Restating market breadth timing rules as ratios

What the recode found

A programmed recode of a multi-condition breadth timing system reproduced every published 1980-1990 buy and sell. It also generated five additional signals in 1986 and 1987.

Market breadth here is daily participation across advancing versus declining issues and volume, read as a market-wide condition rather than a single-index price print. The work was handled as a mechanical trading system: a complete, programmable set of entry, exit, and stand-aside rules that can be recoded and checked against a published historical signal list.

Retiring a buy that tagged too early

One of those extra buys combined two specified buy conditions on 16 October 1987, the session before the Dow Jones Industrial Average fell 508 points. The same two buy conditions had already produced published entries before the Dow Jones Industrial Average printed its final low, which is why that buy clause was removed.

Deleting that clause removed the 16 October 1987 buy and changed the dates and prices of the two earlier matching buys, while leaving the rest of the signal list largely intact. A rule-based entry still fires only when a named combination of breadth, volume, and price-structure conditions is true together.

Issue counts restated as ratios

Original clauses that required more than 1000 advancing or declining NYSE issues became easier to trip as listed issues rose from about 2000 in the 1980s to about 3000, including days when both advances and declines exceeded 1000. Those clauses were rewritten as advance/decline ratios, meaning advances divided by declines, or the reverse on the sell side, so an urgency threshold stays comparable as the number of listed issues grows.

The restated urgent-participation pair requires two consecutive sessions with advances at least twice declines, or the reverse on the sell side, and one of those sessions at least five times.

The restated persistent-participation pair requires advances at least 1.75 times declines, or the reverse, on three of four sessions. It replaces a four-of-seven lookback and stays below the urgent five-to-one bar.

Volume confirmation and the 1978 window break

A declining-volume spike greater than nine times advancing volume was added as an extra sell condition alongside two existing sells. The matching buy requires advancing volume greater than nine times declining volume and no such declining-volume spike in the prior two sessions. That volume spike gate is extra confirmation, with a two-session anti-spike filter on the buy side because selloffs more often print a down-volume climax and then a rebound.

After that volume buy was added, an earlier buy clause was dropped as redundant, and the index-drawdown buy was tightened from a 10 percent to a 9 percent decline from the 52-week high of the Dow Jones Industrial Average.

The revised rules could not be tested before 1978 because NYSE new-high and new-low counts switched on 1 January 1978 from a variable window of about two and a half to 14 1/2 months to a fixed 52-week window. That new-high/new-low window change would force a rewrite of the new-high/new-low sell condition, so it blocks a clean test of that sell on earlier dates.