Stock Disciplines ▪ Signals ▪ Setups ▪ Stops
Stock Market Review – Alerts – McClellan Oscillator – Summation Index – Chande Momentum Oscillator – Stochastic Oscillator – MACD – Market Bias Indicator
1. A free list of high-momentum stocks is at Momentum List
2. A free list of high Relative Strength stocks is at High-RSI-Stocks
3. A free list of stocks surging in volume is at Volume Surges
4. A free list of “Hot Stocks” is at HotStocks
5. We list new highs on Sundays at New Highs
This site also has breakouts, stocks in setup patterns, strongest ETFs, stock alerts, stock scan reports, ETF signals and numerous indicators.
Video: Indicator Review
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The S&P 500, and the Nasdaq
Click on charts to enlarge
Triple Moving Average Crossover System Above, we illustrate 4-day (dark blue), 9-day (green), and 18-day (red) MAs. The line crossing the volume bars is volume’s 50-day moving average. The 4-day, 9-day, and 18-day MAs are more sensitive and give earlier signals than the 5-day, 10-day, and 20-day MAs. These MAs are used in R.C. Allen’s triple moving average system, a system that gives information not evident with a dual moving average system.
Wednesday, 10/27/21 (After Close) Comments & Data
The Dow was in decline most of the day. We see this as a correction from a Technical overbought condition. Such “adjustments” are normal, and they are beneficial in that they help prevent much more catastrophic plunges. Think of a spring that is stretched. The more it is stretched, the greater the tension and the greater the potential energy build-up. The more that spring is stretched, the greater the kinetic energy that will be released later (the greater the devastation of the decline when the tension breaks). In our view, today’s decline is nothing serious, and if you have been following us, you know it was expected. Relative to yesterday’s readings, the 4-day moving average has declined, the 9-day moving average has risen, and the 18-day moving average has risen. Now, regarding the Donchian system, the last signal generated was a “Buy.” Relative to yesterday’s readings, the 20-day average is rising, and the 5-day average is declining. The 5-day moving average closed at 35,653.76. The 20-day moving average closed at 34,922.99. The S&P 500 dropped, but remains above the blue horizontal (dashed) line, which has given some support and helped stop today’s decline. However, it may not be able to withstand continued selling pressure. Within the current probability envelope there is the scenario in which there is modest intraday penetration of the blue line but a close above that line However, the probabilities are ambiguous. If there is penetration, there is additional support in the vicinity of the green line. Relative to yesterday’s readings, the 4-day moving average has risen, the 9-day moving average has risen, and the 18-day moving average has risen. Now, for the Donchian system. The last signal generated by the Donchian system was a “Buy.” Relative to yesterday’s readings, the 20-day average is rising, and the 5-day average is rising. The 5-day moving average closed at 4,557.53. The 20-day moving average closed at 4,439.03. Regarding the Nasdaq, note where it closed relative to the blue dashed line. There is some support there, but it may not be enough to prevent additional decline. Note the distance from the blue line to the close. now subtract the same distance from the blue dashed line. That will take you midway between the blue dashed line and the 9-day moving average (green). That is where there is additional support that will kick in if the Nasdaq falls below the blue dashed line. The alignments are still favoring a bullish outlook. Relative to yesterday’s readings, the 4-day moving average has risen, the 9-day moving average has risen, and the 18-day moving average has risen. Turning now to the Donchian dual moving average system, the last signal generated was a “Buy.” Relative to yesterday’s readings, the 20-day average is rising, and the 5-day average is rising. The 5-day moving average closed at 15,200.83. The 20-day moving average closed at 14,798.07.
Key Intraday Resistance and Support Levels. If a stock benchmark is above the intra-day resistance level (posted below) for more than 30 minutes of the first hour of trading, the probability is that that benchmark will have a positive bias the rest of the day, and there is a high probability that it will close higher for the day. If the benchmark is below the intra-day support level for more than 30 minutes of the first hour of trading, the probability is that that benchmark will have a negative bias the rest of the day, and there is a high probability that it will close lower for the day. These probabilities assume there are no sentiment modifying news events before the next market close.
Dow: the intraday resistance is at 35,720. Intraday support is at 35,375.
S&P 500: the intraday resistance is at 4,573. Intraday support is at 4,540.
Nasdaq: the intraday resistance is at 15,692. Intraday support is at 15,541.
