[DbPhoenix]

Originally Posted by Tasuki »

Chart 4 is why I got into this Volume Splitter thread in the first place. It took me years to finally get the principles of VSA sufficiently stuck in my head that I believed them and saw them working in real time. As some of you know. VSA is based on Wyckoff's work, but neither Wyckoff nor his modern counterparts have ever been able to see direct evidence of the influence of the big traders--that influence has always been implied. Well, the whole point of this volume splitters thread has been to try to see visual proof on our charts of the actions of the big traders. If phall's indicators are really working properly, we should be able to take the principles of VSA and visually observe them on the chart, and here is one such *possible* example. I think I have identified an example of the infamous "upthrust" from the VSA thread. The scenario makes sense--the big traders are short, but price has come down so far that every monkey and his/her uncle is short, and the big traders need to convince some suckers to go long so they can wash them out and make the market go down again. So, they create an upthrust--they buy against their own positions with moderate volume--not enough to screw themselves, but enough to spook the shorts, and convince the unwary to go long. Then, they take them all to the cleaners, driving the market down again.

Hello, Tasuki. I saw your post in the VSA Forum regarding your post above. I'm not a VSA expert, though some people think so. But I doubt that a VSA expert would advise looking for thrusts with an interval this small. But then, who knows?

As to whether or not VSA is based on Wyckoff, there's been a spirited discussion about that over the past couple of days. If you'd like a Wyckoff take on this, let me know (Wyckoff was a tape reader, so this kind of interval would be no problem for him). But it won't involve indicators, so it may be wildly off-topic.

Either way, I'm glad this is working out for you.

[Tasuki]

Db, Thanks for your reply. Yes, I agree, such a small interval is not conducive to VSA--I started these charts at midnight last night, when trading was thin, and I wanted to see *something* so I used a very small interval. This is only an initial test. Tomorrow I will put this on longer charts to see how/whether it works. Today's posting was just sort of a "proof of principle" test.

Yes, please do enlighten us on Wyckoff's approach to the chart I've posted. The whole reason I posted on the VSA thread was to encourage a multi-disciplinary approach. Being off topic is a bad thing when you start mentioning fairies and cupboards (see my VSA posting for what not to do), but a synergistic approach to the markets, melding two or more valid techniques, can be extremely helpful to understanding the markets.

[RichardTodd]

Originally Posted by pimind »

I think that we are trying to recreate something that we think is perfect when it is not perfect instead of concentrating on coming up with a volume indicator that will do a better job than the current volume indicators available.

I agree (and have said more than once) that it doesn't do you any good to try to match our one implementation bar-for-bar.

I would caution that what you probably want is a family of related indicators for various tasks. To say that any indicator is "accurate" or does "a better job" without context is a bit off the mark in my opinion. A moving average is always 100% "accurate" if it is calculated correctly, and nothing could do a "better job" at showing you the moving average.... it just might not be the best fit for a particular trading plan.

For certain applications, our splitter, or phall's, might be perfect. For others, you might want to manipulate the data a different way. For tape reading/VSA-type stuff, I'd massage data a bit differently (in particular for starters I would try to bring out cases when traders seem to have trouble eating through price levels, as this would help you see the limit-order side of large supply and demand). In fact I'm starting to do statistical research on that very topic in my spare time.

[DbPhoenix]

Originally Posted by Tasuki »

Yes, please do enlighten us on Wyckoff's approach to the chart I've posted. The whole reason I posted on the VSA thread was to encourage a multi-disciplinary approach.

Okay, but everyone please understand that this has nothing to do with coding and indicators, so if that's what you're looking for, you may want to just breeze on by. Tasuki extended the invitation, so it's all his fault. OTOH, those who just can't code may find this to be an acceptable alternative.

First, the context, as always. You were talking about thrusts and sucking longs into bad trades. It's worth knowing that distribution has been going on all month. And this is fortunately real simple. (Though it's not classic Wyckoff as it splits the volume; one can detect this stuff with a regular chart, but it's more subtle, and I can guarantee that Wyckoff would have used this split volume if it was available to him because he liked an indicator similar to OBV.)

Note here that the NYSE and the SPX track each other pretty well.

And if you're wondering So What?, it's because data providers split up volume and down volume for the NYSE and the Nasdaq. Matching up the Nasdaq UD volume with the Nasdaq is no problem. But there is no UD volume for the SPX. But the SPX and the NYSE track each other so closely that it's not a big deal. And that's so what.

So here we have the up volume -- that is, the volume of advancers -- for the NYSE plotted below the SPX (is this starting to make sense?):

Note that even though that first push up at the beginning of June looks pretty good, the up vol is pretty lame. And it gets lamer and lamer as the month rolls on. Finally, Friday, we get this huge push up in up volume that results in zip movement. This is not good. At least for longs. And all of this is a clue as to what to anticipate regarding today's action (not predict; anticipate).


