Yesterday was the last day for additional FTD’s. and yes, both meet criteria. Didn’t have time to list that last night (technically had to wait for close).
There is no Market School signal for crossing the 200. Obviously, it’s a key resistance area and most technical analysts look at it as a key move, but Market School does not list it in their criteria.
It’s not what Webby wants, it’s what the Market School states. “Buy after closing above the last marked high as defined by MarketSmith.” MarketSmith being the original name for MarketSurge. But that’s the hard part as their marked highs are not always clear simple new highs and there is a time factor (I believe greater than 10 days). If anyone has a clear definition of IBD’s criteria for marked highs and lows, please share.
Not bashing Webby, but it’s clear he wants to modify a bunch of Market School and his comments muddy the water’s sometimes. I’m trying to stick to the published references and rules.
That is true and he admits it in a lot of his video’s. He claims O’neill was very structural but would also bend the rules. I think it is good you are trying to cement the rules and then you can modify them to suit you later on.
You said yesterday was the last FTD. Is that counted by 25 market days from the Rally or is it 25 days from the rally?
From all the market school marked up charts that I have studied, they only count Market days. Plus, they seem to use Rally Day as day one. The phrasing as I have seen is. “…….within 25 days from the rally day.”
CORRECTION:
I previously listed that on 5/2 we had a Buy 6 Signal (low above the 50 sma) and that was incorrect. I have used 21 EMA for decades and was looking at one of my routine charts when I made that call. The rule actually states that it is a “Buy on flat or up day when intraday low is at or above an uptrending 50 sma.” I was wrong doubly as I was ignoring the need for an uptrending moving average plus I was looking at EMA not SMA. That uptrend in the SMA just occurred today, so today is the B6 Signal.
I wanted to also make all away of a “Rule” that I should have listed earlier:
RESTRAINT RULE
Basically, it is an attempt to limit exposure risk early in a potential recovery from buying too much too fast. Risk is reduced by limiting the exposure to a maximum of +2 (two buy stages) until the index makes significant progress above the close of the initial Follow-Through-Day OR a Buy 4 Signal occurs.
Significant Progress is defined as the price percentage gain as determined for a FTD based on volatility but with no volume criteria.
B4 Signal is “Trending Above the 21-sma.”
We actually had three buy signals 4 days before our clear B4 signal. Just trying to set the record straight.
We are close to obtaining the next “major” status, which is not a specific signal but a change in perspective on the market or mind-set, the Power Trend.
POWER TREND ON Conditions:
21 sma crosses above and stays above the 50 sma for at least 5 consecutive days without any drop below 50 sma
Index closes up or flat for that initial 5th day above the 50
50 sma in uptrend for at least 1 day (50sma > 50sma[1])
Index low has been above 21 sma for at least 10 consecutive days
Represents the strongest market condition, indicates a healthy market that can absorb normal profit-taking without major declines
Power Trend Actions:
Buy Switch override-regardless of other signals, “Buy switch” forced on
Buy signal count can go to +7 - however, you don’t act on anything over +5; you create a buffer of “extra” buy signals
A “Floor” is established once buy count +2 and Power Trend in effect-trying to get better examples to clarify what this really means.
CONDITIONS TO WATCH FOR AFTER FORMING
These are “warning” stages
PT Under Pressure Conditions With Floor
Initial warning stage of decline in strength. Suggests moving to more defensive positions and maintaining core positions.
Triggered by a Failed Rally Attempt of a minor low (S2) or Distribution Cluster (S13). With a floor, max count reduced to +5 and floor to +1.
PT Under Pressure Without Floor
More concerning if no floor and suggests higher risk of continued market decline. Triggered by Break below 50 sma (S9). Triggers reduced exposure to +5 and floor removed.
Reset Power-Trend from Under Pressure
Conditions for PT as noted initially must be present and 10 consecutive days WITHOUT Minor Low failed rally (S2), drop below 50 sma (S9) or Distribution cluster (S13).
Power Trend OFF Conditions:
21 sma crosses down below 50 sma with index closing down
Major Low or Failed Rally Attempt (S2)
Circuit Breaker
Turning the Power Trend Off results in Buy Count reset to maximum of 5 without buffer signals, Buy Switch is not forced to be on, and there is no floor. Changes perspective to capital preservation.
This is all confusing, which is why I wanted to work through this system. The hope is that it will clear and become more intuitive as we go through this. I will try to find time to write out to post the distribution rules and they are a key component for again, warning signs of a change.
The Nasdaq is essentially in a power trend, but that can’t start on a down day. Meanwhile, the S&P 500 will be eligible for its own power trend with the next up session.
Update for 5/16/25
The S&P 500 and Nasdaq have now entered a power trend, signifying an especially strong market rally. A power trend is not a buy signal by itself, but it’s time to be especially invested and more willing to hold aggressive growth plays.
So we are in a Power trend that just started but Moody just downgraded us. What great timing right? @PuddinHead42 , @Lakedog . What do you guys think about this now. Do you think (just surmising not trying to predict) We get a third leg down? I am watching the market, but I do not see how it shakes off a credit downgrade in the short term.
Excellent question. No absolute answer. And yes, we met criteria for a Power Trend.
Couple thoughts and perspectives. First, this was also Max Pain week, they were looking for a 4-5% drop to balance their books, and that may be influencing an exaggerated response. Not a Market School item. I also find it hard to believe that marketmakers were caught totally off guard on this. Will the general retail players accept it, is part of the question. I guess I expect the general initial indication as to a major drop will be attenuated, but still somewhat significant. Personally, I am tightening some stops. I’m up and plan to hold a lot of it, since I’m back with wifi.
Also, it brings to bear another aspect of “Market School” which is the circuit breaker.