This CCI is based on the Russell 3000, which consists of the 3,000 largest U.S.-traded stocks (representing about 98% of all U.S incorporated equity securities). Traders often check the CCI to see if there is divergence between it and its underlying security. They also look for overbought and oversold conditions. If the Dow is making new highs but the CCI is not, for example, then the Dow is probably heading for a correction or pullback of unknown magnitude. The CCI usually ranges between +100 and -100. If it is above +100, the underlying security is considered to be overbought. If it is below -100, the underlying security is considered to be oversold. However, there is much more nuance to the usefulness of this analytical tool.
Anticipating The Next Day
● The probable bias at the open will be suggested by pre-market data that we post near the top of this page under “U.S. Stock futures”
● To confirm the general bias after the open, monitor the benchmarks during the first hour relative to the “Key Intraday resistance and support Levels” posted above.
● If you want to buy something, increase your odds of making a profit by focusing on “setups,” chart configurations that are most often seen before a price surge. Be sure to wait for the “trigger event.” A “trigger event” is your buy signal, assuming there is not overhead resistance or other contrary indications. For more on setups, go the Q&A page and read item 13. Then use the link at the end of that explanation.
One of the most popular features of our Website is the list of stocks with the highest RSI. The RSI is a measurement based on the last 14 days. However, we think there is also an interest in stocks that have surged over the last 7 days, the most recently strong stocks. Some of these will be in the earliest stage of a new trend. The following list may also be of special interest to those who aim to benefit from short-term swings in price. The way to gain the most from a trend is to enter it as early as possible, but it is important to avoid stocks with nearby overhead resistance. To identify the stocks that have had strong surges over the most recent few days, we scan thousands of stocks to find those that have the highest RSI over the most recent 7 days. This list will be updated daily, but we may move it to another location. If it is not popular, we may remove it entirely. It can be useful to compare it with the Highest RSI list.
|SYMBOL||10/27/2021 — UPDATED WED AFTER CLOSE||RSI|
|BGI||BIRKS GROUP CL A VTG ORD||99.0|
|SLAB||SILICON LABORATORIES ORD||95.9|
|SJT||SAN JUAN BASIN UNT||92.3|
|TPVG||TRIPLEPOINT VENTURE GROWTH BDC ORD||92.0|
|CXDC||CHINA XD PLASTICS ORD||91.7|
|PVG||PRETIUM RESOURCES ORD||91.0|
|UBS||UBS GROUP N ORD||90.8|
|WIW||WESTERN AST INFLTN LINK OPRT INCM CF||90.6|
|KKR||KKR AND CO ORD||90.6|
|MLI||MUELLER INDUSTRIES ORD||90.5|
|SLF||SUN LIFE FINANCIAL ORD||90.2|
|AMRC||AMERESCO CL A ORD||90.1|
|ARCC||ARES CAPITAL ORD||89.5|
|REXR||REXFORD INDUSTRIAL REALTY REIT ORD||89.2|
|SHW||SHERWIN WILLIAMS ORD||89.1|
|EGP||EASTGROUP PROPERTIES REIT ORD||89.1|
|MANH||MANHATTAN ASSOCIATES ORD||88.9|
|LOW||LOWE’S COMPANIES ORD||88.3|
