TECHNICAL INDICATORS Volume Line: ...

TECHNICAL INDICATORS

Volume Line: Indicates changes in the amount of currency coming into, or leaving, an equity market (or a stock). standard of value coming in is bullish because it portray by actions accumulation of stocks-presumably by informed people; riches leaving is bearish because it shows informed reductions of positions in stocks.

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

Moving Average: sleeks out weekly fluctuations and provides a hint point for comparison purposes with the generally received level of the Index or the turn 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 is considered over-bought when the A-D Ratio stirs above S8%; over-sold when the Ratio least bits below 42%.

Buy Signals

When an index (or stock) reaches a fresh low level (price) without the whirl Line also making a unique of the present day low (i.e. failing to confirm the recently made known 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 just discovered 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 compass Line is below its moving average and the RSI is over-sold

A market rally can be awaited when an index reaches a fresh low level but the A-D Ratio does not.

Sell Signals

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

A major market decline can be awaited when both the Volume Line and RSI fail to confirm a recently made known high for an index.

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

A market sell-off can be rely uponed when an index reaches a of the present day high price but the A-D Ratio does not.

For the week ending February 14 1997 the Dow Jone Industrial Average made a just discovered high at 6988.96, which was confirmed by way of its Volume Line also making a recent high. For the week ending March 7 the Dow made another recently made known high at 7000.89. This time the compass Line fell short of its previous peak forward February 14. That signalled the start of the passing from hand to hand correction.

The all-important question now is, was that the top of the market? I doubt it for several reasons.

In the first place, neither the TSE 300 nor the 35 gave exchange signals. It would be self-same unusual for Toronto not to give a signal before, or at least coincident with, strange York.

Secondly, the signal was given from one side of to the other a short period, that is, barely four weeks between the sum of two units peaks. Major signals resulting in bear markets usually take three to four month to form.

Thirdly, when a major top present itselfs it won't be because Mr Greenspan announces it from his soap enclosed seat [i]or[/i] seats Nothing is ever that obvious in the stock market. Now the fear is, of course, that interest rates will rise equal further and the market will collapse. however there have been occasions in the past when interest rates rose for several month and the markets continued to rally. When the markets decline and nobody knows wherefore that's when you have to win really worried.

Fourthly, the 5-week A-D Ratios for the TSE and the Nasdaq are oversold at 401% and the NYSE's is right at the top of the oversold window at 421% The links are also oversold with their 5-week A-D ratio at 409%

Fifthly, as the Toronto and strange York markets decline, there are more stocks with stronger rather than weaker book Lines. In Toronto, the ratio is 65% to 35% and in modern York it's 58% to 42% In a bear market, we should papal court a greater percentage of stocks with weaker compass Lines.

Kenneth L. Fisher is a portfolio manager in California who wrote an article for Forbes magazine in the May 9 1994 issue. I kept a model of it and, every time there is a sharp selloff I contest it out and read it again. brace of his comments are worth mentioning here.

The first is that "Bull markets die with a whimper, not with a bang. A dip off a broad peak similar as we just had is scary, yet it's the way corrections act, not to what degree bear markets usually begin".

The inferior is "Buy whenever stock indexes fall 7% or more in just brace calendar months." Fisher's research demeanored over a twenty-year period from 1974 to 1994 revealed 84 very littles of 7% or more and yielded the following results: "Sometime between 3 and 12 month later, a two-month 7% ear-ring was followed by higher prices in an overwhelming 82 or the 84 incidents