Though the Pink oscillator continued its upward movement at open today and the Black oscillator swiftly turn around, today belonged almost entirely to the Slow Blue oscillator. It shot up and remains up at close. A very strong downward crossing point [2] between the Pink and the Black could only lead to weaker retreat we saw towards close. 

In the intraday chart for NASDAQ composite at close of today shown below, we can see that

• The Pink oscillator is still going down. Its crossing point impact has caused the Black oscillator to lose considerable momentum.
• The intraday residue in the top right chart is way out of lower bounds. It can have a bounce back early tomorrow.
• The Blue oscillator and Daily Residue at the bottom right who dominated today are now way out of bounds. The Blue still is not showing any signs of reversal.

It was a great Tuesday for Intraday trading with the NASDAQ composite first going down almost 1% and then climbing up almost 1% into the positive territory. Both positive and negative alerts [1] in the ticker table benefited from the big move. 

In yesterday's blog, I had anticipated an up open from the fast oscillators which would then have sustained momentum as the Pink oscillator had its upward move expected for most of the day. But NASDAQ opened lower. The fast oscillators and the downward moving Pink from yesterday pushed the levels lower before doing a bounce back quite like the slingshot move we have seen earlier.

Instead of presenting a single screenshot, today I am posting first the enlarged and zoomed in view of the top right panel of the Intraday graph of NASDAQ that shows the fast oscillators and the intraday residue (in gray). We can see below how they evolved during the day doing full cycles. 

Those interested in day trading definitely benefit from using these oscillators for timing. 

However the safety of the moves of these fast oscillators depend on the relatively slower ones which we call the Mid oscillators. In the enlarged view of the top left panel of the Intraday chart shown below, we can see these. 

The Pink oscillator is the sum of the Green and the Violet. We can see 

• how the Green component led the surge initially and 
• by the time it turned around the upward momentum was sustained by the Violet component. It is the conflicting move of these components that caused the mid way turn around that the Pink oscillator did during the day today. 
• Also notice that when the Pink oscillator was moving with good momentum, the fast oscillators fizzled out in their opposing move. This is the essence of what we call "safety" based on slower oscillators.

The black oscillator can be seen steadily finishing its downward move today. Towards the end of the day, it appears to have begun a turn.

From the positioning of the Pink oscillator today, its primary move will be downwards tomorrow. If this move begins early in the day, it can delay the turning around of the Black. We have more negative alerts than positive alerts at the end of the day today in our ticker table across the individual stocks. This preponderance of negative alerts also adds to the chance of a downward move tomorrow. 

I expect the Green which is currently pausing at the zero line to continue its downward move in this scenario. The significant crossing point[2] if it happens tomorrow will be the downward one of Pink and the Black when the Black moves up.

I'll refrain from speculating about how the open would be because it is earnings season and it gets tricky when biggies like JPM report.

Now we can take a look at the longer term scenario from the End-of-Day charts shown below. Once again only the enlarged view of the top left panel is shown. We use the same color coding for oscillators of various speeds in both the Intraday and E-o-D charts but while a Mid Pink oscillator in the Intraday has a time period roughly one trading day, as you can see below, in the case of the Pink in E-o-D the time period is several weeks. Today's move hasn't made any significant changes in the way oscillators are poised in this chart. The wait for the elusive Red October continues here!

Have a great evening!

[1] Learn more about alerts in this manual chapter.

[2] This blog talks about the significance of crossing points.
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In yesterday's blog, I mentioned that the fast oscillators for NASDAQ Comp were out of bounds and could bounce back. But from their magnitude at close of yesterday, it didn't look like such a bounce would be able to induce a turn around in the Black or Pink oscillators. 

Those traders were clearly not interested in buying back in at that time.

But come this morning, the fast group did a magnificent quick plunge taking the market down 1%. 

From that level, their bounce back was sufficient to make the slower groups sit up, take notice and follow suit. 

The move was similar to the gravity assist or slingshot maneuver in orbital mechanics. The fast oscillators rapidly moved down at the start and then bounced off armed with greater momentum in the upward move. 

I had tweeted the screenshot of the charts illustrating this move earlier today:

http://twitpic.com/2stsww/full

Now let's look at the Intraday chart at close of today. 

The Fast oscillators are within bounds and poised down in the right panel. In the left top panel we see that the Pink and the Black groups have some more upside. In the bottom right panel, Blue is steadily heading down. 

So it is a battle between the groups in the top left panel and the Blue. 

We have roughly the same number of positive and negative automated alerts in the ticker table today which would signal tomorrow to be another day of good intra day movement. Also keep in mind that the oscillators in the top left panel move much more swiftly compared to the Blue.

In the E-o-D charts we see that the Black oscillator still is optimistic. Today's move has done precious little to the other groups. The downward crossing point of Pink with the Black here will definitely be interesting.

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Granted we were expecting an upward open from the way fast oscillators and the Green component of the Pink oscillator was poised at close of yesterday. We had twice as many positive alerts as negative alerts, so today was very profitable in terms of individual trades. But obviously the brilliant 50 points move of NASDAQ definitely demands careful study.