|RDUS||RADIUS HEALTH ORD||88.1|
|EIX||EDISON INTERNATIONAL ORD||87.6|
|BLFS||BIOLIFE SOLUTIONS ORD||87.3|
|ADP||AUTOMATIC DATA PROCESSING ORD||87.3|
|ADMS||ADAMAS PHARMACEUTICALS ORD||86.6|
|XLY||SPDR FUND CONSUMER DISCRE SELECT ETF||85.8|
|FSM||FORTUNA SILVER MINES ORD||85.8|
|IBP||INSTALLED BUILDING PRODUCTS ORD||85.7|
|HD||HOME DEPOT ORD||85.7|
|ENTA||ENANTA PHARMACEUTICALS ORD||85.4|
|NSC||NORFOLK SOUTHERN ORD||85.4|
|AB||ALLIANCEBERNSTEIN HOLDING UNT||85.1|
|SA||SEABRIDGE GOLD ORD||85.1|
|BIP||BROOKFIELD INFRASTRUCTUR PARTNER UNT||84.8|
|UNP||UNION PACIFIC ORD||84.7|
|UNH||UNITEDHEALTH GRP ORD||84.6|
|TIP||ISHARES TIPS BOND ETF||84.2|
|GAIN||GLADSTONE INVESTMENT ORD||84.2|
|IPAR||INTER PARFUMS ORD||83.8|
|TRNO||TERRENO REALTY REIT ORD||83.8|
|AUPH||AURINIA PHARMACEUTICALS ORD||83.7|
|SCHP||SCHWAB US TIPS ETF||83.6|
|CARA||CARA THERAPEUTICS ORD||83.5|
|LTPZ||PIMCO 15+ YEAR US TIPS INDEX ETF||83.5|
|SBSI||SOUTHSIDE BANCSHARES ORD||83.3|
|DSI||ISHARES MSCI KLD 400 SOCIAL INDX ETF||83.3|
|RENN||RENREN ADR REP 45 CL A ORD||83.2|
|WIRE||ENCORE WIRE ORD||82.9|
|TSC||TRISTATE CAPITAL HOLDINGS ORD||82.8|
|STIP||ISHARES 0-5 YEAR TIPS BOND ETF||82.8|
|DGLY||DIGITAL ALLY ORD||82.7|
|EGO||ELDORADO GOLD ORD||82.5|
|DRE||DUKE REALTY REIT ORD||82.4|
|ADUS||ADDUS HOMECARE ORD||82.3|
|STPZ||PIMCO 1-5 YEAR US TIPS INDEX ETF||82.3|
|GSK||GLAXOSMITHKLINE ADR REP TWO ORD||81.8|
|MMI||MARCUS & MILLICHAP INC. ORD||81.7|
|TIPX||SPDR BLMBRG BRCLY 1 10 YR TIP ETF||81.7|
|IBN||ICICI BANK ADR REP 2 ORD||81.6|
|ENPH||ENPHASE ENERGY ORD||81.6|
|HTBI||HOMETRUST BANCSHARES ORD||81.5|
|GNRC||GENERAC HOLDINGS ORD||81.0|
|ODFL||OLD DOMINION FREIGHT LINE ORD||81.0|
|THQ||TEKLA HEALTHCARE OPPORTUNITIES CF||80.9|
|TDTF||FLEXSHARES IBOXX 5 YR TIPS IDX ETF||80.8|
|LLY||ELI LILLY ORD||80.8|
|BMO||BANK OF MONTREAL ORD||80.7|
|RNP||COHEN STEERS REIT PREFER INCOME CF||80.6|
|INFU||INFUSYSTEM HOLDINGS ORD||80.6|
|ICLN||ISHARES GLOBAL CLEAN ENERGY ETF||80.6|
|ABT||ABBOTT LABORATORIES ORD||80.6|
|NEP||NEXTERA ENERGY PARTNERS UNT||80.6|
|RXDX||PROMETHEUS BIOSCIENCES ORD||80.4|
|APD||AIR PRODUCTS AND CHEMICALS ORD||80.4|
|BNS||BANK NOVA SCOTIA ORD||80.4|
|SOL||RENESOLA ADR REPSTG TEN ORD||80.4|
|MAA||MID AMERICA APT COMMUNITI REIT ORD||80.1|
|PLOW||DOUGLAS DYNAMICS ORD||80.0|
|STFC||STATE AUTO FINANCIAL ORD||79.7|
|COST||COSTCO WHOLESALE ORD||79.2|
|EXK||ENDEAVOUR SILVER ORD||79.2|
|GSS||GOLDEN STAR ORD||79.2|
|SLI||STANDARD LITHIUM ORD||79.2|
S&P 100 (OEX) & Dow: A Strategy
The S&P 100 (OEX) is a subset of the S&P 500. It includes 100 companies that have exchange-listed options. All stocks on the following list are in the Dow or the S& P 100 (only one Dow stock is not in the S&P 100). The approximately 100 stocks listed (mergers may change the count) are ranked in the order of their 12-day momentum. A review of the list might suggest which industries or sectors have the most strength. However, the list offers more than that.
This table replaces the charts of the 30 stocks that make up the Dow. It includes all those stocks and also includes ranking information that the charts lacked. We also believe it is more useful.
