Technical Analysis Based Market Breadth

Breadth Unlimited

By Mathew Verdouw, CMT

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Disclaimer

NO FINANCIAL ADVICE - The Information in this presentation is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any particular purpose. The Information contained in or provided from or through this material is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice. The Information in this material is general in nature, educational and is not specific to you the viewer or anyone else.

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About Me

• Honours Degree in Computer Systems Engineering.

• Started Market Analyst in Australia one year after leaving University.

• Designing and building software models for 18 years.

• Obtained the Chartered Market Technician Designation in 2013.

• Passionate about breakthroughs in Financial Analysis.

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2 Minute Primer on Breadth

• Market Breadth is a fantastic way to get a view of market sentiment

• Take the AD Oscillator

• Count securities that have higher closes

• Convert to a percentage of all the members in the Index/Exchange

• 75% of securities rising is a very bullish sign.

• Look for divergence.

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AD Oscillator – SP500

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AD Oscillator – SP500

• Oscillators are good, but a lot of noise

• We are really interested in Peaks and Troughs.

• Switch On when peaks over 75

• Stay On until troughs less than 25

• We can show that with a Switch function.

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SWTICH(Close() > 75, Close() < 25)

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AD Oscillator with Switch

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A different thought on Breadth

• What if we allow for other measures of Trend to be used?

• Perhaps we can filter out some noise.

• Gann Swings have always been a great way to filter choppy markets.

• Based on bar relationships

• Higher Highs and Lower Lows

• Gann called them his “Master Trend Indicator”

• Made sense to try these out in Breadth.

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Gann Swings

• Four types of Bars

• Higher – Green

• Lower – Red

• Outside – Blue

• Inside – Black

• Once we have a complete bar in the opposite direction we change Trend.

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Gann Based Breadth

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Gann Based Breadth

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Gann Based Breadth

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Gann Based Breadth

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• Add smoothing to the results.

• Gives an overview of the sentiment.

• What else could we use?

• RRG Ratio?

• Has a smaller range.

• RRR Risk > 3?

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JdKRS Ratio Breadth

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Risk Breadth

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Technical Breakthroughs

• Innovation in Financial Analysis is alive

• We welcome those who want to question why? and what if?

• Mathew Verdouw, CMT

• Email : Mathew@mav7.com

• Web : www.mav7.com

• LinkedIn : MathewVerdouw

16 April 2014 Mathew Verdouw, CMT