So for this paper napkin research I did some analysis of my personal blog web traffic. I converted my visitors number using the same calculation as used for on-balance-volume; termed on-balance-visits. When the S&P closed higher I added my blog readership to a cumulative total, when it closed lower I subtracted it. Overall, I experienced strong readership growth; moving from around 400 visits a day in October 2007 to the 700 currently:
By using an on-balance-visit calculation I can sidestep some of the concerns which may effect other metric calculations when trying to account for general readership growth. The key distortion when using on-balance-visit is a megaphone style chart with larger extremes as heavier (overall) traffic is added and subtracted to the cumulative total. This could be overcome by overlaying a moving average trigger as is done for on-balance-volume, or support/resistance lines connecting peak highs and lows (assuming constant growth in site traffic). I did neither here but it may be considered at a later date.
Like on-balance-volume, depending on when you start will dictate your zero line, so I started from the beginning of October just before the 1,576 top in the S&P. The initial relationship is given in the chart below; the green line represents on-balance-visits, the black line the S&P:
What is clear is peaks in on-balance-visits mark important market reversals; not just for bottoms but tops too.
In terms of spike lows, March 27th 2008 and November 16th 2007 were important on-balance-visits bottoms; each falling below the -3,000 mark. The S&P was at 1,325 in March and 1,459 in November. The spike high of 1,371 in my core visitor numbers actually occurred the day after the March 27th on-balance-visit low.
With respect to tops, complacency sets in on breaks above +1,000. The first break of 1,000 came on December 27th, then February 22nd and more recently on May 14th. The S&P finished at 1,476, 1,353 and 1,409 across each of those dates.
However, the current rally in the S&P has seen another surge in traffic to take on-balance-visits past the +3,000 mark. The prior two peak tops in on-balance-visits in December and February were quickly punished with declines of 11% and 6% respectively inside a few weeks. So what will the next couple of weeks hold for the S&P?
Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, market alerts, and stock charts website
1 comments:
Generally when index is rising, more persons (not only regular investors) show interest about markets and search for them. Good article.
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