On Thursday, the indicator dipped briefly below the 75 threshold (74.82 to be exact). It is now above 75 again. The indicator is only “green” when the last ten days have been above the threshold. So it is officially yellow for now.
What should you do? Panic? Sell everything and buy gold and/or bitcoin? Er…no. Just wait to see where it goes.
The indicator has turned yellow. This means…do nothing. Nine more days in the 75+ range will turn green, at which point you should…well, do whatever it is you do when the indicator turns green! I for one consider longer term investments when it turns green.
On February 17th, we got a signal from Matt’s Breadth Indicator (aka “The 30% Up/Down in a Quarter Diffusion Index”…can you see why I just called it after myself?) to get the heck out of the market. Or at least to put on our Danger Spectacles and tighten your Volatility Helmets. You would be excused a week later for asking what the problem was. The problem of course manifested itself shortly thereafter. We are now into a second period of closing below our initial “get out!” period.
See? The indicator told you so. Even when the S&P 500 seemed to be saying otherwise.
Does this mean the markets are going to drop to the ground like some bunker-busting price-bomb? Er…I dunno. It’s just an indicator, not a prognosticator!
In the last post (here), I examined what happened after a stock moved down a significant multiple of its previous day’s Average True Range (ATR20 in this case). Stocks tended to have up days on day 1 and days 3-5, with a down day on day 2 as an average. What about bursts upward? Are they the opposite? Would they make a good shorting opportunity?
Continue reading Pop or Drop part 2: Big Moves Upward