The intraday chart for NASDAQ COMP from 15:00 today shown is shown below. The impact of today's move as captured and distributed over the different oscillators and the daily residue is clear.

With our system of oscillators, we are not caught up with numbers like ceilings and floors which get broken through or pierced. Our philosophy is to profit from the market when it moves. Prices don't form our triggers, the turning of oscillators do. And these oscillators capture the sentiments of different groups of traders.

In the intraday charts:
The fast oscillators represent the higher frequency traders who trade a couple of cycles in the market within a day. The Mid oscillator (Pink) with its main components (Green & Violet) capture the group that trades in a cycle that lasts close to one trading day. The group whose trading cycle lasts a couple of days or so form the Black oscillator. The much slower moving Blue oscillator has a half period close to a week. It makes sense to have standard deviation based symbolic upper and lower bounds for the faster oscillators and the slower oscillators. It is the ones in the middle (Mid) are the ones who get swayed the most psychologically!

The oscillators in the end-of-day charts also capture such distinct group of traders and investors but they trade in cycles that last weeks and months. We can see the upper and lower bounds in these charts.

What the charts offer us is a snapshot of how the different groups are poised so that we can time our moves. It is also important to realize that all these groups are active participants who are watching each other as represented by the market. Thus the influence and transfer of momentum across oscillators of different scale. When new traders/investors enter the market (more money coming in), they are distributed among the oscillators or get accounted in the daily residue (gray).

It'd be most interesting to see how today's move is reflected in the End-of-Day oscillators. I'd expect much of the momentum to be captured by the fast oscillators there with the Violet component of Pink delaying its turning down. Even if slowing down and small upward kinks appear in the downward moving oscillators in that chart, it will take more than just one day's move to change the mind of those longer term traders. It took the whole first week of September surge from the Pink group before the Black group decided to do a rethinking there.

Will post the End-of-Day charts later.

Have a great weekend.

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We have discussed how the various oscillators can be viewed as representing the sentiments (bullish, bearish or neutral) of different groups of traders active in the stock or market. 

For different stocks and the index, from time to time, different groups gain and lose dominance (amplitude).

With this in mind, think about the crossing points between adjacent oscillators. 

By adjacent, I mean, ones with time-periods that are comparable. 

So the fast oscillator is considered adjacent to the Mid oscillator(Pink) and its main components (Violet and Green); the Mid oscillators and its components are adjacent to the Black oscillator and the Black oscillator is adjacent to the Blue oscillator. 

The crossing point of adjacent oscillators can be looked at as a point in time/price when these different groups of traders become aware of each other's position. It is at the crossing point that oscillators influence each other's momentum. Therefore the crossing points herald major change in the price in the direction of the faster of the two colliding oscillators.. 

For a great example of this crossing point theory in action, look at the zoomed in view of the top left panel of NASDAQ COMP end-of-day chart at today's close below. 

We can see a clear crossing point that heralded the September surge. In fact it was a double hit. The traders who had been bearish since August, captured by the Black oscillator, collided with the upward moving groups of both the Violet and the Green. We can see that subsequently not only did the Black group lose their downward momentum, but they even did a shallow turn around.

The choppier light blue line seen here is the End-of-Day fast oscillator not to be confused with the smooth deep Blue oscillator in the intraday charts.

Yesterday we had a nice crossing point of the faster Green with its adjacent Violet. Today we can see that the Violet has begun to flatten out though it is not quite turning yet. 

Unlike the double hit that lead to September surge, now we are heading to three separate crossing points. First we will have the Green with the Black possibly as early as tomorrow. Pretty soon we should see a change of heart of the men and women in Black again as they decide to stick to their original plan from the beginning of August!

In the Intraday chart posted earlier today, we can see that there is some upward movement coming from Intraday Pink and Intraday Black but the dominant Blue oscillator is steadily down. So in the absence of some major uplifting fundamental news, we could have a flat or slightly up move which doesn't look like carrying much steam. Remember, the price/index is always the sum of the oscillators and indicators.

Happy Trading!

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As discussed yesterday, since the Pink in the End-of-Day chart was neutralizing the downward momentum of the Blue in the intraday chart, the market moves according to the Pink and Black of the Intraday. Well, here's the intraday chart of NASDAQ Composite for 1:15 today (9/9) heralding a reversal.

In yesterday's blog, we had wondered if NASDAQ has reentered the Red zone. We saw that the Pink in the End-of-Day charts was still strongly up. So in the Intraday charts there was a conflict between the dominant Blue that was headed down and the Daily Model which was sharply up. Moreover, the Pink and Black in the Intraday charts had an upwards crossing point. Today markets have a nice little 1% pop so far!

Now let us look at the charts for today. Here's the NASDAQ COMP Intraday chart from 12:15 today (9/8). 

Once again, we have a crossing point of Pink and Black but this time downwards in the top left panel. 

The fast oscillators are also poised down. 

Also notice in the lower left panel that the Intraday Model is just grazing the Daily Model and not really crossing it down. This is reflected in the languishing Red in the lower right panel. 

Remember how Intraday Model=Daily Model+Red. 