Circuit Breaker:
Exposure count goes to zero, Buy Switch off and Power Trend ends.
Triggered if the index falls 10% off highs and falls 5% or more below 50 sma on intraday basis OR index closes below 50 sma and in lower half of range or > 1% below 50 sma
This is the unanticipated market moves reaction for Market School.
I’m disappointed (more like tired of all the BS external influences) but watching closely. Have some significant gains and want to maintain them.
We are very news driven, a tweet here, an announcement there. I think we brushed off some inflation news Friday. Futures are currently down 1.22% on the Naz. I don’t think the debt downgrade news will take us below the 21, much less a third leg down. We have 90 days to deal with China, so investors will grant leeway for that. Webby made a comparison to the 1998 correction, which looks similar. Once it started going up, it did not stop.
Webby reminds us to rank all our stocks this weekend and maybe set some stops. You have to know which stocks you will sell first when the unexpected happens.
I predict we see a bottom by 10:30am and at 4PM you will say “I wish I bought TQQQ at 10:30”. But I won’t be around until 11:30, so won’t have to make that decision.
One of the key aspects to trying to follow this is to see how well the TOS Market School Thinkscript works. While it’s early, it has been spot on. Here’s the charts from the Rally Day on. I have shut off many of the labels as it gets too busy, but they spell out what the flags mean and the status.
Lots to do due in regards to fine tuning and adjusting colors. Most folks use black backgrounds while I like an off-white, but makes the original settings not work well. The more important part, the details, seems to be on track. It does help tremendously since this becomes a very busy process to track.
Thanks Lake very nice. Can you turn some of the information off? Like let’s say you only wanted to track FTD’s, Power Trends and distribution days. Would that be possible? Oh and does the script cost money/ how do you get it?
Yes, there is a control panel within the TOS system that let’s you do individual switches. Actually, when everything is on (mainly full labels) it’s impossible to look at much more than a few days. Here’s a chart with a few weeks:
The Chart Labels, the colored boxes in the upper left hand corner, list New Distribution Days total (hard to see in light green), Market Exposure which is the buy signal count, Buy Switch on or off and the status of the Power Trend. I’m sure what you are thinking, and I totally agree, this is probably most useful in trying to have a chart that you can glance at and get the key info. Especially at rallys and pullbacks. This can largely do it, but it’s a huge script and it’s a bit awkward in trying to adjust things such as colors. While probably a project to be thrown on the list of “to-do’s” for the next rainy season, I think I can modify it some to be simpler and help mainly with starts and stops of uptrends. At least as an adjunct.
I’ve listed downloading it before, on it’s own thread, Thinkscript for IBD stuff. This is a great site if you use TOS and play with thinkscript. It is both a free site and has a paid component. I have used so much stuff from it that I pay. It’s only fair. They have some scripts that are restricted to paid members, but this one seems to be in the public domain. You obviously have to have TOS (also free) and even if you don’t use it as your main trading platform, it has a lot of other value to make it worth trying. They state on IBD Live page that they use TOS for options and candlesticks, so you can be like Webby.
TradingView has a very clean looking chart system that is very adjustable and have some enhanced displays for the data. But it costs, I think as a subscription so is a constant charge. But what I have seen looks very nice.
Thanks Lake, I think the reason I didn’t pay attention to it was because I do not like coding, just not my thing. Although I did have 2 years of Java in college and did work a short time debugging software for the telephone company. But I like what you are showing and might have to give it a go. Thanks for your time and all you are doing.
Looks like a distribution day (Today) on the Nasdaq but not the S&P. Edit looks like volume went up towards the end of the day for the S&P so it has a distribution day also. 1 on Nasdaq 2 on S&P.
Today brings up one of the major hurdles/short-falls/frustrations with the system. Signals dependent upon volume by definition, specifically involving SPX as it depends upon which volume data you use. Historically, according to Market School documents, they used the volume on the NYSE as the factor. Not sure what they use today. But there are time delays and other issues to make the final call.
Regardless, moving on and as a reminder, the definition of a Distribution Day is when the index closes down more than 0.2% with volume greater than prior days. Both SPX and NASDAQ were down more than 0.2% and NASDAQ clearly with higher volume. SPX did also complete criteria based on NASDAQ and NYSE volume. Using Thinkscript, it shows it clearly with the NASDAQ volume:
In addition, May 6 does fit criteria for a SPX DD as previously reported at the time. Yet it is missed now by Thinkscript. So, errors exist and at some point I may try to identify the buggy code, but will just note it for now. Does it matter about May 6? Well, Distribution Day counts fall off at 25 days out, so yes.
Note, NASDAQ had a high today a hair above the previous, then declined. That meets criteria for:
S11: Downside Reversal Day
Defined as new intraday high within prior 13 weeks, with close down for day and in bottom quartile. Thankfully, price action only, no volume requirement. Prior high was February 27th.
In the big picture, they are not acute action items, more signs of possible change but well within the normal overall market movement.
You are correct, my comment was more about the glitches in the program. Using NYSE volume data it is giving me two back-to-back DD and skipping May 6th for SPX. Interestingly, using NYSE volume in the NASDAQ gives me two back-to-back DD in the program also. May 6th was slightly lower in volume for NASDAQ so did not meet criteria. Going through the data, I think the May 6th and yesterday are the correct ones in SPX and only yesterday in NASDAQ.
The differences are all generally very small changes in volume. Personally, I’ll probably take DD’s more seriously with clear increase in volumes and as the rules include, when in clusters.
If we close up today, we could have B5 signals (Living above the 21) which in NASDAQ would cancel out yesterday’s S11. All a moot issue since the Power Trend is on and the buy’s are well over 5 total. It’s the bean-counting that makes this less useful, but the big-picture is helpful.
