Stan Weinstein's Stage Analysis

This is a discussion on Stan Weinstein's Stage Analysis within the Technical Analysis forums, part of the Methods category; Originally Posted by lplate blackmamba and isatrader, you don't really know what the market is pricing in; it prices in ...

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Old Jan 1, 2012, 11:24am   #191
 
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Re: Stan Weinstein's Stage Analysis

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Originally Posted by lplate View Post
blackmamba and isatrader, you don't really know what the market is pricing in; it prices in only what it feels at the time, and who knows what that is.
The technical case for saying it is too bearish or is pricing Armageddon is that the TLT is at the same level as Christmas 2008, i.e. AFTER Lehmans, not before. SPY vs TLT (20yr Treas)
Technically all you had in late 2007 to early 2008 was a peak in late Sept 2007, a lower high, a turn down in the 30 week MA, a move below the 30 week MA, and another lower high.
Likewise in 2011 you have a peak in late April, and so on. We are now faltering at that second lower high. (Treas and USD also look like they may go higher.)
I agree we don't know what's priced in, and I'm sure if Europe did collapse that it would drop the market further very quickly. But at the same time I think because it's been trying to price it in for 6 months that the actual event could be the final flush out of the weak hands and would clear the decks for a possible new bull run. Or it could be the beginning of new longer term bear market move. I think however what Weinstein's method has taught me is that it doesn't matter what I think personally, I just need to follow the price action that occurs and make plays based on it. So currently we are in Stage 1A on the S&P 500 and above a flat 30 week weighted moving average, which is neutral territory still.
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Anyway, thanks for explaining isa about your use of "trading" daily and currencies and commodities. Yes, there is nothing to prevent you trading in other ways until the stage 3 (or continuation 1) has finished.
(Commods should measure against the CRB index, I suppose, and currencies against the DXY or Gold.)
It does go to show the differences in interpretation, though, don't you think, and as Dawson says there is no strict blueprint for how you use the Weinstein book?
Agreed, there are many ways to use it and people will interpret it differently, they always do with any method. But there are also lots of things in there that aren't open for interpretation really, like the long term entry points and how to manage your stop loss etc. My personal plan is develop a deeper understanding of stages as I think correct identification of them is the key as getting into a move at the right point, which is critical to long term success imo.

Happy New Year
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Old Jan 2, 2012, 1:29am   #192
 
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US 30 Year Treasuries

isatrader started this thread US 30 Year Treasuries have continued to consolidate near the highs. The weekly chart is currently in Stage 2B still. It made a weekly closing high three weeks ago, but failed to make a new high overall but is still near the highs, so it could breakout higher. However, momentum on the 30 week MA is slowing and a Stage 3 top looks to be developing, but it is still rising at the moment and price has yet to break it. So I consider it Stage 2B until the stop below 139.5 is breached.

Price broke below the short term trend line and is trying to break back above it again and relative performance versus the S&P 500 is flattening out.

So watch for a Stage 2 continuation move above the high or Stage 3A breakdown below the 30 week weighted moving average and stop position below 139.5
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Old Jan 2, 2012, 4:37am   #193
 
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Re: Stan Weinstein's Stage Analysis

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So currently we are in Stage 1A on the S&P 500 and above a flat 30 week weighted moving average, which is neutral territory still.
Just thought I'd put in my 2 cents - you keep mentioning that the s&p is in stage 1. I believe that it is actually in stage 3. Not because i believe that stage 4 is coming - I have no idea what this year holds - but if you look at leading stocks from this cycle most of them are topping in stage 3 or early stage 4.

If the market goes higher from here then its just a "continuation" move. If lower then we move into a confirmed stage 4. If you look at the weekly we are in the same situation as early to mid 2008 and only a more severe version than mid 2010.

Anyway you are right that it is a neutral market - however I think right atm the long (stage 1 to stage 2) side of things is not the path of least resistance.

Of course this is all fluid & can change over the coming weeks.
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Old Jan 2, 2012, 9:07am   #194
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Re: Stan Weinstein's Stage Analysis

isa
I think Dawson is right on either stage 3 or early stage 4
The 30MA is moving down, not sideways (top of p 14 instructs on this). (The 10 week MA is moving upwards it is true, and the 6 month chart could be seen as potentially bullish. It is a triangle, so is a potential continuation as Dawson says, isn't it?)
The forest to trees idea (p75) suggests to me it is not a good idea to buy shares at the moment, even for Trader method. Weinstein (p 61) suggests using Trader method only within a Stage 2 (or selling in a Stage 4), i.e. it should be in the direction of the bigger picture.
This shows, no matter how simple Weinstein's method appears, how the key principles can be interpreted differently in practice.
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Old Jan 2, 2012, 1:11pm   #195
 
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Re: Stan Weinstein's Stage Analysis

isatrader started this thread As we seem to be disagreeing on the current Stage of the S&P 500 I've laid out the sub-stage definitions from the Global Trend Alert Newsletter below and will explain why I personally think it's now Stage 1A.

Stage 1A - Start of a base. Needs much more time.
Stage 1 - Basing Phase. May begin accumulation.
Stage 1B - Late in base-building phase.Watch for breakout.

Stage 2A - Early in uptrend stage. Ideal time to buy aggressively.
Stage 2 - Advancing Stage
Stage 2B - Getting late in uptrend. Watch carefully. But still a hold.

Stage 3A - Looks as if a top is starting to form. Be sure to protect holdings with a close stop.
Stage 3 - The Top Area. Start to reduce positions.
Stage 3B - Has become increasingly toppy. Use rallies for at least partial selling.

