Welcome to June, 6/1! And ChartsEdge bp interpretation comments

Welcome to June, folks! If you were like me, observing and then celebrating the Memorial Day holiday, then I hope you'll understand my delay in posting up Andre Gratian's weekend technical analysis report. I'll post that as soon as I can, today. For now, we've got ChartsEdge - look back at their cycle charts for this week (in my personal opinion, their subscriber-view beta particle chart is consistent and I'm sure it'll get shared for all to see later this week). And below are comments that Mike Korell composed and posted at his ChartsEdge Daily Maps webpage at http://www.chartsedge.com/wp/:

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A zero-sum game

Posted: May 30th, 2010 Author: Mike Korell Filed under: One-Day Market Map No Comments »

As with most things pertaining to the stock market, the calculation of the BetaP will always add up to zero over time. With that being said, how is it possible for trends to occur?

The answer to that is in the optimistic nature of traders and in the impact of weekends.

Weekends are a major contributor to the direction of the market by doing nothing. That is to say that if there is a stimulus for a lower market over the weekend, the response by traders is to ignore it… well at least until Sunday night when the futures markets open. This allows medium-term trends to occur. Of course, these errors tend to zero out over the longer time frame.

Optimism is the primary mover. I went back to look at the BetaP and market prices during the last Monday holiday. That happened to be Feb 15th. The market had just experienced a sharp correction and had been attempting to pull out of it. The S&P was almost exactly where it is today. The return from the holiday resulted in a substantial rally on Tuesday the 16th. That rally continued through the rest of the week.

Trading the BetaP that week would have been very profitable, but the targets were not correct. So what is that about? The BetaP data was zeroing out every other day. That is to say, a gain one day was followed the next with an equal down move. This sawtooth pattern created a bullish scenario where traders moved prices higher on the upward moves of the sawtooth and the market went flat on the downward moves of the sawtooth. The only fly in the ointment is that my trading rules would have not responded fast enough to allow for over half the possible gains.

Optimism triumphs with everything else being even in the short run.