Ian Woodward's Investing Blog

Stock Market: Floodgates Open or Bounce Back? Part 2

So it seems you like this stuff from the feedback I am getting.  Here are a couple of quick snapshots which will give you the “What If” should the Markets tank next week.  I have used the Russell 2000 (RUT) as the guinea pig so see if this will help you.  I am NOT discounting a Bounce Play from this Oversold condition…but the object of this lesson is to see if the pointers I give you work SHOULD the Market go down.  Then at least we will FAITH for the next time if not this time!

Many moons ago I taught you that when the Market Drops rapidly, the floodgates open on the BANDWIDTH which rapidly gets wider, so that’s the thing to watch.  Here are the three steps it took when it was at a similar (not identical) point in time in mid-May 2012, when it rapidly moved up to 0.073, 0.089 and 0.104 in three days, while the RUT lost 25 points in three days as shown:

You know by now that the trick is to lay that same picture on “now” to see what to expect at this stage given the same move when playing “What If” games:

The net-net result is to expect 770ish if it is a big down week.  Now, I am no soothsayer, but you get the message.  The all important point is that in times like these when things are on a cliff edge, it is the change in Bandwidth that gives you the big clue day to day.  Of course they will try to hold the Market here, but if the floodgates start to open these last two Blog Notes should be your guide! Watch the Bandwidth 1 Day Change, and the %BxBW as I showed you in the last Blog Note.

All the best,

Ian

4 Responses to “Stock Market: Floodgates Open or Bounce Back? Part 2”

  1. Richardb Says:

    Hi Ian
    Thank you very much for your kind comments. I should just say that the reason I use RUT is because that’s the index I trade and I haven’t found that it gives any particular, tradeable insights into what might/will happen in other indexes, beyond the general confirmation of intermediate trends.

    770 on the RUT is a key level for me too and I am looking for it to hold by the end of November. If it breaks that level before then it would mark an acceleration in the intermediate (weekly) downtrend and threaten the long (monthly) uptrend which has lasted since the 2009 bottom. It would also most likely take the weekly 50SMA high jump into the “danger territory”.

    For me, we’re stil in an orderly intermediate downtrend with one or two day day bounces very likely, but now closer to an intermediate bottom. If RUT doesn’t start to show some signs of an intermediate bottom over the next two to three weeks, then I too think this will signal a possible change of character in the market, so some key inflection points coming.

  2. Lu Says:

    Ian,
    Are you aware of Walter Bressert’s BLine indicator?
    Lu

  3. Craig Conover Says:

    Thank you, Ian. I know it’s no easy task putting this together and getting it out to your followers. As always, thanks for the alerts to help us keep our nest eggs on the right side of the market. All your work is very much appreciated! Craig

  4. ian Says:

    Hi Lu,

    Many Thanks for mentioning Walter Bressert’s BLine indicator which I looked at a while ago. Now that the newsletter is behind me, I will brush up on his work again and appreciate your input. If you have any suggestions on how you use it, I would appreciate hearing from you to my e-mail address at ianforum@aol.com or ian#highgrowthstock.com.

    Best Regards,

    Ian.

Leave a Reply


1 × five =

Copyright © 2007-2010 Ian Woodward
Disclaimer: Commentaries on this Blog are not to be construed as recommendations to buy or sell the market and/or specific securites. The consumer of the information is responsible for their own investment decisions.