Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Relatively Speaking

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As a reminder, SlopeCharts has the ability to present charts based on combining symbols, modified with any mathematical mutations you might like. Below I am showing three simple ratio charts, each of which is pretty interesting.

The first is IWM/SPY, which nicely shows how, over the course of many years, small caps have been losing the battle against the S&P 500. If this were an individual stock, it would look very shortable, because that is one huge inverted saucer.

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Onwards And Downwards

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From Springheel Jack: It’s been a while since my last post and my apologies for that. It has been an intense summer of medical treatments for my wife, exams and results for my children, computer upgrades and so on. I’ve been feeling somewhat drained.

However the market has so far avoided being as tedious as it often is at this time of year, and, if I’m not much mistaken, then the next leg down on equities has started this morning from a short term reversal setup that is really one of the nicest that I have seen in quite a while. I was going through that in detail across SPX, ES, NQ, RTY, DAX and ESTX50 in the video below before the open this morning.

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That Amazing Line

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One of these days, I’m going to trust my own drawings more.

This morning, I woke up to yet another annoying rally (and, yes, that’s a word I use a lot these days). Based on absolutely nothing, the market was pushing higher and higher, and it actually spiked after the opening bell.

I noticed, however, it was approaching a trendline. If I had rock-solid faith in these things, I would have concluded: “Great, short everything that moves.” But I didn’t. And here’s what happened:

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Rate of Ch-Ch-Changes

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Another day, another improvement! I am pleased to report that SlopeCharts now has the Rate of Change indicator. (Truth to tell, we’re going to deploy it about 20 minutes after this post goes out, but I’m eager to get a new post up since it’s been a while!) In the meantime, let’s learn about it!

The rate of change is a simple, straightforward momentum indicator whose math is very easy to understand: it measures the percentage change of a given security, on a continuous basis, for “n” periods of time.

For example, if you measured the rate of change with a setting of 30 days, then each point plotted on a chart for ROC would indicate the percentage change on that day compared to 30 trading days ago. Collectively, these points would present to you the upward or downward movement of a security. The lowest setting, 2, would show the percentage change for every single day compared to the prior day, whereas the highest setting, 400, would do so for a period of nearly two calendar years (and thus be a far less volatile chart).

Choose this indicator as you do all others, from the Technical Studies dialog box in SlopeCharts:

There are just two controls: one for the number of days on which to base the calculation, and the other for the color the line should use. You can type in the number of days or, for a more dynamic experience, move the slider left and right to immediately see what the ROC would look like given any setting you choose.

Here is an example of just how different the presentation of price movement can be when seen by way of the ROC. This is the SPY using the slowest ROC, the 400-day. Such a long ROC would illustrate the longest-term price trends. Even though the SPY has, in this chart, moved steadily higher for over a decade, the ROC actually peaked years earlier, when the amount of the change was most extreme. In other words, the “meat” of the bull market – – that is, the richest percentage rewards – – was complete six years into the decade-long run, even though the market kept moving higher. Most recently, those who bought 400 days ago would have experienced almost no gain whatsoever.

One way to use the ROC is by looking for extremes. The lowest an ROC can go is -100, since that would imply a 100% wipeout of value ($0 price). The highest and ROC can go has no theoretical limit. However, over a period of years, instruments do tend to have high and low extremes on the ROC which vary on a symbol-by-symbol basis.

For example, here is the small caps fund symbol IWM. It appears that when the ROC pushes to 85 or higher, the price run is complete, and a reversal may be at hand (see green tints, showing the ROC peaks and where they correspond on the price chart).

Conversely, when this particular ROC went to 0 (indicating no net price gain over the period being measured), that indicated a good time to buy, as shown with the magenta bars.

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