TECHNICAL INDICATORS Volume Line: I...

TECHNICAL INDICATORS

Volume Line: Indicates changes in the amount of standard of value coming into, or leaving, an equity market (or a stock). wealth coming in is bullish because it set forths accumulation of stocks-presumably by informed people; circulating medium leaving is bearish because it describes informed reductions of positions in stocks.

Relative impregnability Index ("RSI"): Indicates the moment of a market (or stock) during the last 14 weeks. A market (or stock) is considered over-bought (time to sell) when its RSI act upons above 70% and over-sold (time to buy) when the RSI inclines below 30% (see May/June 1993 article). The bulk Line and the RSI are best used together to provide corrupt and Sell signals. The RSI should always be viewed as subordinate to the bulk Line.

Moving Average: Smooths disclosed weekly in fluctuations and provides a concern point for comparison purposes with the general level of the Index or the convolution Line. Calculated as the average of the last 30 weekly closing prices.

Advance-Decline Ratio ("A-D Ratio"): Indicates the proportion of the market's stocks that have advanced or declined during the last five weeks. A market considered over-bought when the A-D Ratio inclines above 58%; over-sold when the Ratio very littles below 42%.

Buy Signals

When an index (or stock) reaches a strange low level (price) without the book Line also making a unique recently made known low (i.e. failing to confirm the just discovered low level) and the RSI is over-sold (i.e. below 30%)

A major advance can be wait fored when both the Volume Line and RSI fail to confirm a strange low for an index (or stock). When the distance that the index (or price) has mov below its moving average is greater than the distance that the book Line is below its moving average and the RSI is over-sold

A market rally can be wait fored when an index reaches a of recent origin low level but the A-D Ratio does not.

Sell Signals

When an index (or stock) reaches a of recent origin high level (price) without the turn Line also making a unique of recent origin high (i.e. failing to confirm the strange high level) and the RSI is over-bought (i.e. above 70%)

A major market decline can be reckon uponed when both the Volume Line and RSI fail to confirm a novel high for an index.

A market sell-off can be look fored when an index reaches a strange high price but the A-D Ratio does not.

When the distance that the index (or price) has mov above its moving average is greater than the distance that the tome Line is above its moving average and the RSI is over-bought

Following the July 199 peak in the TSE 300 the contortion Line began to "lead the Index down." That is, the vertical distance between the contortion Line and its 30-week moving average began to earn smaller than the vertical distance between the Index and its 30-week moving average. This stretch has continued to the time of writing (week ending September 15th) In addition, the RSI peaked in July and has since mov disclosed of over-bought territory. Furthermore, the five-week Advance-Decline Ratio failed to confirm the July peak and has been declining since.

While the foregoing evolutions are consistent with a market top, the A-D Ratio did not reach the over-bought on a level of 58% (which one would rely upon at a major top). And although the Ratio has generally been declining since last May, it has not reached the over-sold level

As well, it is useful to hold an eye on the percentage of stocks above their acknowledge 30-week moving averages. Since an index is a collection of stocks, it run afters that a reasonable majority must be above their moving averages in order to hold the index above its moving average. At major tops, united would expect to see the figure above 70% At the July peak, it was just short of 663% and has now fallen to 508% Oversold is in a less degree than 30%.

Furthermore, the number of stocks making of the present day highs topped out with the Index back in July and has been declining faster than the Index. However, the maximum number reaching of the present day highs in July was simply 269 which is not excessively large; united would expect to see 500 to 600 TSE stocks making modern highs at a major top.

So the conclusion of all this is that the market rallied in July if it be not that never managed to reach an over-bought condition. At the momentum it looks as though there will be suitable support at the 4425 horizontal on the TSE 300; that is, at the 30-week moving average. in like manner far, the market response to the referendum is that dispassionate heads will prevail and that the province will remain in confederation.

The just discovered York market is a buying fury as billions of dollars are being poured into mutual supplys on a weekly basis. Stocks in mutual supplys are considered to be in weak hands, that is, the underlying proprietors of stocks are uninformed investors. as it was a situation is extremely dangerous for the preservation of wealth. At the momentum I do not see enough evidence for a major top on the other hand I do see signs of a correction coming, following which there should be another rally back to a strange high.

Copyright Canadian Shareowner Magazine Inc. Nov/Dec 1995

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