Stage 4A - Stock has entered Downtrend Stage. Close out remaining positions.
Stage 4 - The Declining Stage. Avoid on the long side.
Stage 4B - Late in downtrend. Much too soon to consider buying.

Additional ratings
(A) Early in that Stage.
(B) Late in that Stage.
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

Below is the most recent interview with Stan Weinstein from 12th November 2011. The interview starts around 30 minutes into the recording.

Technician Stan Weinstein: Markets Still in Neutral Territory, Still Opportunities to Make Money Jim

During the interview on 12th November Weinstein says the S&P 500 is in Stage 4B- (Which from the definitions above is - Late in downtrend. Much too soon to consider buying. So it is eight weeks later now and the S&P 500 has since made two higher lows. The 30 week weighted* moving average is flat as has been moving between up an down randomly for the last 8 weeks, with a total of 4 down weeks and 4 up weeks. Currently it has turned up for the last two weeks (see my chart attached). Price has broken out of and held above a 10 month down channel for the first time, although this was during the light volume year end week. Price has also managed to close above the flat 30 WMA for 5 weeks in a row now, so by my interpretation of the method and extrapolating from Stan Weinstein's own rating in early November I think we have now moved into Stage 1A, although it could deserve a minus rating as it is an unexciting pattern in that Stage. So I agree that this isn't a time to be buying or selling until the market moves into either a Stage 4 continuation move (below 1158 for me) or stabilises further into a proper Stage 1 - where he says you may begin accumulation.

*The 30 week weighted moving average - from my study of the book I came to realise that even though he talks about the 30 week moving average. He was actually using the 30 week weighted moving average, as that is what the Mansfield charts he uses for all of his actual examples uses. So this is one of those grey areas from the book that is open to interpretation. Currently if you use the 30 week simple moving average it is still in a downtrend although momentum has slowed. However if you use the weighted 30 week MA - as the Mansfield charts did - the MA has been flattening for the last 10 weeks and has turned slightly up for the last 2 weeks. So to be clear, I'm going to stick to using the weighted moving average as I think this the most faithful to real examples from the book.

As always this is just my opinion from my interpretation of it.
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Old Jan 2, 2012, 1:45pm   #196
 
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2007-2008 Comparision

isatrader started this thread Attached is a chart showing the 2007-2008 similar period alongside today's chart with Weinstein's advance decline momentum indicator and my 30 week MA momentum indicator. I hope it will further explain my current position on the Stage I think we're at, as although the charts look similar, I can see a number of important differences from the price action and the secondary momentum indicators. The advance decline breadth data especially.
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Old Jan 2, 2012, 6:10pm   #197
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Re: 2007-2008 Comparision

isa
This is a great thread, and thank you for your detailed responses to our questions. I see exactly how you see things now, and your analysis is much more detailed than mine (which is based simply on the price and the 30week SMA, though, as I can get it on the free charts, I have added the potential MACD identical cross/zerofailure repeating mid 2008 also).
Just on one point, though, Weinstein's diagrams on the A/D line as confirmation (pp 76-77). He clearly says to increase your odds the A/D direction ideally should confirm the direction of the market, but in your chart it does not confirm the higher low. Instead it goes flat.
Keep up the great work.
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Old Jan 2, 2012, 6:20pm   #198
 
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Re: 2007-2008 Comparision

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isa
This is a great thread, and thank you for your detailed responses to our questions. I see exactly how you see things now, and your analysis is much more detailed than mine (which is based simply on the price and the 30week SMA, though, as I can get it on the free charts, I have added the potential MACD identical cross/zerofailure repeating mid 2008 also).
Just on one point, though, Weinstein's diagrams on the A/D line as confirmation (pp 76-77). He clearly says to increase your odds the A/D direction ideally should confirm the direction of the market, but in your chart it does not confirm the higher low. Instead it goes flat.
Keep up the great work.
Thanks lplate, I appreciate it and I hope you will continue to contribute to the thread as even though you disagree in certain areas it's good to be challenged on things and makes me try to be more thorough with my work.

I agree with your analysis of the A/D line. It hasn't confirmed the higher low, but at least it's not falling off a cliff this time. Although that could change if the Euro really does fall apart. So will keep my eye on it.
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Old Jan 2, 2012, 9:33pm   #199
 
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Re: Stan Weinstein's Stage Analysis

I think this point on TLT is spot on...we are pretty much at the Dec 2008 highs here on TLT at the height of the doom and gloom back then. I’m thinking TLT can’t just go up another 20% from here (although EU breakups could trigger it but I don’t think that’s likely).

I’m not ready to short TLT or buy TBT just yet…unlike the Dec 2008 boom in TLT, we are seeing way more buying volume this time around and the chart actually looks way stronger now than it did back then. We would have to see a big drop in price for the 30-week MA to begin flattening out and get into stage 3. The daily chart on TLT looks pretty strong too.

Folks piling into TLT now are likely to be sorry when it reverts back to its mean around $100 or so…

Question for the group: Is there a forum for discussing trading ideas on specific stocks? It’s always helpful to see how others are thinking about applying TA in practice.


[The technical case for saying it is too bearish or is pricing Armageddon is that the TLT is at the same level as Christmas 2008, i.e. AFTER Lehmans, not before.]
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Old Jan 2, 2012, 10:06pm   #200
 
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Re: Stan Weinstein's Stage Analysis

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Question for the group: Is there a forum for discussing trading ideas on specific stocks? It’s always helpful to see how others are thinking about applying TA in practice.
With regards to Weinstein's method, there's no forums for talking about specific stocks. Something that I've started using recently though is StockTwits® - Share Ideas & Learn from Passionate Investors & Traders which has feed for each US stock, so you can see what people are saying and look at a range of analysis from various sites. So you might find that useful.
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