As of the close on Wednesday the Capitulative Breadth Indicator (CBI) was at 4.

With prices at the current levels as of 2pm Thursday the CBI is set to spike to 16.

This is an extremely oversold level. Ten and above has often led to market bounces. Not always immediately, though. It got up into the 40’s in July 2002 and October 2008.

For more on the CBI and what this all suggests you may want to check out the CBI posts.

https://quantifiableedges.blogspot.com/search/label/CBI

For more CBI updates toward the close you may follow me on Twitter.

https://twitter.com/qerob

Lots of different ways to look at this morning’s gap.

So the big question I got yesterday from readers was “What’s the CBI reading?” For those new to the blog the CBI is my Capitulative Breadth Indicator. There is a system I’ve traded since 2005 that I call my Catapult System. It basically looks to buy into S&P 100 stocks that are undergoing capitulative selling. The CBI measures the number of active triggers. When it moves up to levels of 7-10 or more it suggests the market as a whole is becoming oversold to the point that a reversal is highly likely. Extreme selloffs like October 2008 and September 2001 have seen it go much higher (into the 40’s). I wrote many posts about the CBI in 2008 and 2009 since there were so many selloffs that induced high readings. For more information and related research you may us the link below.

https://quantifiableedges.blogspot.com/search/label/CBI

Also, below is the original CBI intro post and explanation.

https://quantifiableedges.blogspot.com/2008/01/my-capitulative-breadth-indicator.html

Since the March 2009 bottom the CBI has not had a significant reading, with the highest only reaching 3. It hit 2 a few days ago and even with yesterday’s selling did not move any higher. Though I checked in the middle of the 2:45 madness and if the market closed there it would have been a “6”. A high CBI is certainly not required for a rally, but I’m personally more comfortable getting aggressively long when I see it.

Should the CBI spike higher over the next few days I will be sure to note it here. And as always I will share the individual Catapult trades that make up the CBI in the Subscriber Letter.

As probably 99% of the people who read Quantifiable Edges are aware, the Traderfeed blog, written by Dr. Brett Steenbarger is nearing an end.

Over the last several years Dr. Brett’s provided a wonderful example for traders, bloggers, and service providers. The energy he put towards the blog and the rest of his work was astounding. His posts were consistently thought provoking and provided many sparks for further research on this site and others. And he’s done it with the kind of integrity not often found on Wall St.

Quantifiable Edges would have come to be without Dr. Brett. But without his inspiration, support, and encouragement throughout the last few years it certainly wouldn’t be as far along as it currently is. Any blog readers or subscribers who have benefitted from my work should be aware that some credit needs to go to the good doctor.

As readers know, I try to quantify most everything here. While it’s impossible to quantify Dr. Brett’s contribution, below is a never-before-seen picture that tells a (true) story of something that happened back in 2008…

Of course that’s just one small example.

Thank you Dr. Brett. Congratulations on your new endeavor. Whoever convinced you to join their firm will surely benefit greatly, just as so many others have over the years. While you will soon be silent on the internet, I look forward to eventually hearing of the good things you’ll accomplish in the next several years.

The NDX has now had a remarkable streak of 50 closes above the 10ma. That’s over 2 months without even a mild pullback. This is the longest streak since the index’s inception in 1986. Below is a chart that shows the number of days the NDX has spent above it 10ma at any point in time.

(click chart to enlarge)

It’s a little difficult to read when try to jam so much history into a small area, but the spike on the right is the current count and it is up to 50. The previous high lasted 47 days in 1989.

In last night’s Subscriber Letter I also discussed research associated with long streaks in the Dow (now at 48 days) and S&P (recently ended at 42 days). The general finding was that such persistent upmoves have a very strong tendency to continue up after the 1st pullback occurs. Rarely will you see an abrupt end to these kind of moves.

If you’d like to see that research then you may take a free trial by clicking here. If it’s been more than 6 months since your last trial you may email me at support @ quantifiable edges.com (no spaces) and I’ll be happy to set you up with one.