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Saturday, November 5, 2011

Curioser and Curioser 11/5/11

The Vindicator was designed to be a means to measure supply and demand in equities. It is based on advance/decline and volume statistics on the NYSE. Supply is translated into a Sell line (red in the charts) and demand is represented by a Buy line (green in the charts). Generally, a bull market will generate a Buy line that is ascendant over the Sell line, and a bear market generates the reverse. Trades are indicated when the two lines cross.
The Vindicator Buy/Sell was developed just about two years ago and has proven to be a valuable trading tool over that time. But in the last week it is doing something I've not seen in the two years I've been tracking it. Instead of the Buy or Sell giving a clear signal it's been essentially flat lining as may be seen on both the 30 minute and 10 minute charts below.

Some oscillation is normal in the Vindicator, but this pattern is out of the ordinary. It began to become obvious on Tuesday this last week. I took the time to manually calculate the formulas to double check the trading platform's output and the trading platform output is correct.
I don't know with any certainty how to interpret what this tells us about market conditions other than to comment that it's probably "what you see is what you get" - i.e. over the last 5 trading days market supply and demand has been fairly evenly balanced. However, if we zoom in on the pattern and overlay the Vindicator Buy/Sell lines over the price chart it can be seen that prices are possibly on the edge of a down stroke. Note the fall off in buying pressure and increase in selling pressure apparent since Thursday's high.


2 comments:

  1. Hi Al, Nice charts! Last week was very news-driven and that's probably the reason of your flat lines. Hope to see more downside next week as your Vindictor suggested on Friday. Derrick

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  2. Thanks Derrick.  Bailed on Friday's short this AM, see post I just put up.

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