[00:00] Hello everyone, today I'm going to be talking about something different. This is not about reviewing a trade or ideas. This is more about how to analyze the marketing overall and deciding if I need to go heavy
[00:18] or reduce my risk. In this case I'm going to analyze this breadth indicator. I'm going to be doing a series of videos about it. this case is going to be only the advance and decline indicator if you go back to august 1st
[00:35] for example you see this dip that happened in the market by the time that this happened i already reduced my size on my trade why was that you can see i have a deep here we have the deep in the
[00:50] market before the reason is because i was analyzing i'm always analyzing the breadth indicator and in this case this is something that i do on the weekends maybe every two weeks not frequently
[01:05] but by the time that the dip came to the market i already knew that the market was weak in this case the breadth indicator is the amount of stocks in the index that are moving up
[01:21] divided by the number of stocks they are moving down how you can see here the stock market in overall the s&p 500 was moving up up up but beneath the surface more stocks were going down
[01:36] that were going up and in this case i show um an average line for the breath indicator in this case is a 13 34 55 short very short period medium period a long long period you can see the stock market is going up but then I see all these arraignances going down and they are aligned in the three periods
[02:03] short medium and long because you can make the case that in the previous dip it was happening the same thing but it wasn't the case you see these highs they were at the same level in the short term
[02:18] but in the medium term and in the long term, it was going up. So no divergence at all. So let me put it back. In this case, they are aligned and the market is weak.
[02:31] So for that reason, I decided to take less risk, close some positions, the weakest one, and reduce the strongest one. And what happened? Yeah, we have this pullback deep in the market.
[02:45] Now, this happened on August 1st. If I go to a day today, we have another dip happening here and another dip happening here.
[02:57] So the weakness is not over. You can make the case that it's still going down in the short term. Not much in the middle term, but in the long term, it's also pronounced.
[03:13] Is the weakness over? I don't think so. for that reason since that day I'm trading with lighter positions if you like it let me know I'm gonna be putting all the details of how to create this chart in thinkorswim in my sub stack
[03:45] .