Skip to main content
Track Market participant analysis
5 / 21
Search the archiveLibrary
Library

1989issue C071-3

Lock smoothing inside each short-share before the breadth ratio

This archive article teaches a construction-first habit for noisy market-breadth work: convert participant short counts into opposing group shares, cancel shared hedging distortion with a ratio, and keep the exponential lookback inside each component so the finished composite is not smoothed twice.

  • Convert participant shorts into three series scaled by 100: specialist shorts over total shorts, member shorts over total shorts, and public shorts over total volume.
  • Apply an embedded exponential to each part (18 percent, 29 percent, and 18 percent) and omit a further average of the finished composite.
  • Publish the index as the sum of the two short-share components divided by public-short intensity so shared hedging noise can offset.
  • Specialist shorts enter both short-share components, and a late-1984 to early-1985 collapse in member trading figures was described as not a half-year withdrawal of funds.
Entries in this reading3 entries
Current trackMarket participant analysis32 readingsMarket breadth147 readingsExponential smoothing183 readings

Editorial framing

Editorial note from TradersWeek: use this archive workflow as a construction-first habit for noisy market-breadth work. Convert participant short counts into opposing group shares, cancel shared hedging distortion with a ratio, and lock the exponential lookback inside each component so the finished composite is not smoothed twice. The steps below are the historical workflow. They are not a claim about present-day markets.

Why raw short counts stop being informative

Raw specialist and member short counts were described as increasingly uninformative once options and futures hedging let participants offset short exposure. That hedging noise makes a raw short count a poor proxy for remaining directional risk.

From late 1984 to early 1985, member trading figures collapsed. That move was described as not representing a half-year withdrawal of funds.

Turn the counts into opposing shares

The breadth composite is assembled from three exponentially smoothed series. Two are short-share series: specialist shorts over total shorts, and member shorts over total shorts. The third is public-short intensity: public shorts over total volume rather than over all shorts. Each series is first scaled by 100.

Member shorts are the combined shorts of specialists, other members, and remaining member categories. Public shorts are total shorts minus member shorts.

Keep the exponential inside each component

The specialist-share component is an 18 percent exponential of 100 times specialist shorts divided by total shorts.

The member-share component is a 29 percent exponential of 100 times member shorts divided by total shorts.

The public-intensity component is an 18 percent exponential of 100 times public shorts divided by total volume.

A further moving average of the finished composite is omitted because the smoothing is already inside the parts. That is an embedded exponential: a constant-percentage smoother applied to each component before combination.

Combine the parts as one ratio

The published composite is the sum of the two short-share components divided by the public-intensity component.

Forming a ratio of one series to another was presented as a way for shared noise in the numerator and denominator to offset. Editorial reading: TradersWeek treats that step as participant-ratio cancelation, so common hedging or reporting distortion that sits in both series is reduced.

Specialist shorts enter twice

Specialist shorts enter both short-share components of the composite. Because member shorts already include specialists, those specialist shorts are double-counted specialist shorts.

Published levels were benchmarks

A historical test recorded composite reference levels of 58 and 99. Those levels were labeled benchmarks rather than fitted parameters.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
5 of 21 in the Market participant analysis track
19891-7 pp.Next on Market participant analysisHeadline intensity as a three-horizon contrarian filterTape families that use only price, volume, and open interest were described as clustering around a simple moving average, while monthly commercial hedging reports miss many interim moves and compiled contrary letters lag and stay mute on holding period.
All readings on this track · 21 readings
  1. 1988Classifying primary futures for regime-aware trades
  2. 1989Odd-lot short interest as a constructed breadth series
  3. 1989Volume-scaled member versus public short sales as a two-class classroom test
  4. 1989Evaluating public versus member short-sale breadth
  5. 1989Lock smoothing inside each short-share before the breadth ratio
  6. 1989Headline intensity as a three-horizon contrarian filter
  7. 1989Evaluating technical-fund open interest and daily volatility
  8. 1990Constructing fund cash and manager-preference filters
  9. 1990Stock-style futures rules miss index-spread drivers
  10. 1991Constructing short-squeeze pain from interest and margin
  11. 1995Contrary sentiment and put-call premiums around large Dow swings
  12. 1995Act on a pattern change, not on formula signals
  13. 2002Single-stock futures: contract selection and the margin box
  14. 2003A crowd fade needs an insider-pattern divergence gate
  15. 2005A quiet insider tape as a seasonal regime case
  16. 2006Unwritten pit cues need testable rules
  17. 2010A gold corrective-phase case after the 1265 high
  18. 2014Ticket charges, margin carry, and bank liquidity limits
  19. 2014A liquidity filter for majors, crosses, and exotics
  20. 2017Test a high-low forecast as one procedure, then cut the book
  21. 2020Follow or fade as one trading procedure
By fieldMarket breadth135 readingsBy year1989126 readings
All 32 readings tagged Market participant analysis
Also on Market participant analysis5 readings
1989Evaluating public versus member short-sale breadth1989Odd-lot short interest as a constructed breadth series1989Volume-scaled member versus public short sales as a two-class classroom test1995Act on a pattern change, not on formula signals1990Constructing fund cash and manager-preference filters