare of an event to back test to create a proper rule. So what we have here is a situation where Bill O'Neil relied on his judgement of the situation. I have seen other out of the box calls before such as calling a FTD using the IBD 100 index. That experiment was deemed a failure and only time will tell on this one. I lean heavily on the Weekly Coppock buy signal conformation coming within ±4 weeks of a FTD. A little bit of excel modeling tells me that we are not set up for a buy signal for at least 5 or 6 weeks so this FTD could be premature.

There are a few stocks that are working such as ARMH, EXP and FLT. A few others may set up properly or pull back to a buy point: HD, RYL, DDD, SHW, ALKS, URI, CVLT, PCLN, ISRG. RNF had a recent shakeout below a prior low setting up a possible shakeout + $3 buy point. Bill O'Neil learned this technique from Jessie Livermore. The buy point is $3 above the first low for stocks trading between $30 and $60.

Mike,

I received this on my Twitter feed (see below). Did we get an actual distribution day and, if so, do you agree with the 95% stat below?

When a Distribution Day comes 1-2 days after a Follow Through Day; the FTD fails 95% of the time.

And this on the IBD website:

Stocks stepped back Tuesday, as the nascent uptrend ran into a little trouble. The NYSE composite lost 0.6%, while the S&P 500 shed 0.5%. The Nasdaq fell 0.3%, ending a six-session winning streak. Volume rose from Monday's levels on both main exchanges, handing a distribution day to each main...

Read More At IBD: [url]http://news.investors.com#ixzz2DWOBdPve[/url]

The statistics are correct however there is not very many cases supporting the conclusion that distribution quickly after a FTD leads to a rally failure.
We had clear distribution on all indices yesterday. On Monday we had technical distribution on the NYA, Dow and S&P but that conclusion is as muddy as the FTD we got on Monday because of the light Friday half-day trading volume.

[QUOTE=adam ali;24242]Mike,

I received this on my Twitter feed (see below). Did we get an actual distribution day and, if so, do you agree with the 95% stat below?

When a Distribution Day comes 1-2 days after a Follow Through Day; the FTD fails 95% of the time.

And this on the IBD website:

Stocks stepped back Tuesday, as the nascent uptrend ran into a little trouble. The NYSE composite lost 0.6%, while the S&P 500 shed 0.5%. The Nasdaq fell 0.3%, ending a six-session winning streak. Volume rose from Monday's levels on both main exchanges, handing a distribution day to each main...

Read More At IBD: [url]http://news.investors.com#ixzz2DWOBdPve[/url][/QUOTE]