MARKETS & STOCKS Volume Line: Indic...

MARKETS & STOCKS

Volume Line: Indicates changes in the amount of coin coming into, or leaving, an equity market (or a stock). riches coming in is bullish because it portrays accumulation of stocks -- presumably by means of informed people; money leaving is bearish because it depicts informed reductions of positions in stocks (see January/February 1993 article).

Relative toughness Index ("RSI"): Indicates the relative size of the "up" and "down" induces of a market (or a stock) during the last 14 weeks. A market (or stock) is considered over-bought (time to sell) when its RSI impels above 70% and over-sold (time to buy) when the RSI influences below 30% (see May/June 1993 article). The body Line and the RSI are best used together to provide pervert with money [i]or[/i] gain and Sell signals. The RSI should always be viewed as subordinate to the turn Line.

Buy Signal

When a market (or stock) reaches a of recent origin low price without the body Line making a unique of the present day low (i.e. confirming the novel low price) and the RSI is below 30%

Sell Signal

When an index (or stock) reaches a fresh high price without the book Line also making a recent high (i.e. confirming the novel high price) and the RSI is above 70%

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 is considered over-bought when the A-D Ratio instigates above 58%; over-sold when the Ratio very littles below 42% (see September/October 1993 article).

Buy Signal

A rally can be awaited when a market reaches a strange low price but the A-D Ratio does not. Furthermore, a major advance can be awaited if both the Volume Line and RSI are also not making modern lows.

Sell Signal

A sell-off can be count uponed when a market reaches a recently made known high price but the A-D Ratio does not. Furthermore, a major decline can be rely uponed if both the Volume Line and RSI are also not making recent highs.

The TSE 300 body Line not only called the bottom in the average as early as June 1994 it also predicted a novel high which occurred in the week ending July 7 1995

Although the timing was different, the same indications were given by the agency of the Volume Lines of the TSE 3 Dow Industrials, Dow Transports, of recent origin York Stock Exchange Composite, Nasdaq, and American Exchange. The arises have been dramatic, to say the least. It definitely pays to watch the tome Lines!

The accompanying charts indicate that the TSE is reach outed above its 30-week moving average with an RSI that achieved a elevated 87% and is now turning down. The farther an index travels above its moving average, the harder its plains are to sustain.

I believe a correction is about to take place because the dimensions Lines and RSIs of the U Treasury attachment and Canada Bond futures have all given exchange signals. When bonds get into disturb stocks usually follow.

The correction shouldn't be too harsh in Toronto because the Advance-Decline Ratio has not at any time been over-bought. I would look for at least one more rally. If during that rally, the contortion Lines give sell signals, the sentiment indicators (which were wildly bullish at the bottom last year) reach bearish flats and, bonds continue to deteriorate, the stock market will top out

In the previous issue, I noted that the TSE 35 had outperformed the 300 Now, the latter has caught up and the 35 is running well ahead of its bulk Line. Therefore, large-cap stocks are likely to stand more than small-caps.

PATRICK TAYLOR IS A DIRECTOR AND TECHNICAL ANALYST WITH THE INVESTMENT DEALER BRAWLEY CATHERS LIMITED.

Copyright Canadian Shareowner Magazine Inc. Sep/Oct 1995

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