Now without going into a lot of details regarding support and resistance (such as that the midpoint of last Wednesday's range was 907), note here that the market tells you that it's finding, or trying to find, support at 907 to 907.5 (this is NY time). When price finally drops below this level at 0824, note how pitiful the volume is when traders try to push it back up above this level, from 0825 to 0829. This is a further indication that the line of least resistance is going to be down:

Where one finally makes the decision to short is a personal one, but there are many places to do so. An aggressive trader might short under the above failed attempt to get back past support (now become resistance). If he wanted to wait for the market open, he could short at any of the places I've indicated:

Once you're in, it's just a matter of letting the trend do the work. The trend, after all, as we know, is your friend. Like the policeman.

As long as the trendline hasn't been violated AND the last swing high has not been exceeded, all you have to do is sit back and relax. No muss, no fuss, no ulcers. As for whatever thrusts or volume anomalies may take place in the meantime, who cares? It doesn't really matter as long as that trend is in place.

.

[phall]

Originally Posted by Tasuki »

Chart 1 simply shows that there are indeed differences between the VS_MACD1 and VS_MACD2. Yawn.

Chart 2 shows how the VS_MACD2 and VS_Volume can work together to give you a clearer picture of what the big traders are doing (and if you care, what the small traders are doing too).
............

Tasuki
thank you for the testing, your points about tick/vol charts, and for the kind words about the indicator approach.

couple comments:
1) The difference in Versions 1 and 2 look minor on the oscillator, but I can tell by the slope that the second VS_MACD that this is counting more accurately. definitely use this instead of version 1. it will be more important as you move up in time fractal

2) the upthrust behaviour is the big traders running stops. they generate a temporary volume spike and get folks to panic. you can watch this using the relative volume of the larger traders. it may or may not cause a divergence to form in the MACD ; depending on the setting of the MACD averaging lengths relative to the timing of the behaviors

3) the divergences you are seeing are the ones that are within the MACD timeframes; that is why some of the turn divergences appear so clearly. This is the big issue with all averaging approaches; since the MACD is just the difference of two average lines the same care must be taken.

to Pimind's point; there are a million ways to display the basic information generated by the "block engine"; let's think up something novel


phall

[AgeKay]

I know my comment might or not be appreciated but I had to get it out (since I have to read all of new posts):

The concept of the Volume Splitter is very powerful but all of you are using it wrong since you don't understand what it's really good at. It's not about divergences, other stupid indicators, longer term charts or any kind of bar or candle stick chart for that matter. Read Wykoff's book about tape reading and you might understand what it could be useful for. I therefore think the last 30 or so post added little to no value to this thread - too little understanding of the matter and too many assumptions being made which is not uncommon in what people call "technical analysis" nowadays.

Btw, the only book published by Wykoff that had any kind of value was the tape reading book, so I don't understand the fuss about being based on Wykoff or not. Who gives a shit if he used it? He obviously sold out later on in his career writing books about indicators like all the wanna-be-trader authors do nowadays. To ensure you really don't like me, I think VSA belongs to the "bushwa" category as most of the other bullshit out there. Technical analsyis is like religion: people tend to turn their brain off (I guess I have insulted 99% of people here now, but I don't care).

[BlowFish]

Hey AK I am not going to disagree with you (if you pardon the double negative). I would not go as far as saying it is 'wrong', whatever works for people. You can make pretty nice oscillators that seem to diverge at turns if that floats your boat. At the end of the day it doesn't float mine, though I try and remain open minded to the idea. Malcom Robinson is another guy that has gone that route he sells an indcator that is based on this stuff with a simple 20ema smoother. I am sure there are others.

Also agree with pimid (and always have been of that opinion) 'emulating' is not the way to go. Implement concepts that make sense to you if it ends up looking like something else...well so be it.

[phall]

Originally Posted by AgeKay »

I know my comment might or not be appreciated but I had to get it out (since I have to read all of new posts):

The concept of the Volume Splitter is very powerful but all of you are using it wrong since you don't understand what it's really good at. It's not about divergences, other stupid indicators, longer term charts or any kind of bar or candle stick chart for that matter. Read Wykoff's book about tape reading and you might understand what it could be useful for. I therefore think the last 30 or so post added little to no value to this thread - too little understanding of the matter and too many assumptions being made which is not uncommon in what people call "technical analysis" nowadays.

Hi AK:

Thanks for the feedback; it's nice to hear other points of view...

Please don't take this negatively; but if you could elaborate a little on what you specifically think we're missing in the VS approach that would be alot more helpful than generalized observations.

phall