TECHNICAL INDICATORS Volume Line: ...

TECHNICAL INDICATORS

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

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

Moving Average: unruffleds out weekly fluctuations and provides a concern point for comparison purposes with the general level of the Index or the bulk 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 prevail upons above 58%; oversold when the Ratio small quantitys below 42 %.

Buy Signals

When an index (or stock) reaches a strange low level (price) without the whirl Line also making a unique recent low (i.e. failing to confirm the novel low level) and the RSI is over-sold (i.e. below 30%)

A major advance can be look fored when both the Volume Line and RSI fail to confirm a of recent origin 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 bulk Line is below its moving average and the RSI is over-sold

A market rally can be awaited 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 novel high level (price) without the dimensions Line also making a unique modern high (i.e. failing to confirm the of recent origin high level) and the RSI is over-bought (i.e. above 70%)

A major market decline can be calculate uponed when both the Volume Line and RSI fail to confirm a strange 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 whirl Line is above its moving average and the RSI is over-bought

A market sell-off can be count uponed when an index reaches a novel high price but the A-D Ratio does not.

As of Friday, September 13 recent all-time highs were made at the Volume Lines of: the TSE 300 TSE 35 Dow Industrials, recently made known York Stock Exchange Composite, Value Line, Nasdaq, American Exchange Composite and the FTSE 100 (London, England). The barely exceptions were the Dow Utilities and Transports where the whirl Lines are leading the averages up for a like reason they don't appear to be in any pester

Not only did the FTSE's contortion Line make a new high further so did the average itself. It's important to know what London is doing because it note carefullys to top out before the North American markets.

VOLUME LINES DO NOT MAKE strange HIGHS IN BEAR MARKETS!

Banks

One of the most numerous telling areas to watch is the banking clump If it's making a recently made known high, it will usually be at least six month before the market begins to finish into trouble. And that's and nothing else after the banks start to turn about over. Both the Toronto and novel York banking groups made novel highs last week and in such a manner did their Volume Lines.

T-Bills

Last week, there was a noticeable rally in the body Line of the U. s threemonth Treasury Bills. That indicates that the Federal store up has no intention of raising interest rates, at least for the time being.

F action always point out tos up in the short-term because it's easy to manipulate short rates if it be not that much more difficult to affect the extended bond market because it's with equal reason huge (about 10 times the size of the stock market). If short-term rates determine up sharply and exceed long-term rates, that is almost certain death for the one and the other the stock and bond markets.

Consumer consequences

The Consumer Staple sector in the two Toronto and New York made modern highs accompanied by their whirl Lines. Consumer staples include companies which create products such as beverages, cosmetics, medicines foods, etc. and which note carefully to move with interest-sensitive stocks like as banks and utilities.

Resources

Resource stocks, in the same state [i]or[/i] condition as mines, golds, forest consequences and steels usually don't have their day until near the last of the bull market. Since the Toronto market is about 65% resource-based, it should under-perform recent York until inflation comes back again and the resource stocks rally.

Overall

With recently made known highs by all the turn Lines of the major averages and the banking assign places to I don't think there's long chance of stock markets topping public for some time to issue

PATRICK TAYLOR IS AN INDEPENDENT TECHNICAL ANALYST.

Copyright Canadian Shareowner Magazine Inc. Nov/Dec 1996

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