The reason for Red's slowing down is the upward Black since Red=Black+Blue. 

Now let us look at the End-of-Day graphs made using only the daily closing price/index value.

The fast oscillators here have begun the downward motion. 

If their momentum can induce Pink to turn south, then we'll be in for a longer term shorting safe market. 

But if enough momentum is not transferred to the Pink, we are bound to have market moves mostly based on the intraday Pink and Black oscillators. This is because the dominant Blue is neutralized by the upward inclination from these End-of-Day charts.

It is clear to see from charts posted in earlier blogs that when a stock or index has a dominant Red oscillator, it can be used to time longer term trades quite effectively.

Generally, we can say that longs are safe when the Red is above the zero line and shorts are safe when it is below.

The price/index direction reversal timing is dependent on two factors: the Daily Model (in gold in the bottom left panel) and the Red oscillator.
A good example is the NASDAQ composite index Intraday chart. The bottom half of the panel is shown below

The Daily Model is never truly flat. But in such an ideal scenario, the price direction will change as soon as the Red has turned.

In all practical scenarios, price direction will change at some point in the time between the Red entering the bounds and before it reaching the zero line. This timing is dependent on how dominant the trend of Daily Model is in the opposing direction.
So for example, if the market or the stock price has been going up and the Daily Model of the stock has an upward slope, the price direction will change downwards after the Red has turned downwards and entered the region between the upper bound and zero line.

If the Daily Model has a very clear dominant trend, then the price direction will change only after the Red has clearly crossed the zero line.
The dominance of the Daily Model can be seen by looking at its slope/trend in the most recent half of the bottom left chart.

Keep in mind that the Red being the sum of Black and Blue tends to do quirky short term reversals dependent only on the faster Black. These are not a lasting change in its direction.

Let's quickly recap a few summations to end this note:

Price = Daily Model + Daily Residue (in gray in the bottom right panel)

Red = Blue + Black

Intraday Model = Daily Model + Red

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For anyone who has seen our charts with its consistent oscillators and indicators, it is fairly intuitive to understand that we can form various trading strategies using the turning of the different dominant oscillators or a combination of them. Several such strategies were developed and applied to historical data of different stocks. The alerts come from the best of such time tested strategies. 

For example, based on the historical charts of a stock, let us say that there were good trading opportunities (price movements) based on say

1. A combination of Mid and Fast oscillators
2. The turning of the Mid oscillator
3. Combination of Mid and Black oscillators

Each of them is a particular trading strategy. Since the oscillators have different periods of oscillation, it is clear that these opportunities provide trades with different durations. For example the first strategy mentioned above would lead to trades with duration less than a trading day while the third one above leads to trades that take close to two trading days between entry and exit.

The main philosophy behind the trading strategies is that they are tractable, i.e. the user is able to understand by looking at the graph, why an alert came up.

Every trading technique has the following basic intelligence:

• Identifies dominant oscillators or combination of adjacent oscillators
• Ensures that the intraday model's slope is not strongly in the opposite direction
• Uses the faster oscillators to improve the entry point

Thus the alerts are meant to draw attention to charts that have great potential for trades. We can see that not many of the safety factors are built into this basic intelligence. We are continuously adding more safety factors and testing them over greater historical time period to improve the quality of the alerts.

However, it is important to conduct a quick and easy chart study to examine the safety of a potential trade. For example consider the alert of type 5 issued yesterday (8/4) at 11:30 for Ceragon Networks Ltd (CRNT). The alert and price is marked on the title of the bottom right panel and the time is marked on the time line at the top. The main points to note are included in the figure.

With the Blue menacing in this Intraday chart, let us consult the End-of-Day chart for CRNT from the closing of 8/3 for some more safety analysis.

The alert has drawn our attention to a potentially unsafe trade.

Below is the chart from 1:30 today (8/4) with the bottom right panel enlarged so that we can clearly see how the dominant Blue behaved and influenced the price.

We can also see that recently there has been an upward crossing point of the Black and Blue in the upward direction that produced an uptick in the price as expected.

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Today (8/3) is being described by Yahoo! Finance as a day when markets are "kept in check" by "mixed earnings and uninspiring data"!
Let us take a look at the charts of NASDAQ Composite at 2:35pm to get the technical analysis view.

We can see that the upward crossing point of the Pink and Black (top left panel) was neutralized by the downward crossing point of Intraday Model (brown) and Daily model (gold) in the bottom left panel. Also notice the downward movement of the slower Blue oscillator in the bottom right panel.

Indicated on this panel are two points of seemingly "sluggish" behavior from the Blue oscillator.
Our 4-panel system with the different oscillators have been created to provide fast & easy visual analysis of the situation. We've already discussed the on-screen summation of different components to form the Red (=Black + Blue) and Pink (=Green+Violet) oscillators.
Actually some of these components themselves have hidden components. These hidden components have very similar periods and amplitudes so they are displayed only through their sum instead of crowding up the display. But sometimes the phase difference between these components create the interesting "sluggish" behavior. This aspect of sine wave summation is illustrated in the figure below where the Red is the sum of Black and Green sine waves.

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