For example, a person could select the top ten stocks on the list for inclusion in a portfolio. These have the greatest positive momentum. Then, once a week, any that have fallen out of the top ten could be replaced with those that replaced them in the top ten ranking. That way, the portfolio could be kept mostly invested in top ten performing stocks throughout the year. Alternatively, the portfolio could be adjusted monthly or quarterly rather than weekly, or a different number of stocks could be included. The stocks are numbered for easy reference. For example, a stock could be replaced if it falls out of the top 8 rather than the top 10, and so on. As of 7/2/21, the OEX has had a total return of 15.32%/year for 10 years. Remember that every stock in the OEX that declines cancels out some or all of the performance of a stock that rises. What would the return be if the portfolio did not include declining stocks? What if it always contained only the top performing stocks and there were no falling stocks to counter the performance of strong stocks? The portfolio should do much better than if it contained all the rising stocks and omitted all the falling stocks because it would contain only the top 10 performing stocks — the best of the best.
We are only providing information, not making recommendations.
Support and Resistance
The illustration shows a line of support. The dots represent buying interests about that line. More accurately, each dot represents a little support if the stock is falling from above the line. and a little resistance if the stock is below the line and rising. Buyers do not align themselves precisely on the line of support drawn on a chart. The line merely represents the central tendency of buying interests. The line illustrates where the influence of the buyers can be expected to be at a maximum. In the real world, a declining stock does not always stop its decline precisely on that line. This is what we mean when we say that a line of support has “elasticity.” Those dots represent a “region of influence” and the line represents the “central tendency” of influence of all those dots. In a given situation, a falling stock is most likely to stop its decline somewhere within the cloud of points surrounding the line. We see this cloud of points as defining a probability envelope where the line is the location of greatest probability. Probabilities diminish with distance from the line.
You may wonder why we are always talking about resistance and support. The fact is that nobody knows what the market will do next. However, knowing the location of support and resistance is extremely helpful to tactical positioning, regardless of what the market does. It is the most important, useful, and reliable information a trader or investor can have. For example, placing a stop loss just below support can minimize loss if the market works against the position. That reduction in risk can enable a person to take a position when it would not be advisable otherwise. A stop order to buy placed just above resistance can enable a person to take a position early on a breakout with minimum risk and without a need for constant monitoring. Also, knowledge about the strength and location of support or resistance can be a help in estimating the probabilities associated with the market’s next move, or how far it is likely to be able to continue in a particular direction.
Group Pressure Gradients
Group Pressure Gradient Explanation. The market has an effect on shares analogous to the effect of air currents on an airplane. The greater the speed of the wind, the more difficult it is for a plane heading into the wind to make headway. However, a plane moving in the direction of the wind will find it much easier it to make headway and to gain speed. An airplane has its own driving force, but the plane’s environment exerts its external force on the plane. Likewise, shares have their own motion based on supply/demand considerations pertaining to those shares, but the environment in which the shares exist exerts forces on the shares that are unrelated to the merits of specific shares within that environment. We refer to this “force” as the Group Pressure Gradient (GPG), and we sometimes refer to it as the “Force of Trend.” A Group Pressure Gradient (or Force of Trend) reading near zero might be compared to flying on a windless or near windless day, and a reading of 28 might be compared to flying with a gentle to moderate tail wind. To continue the analogy, a reading of 28 to 57 might be compared to flying with a moderate to strong tail wind, while a reading of 57 to 85 would be like flying with strong winds to gale level tail winds. Negative readings would reverse the above comparisons. Of course the analogy is not perfect because a pilot would not want to fly in gale winds, but we certainly would not mind investing in shares when the market is registering 57 or more on the pressure gradient scale. The scale is unbound, meaning that readings greater than 100 and less than -100 are possible. The Group Pressure Gradient has both magnitude and direction. Hence, it is a vector.
A river or stream has many currents, cross-currents, counter-currents, eddies, and minor whirlpools. If a person wants to know what the pressure gradients are in a stream, he must select a specific spot in the stream to conduct his measurements. The same thing applies to pressure gradients in the stock market. To measure a pressure gradient, it is necessary to select a specific group of stocks within the market. We are currently calculating this indicator for four groups of stocks: large-cap blue-chips, stocks listed on the Nasdaq, and stocks that make up the S&P500 index (the last time we checked, the S&P500 consisted of 50.8% mid-cap, 45.4% large-cap, and the rest were small-cap). The fourth group is The Russell 2000 index, which tracks the performance of the 2,000 smaller companies that are included in the Russell 3000 Index (the Russell 3000 is made up of almost all U.S. stocks). The Russell 2000 is generally regarded as a bellwether of the U.S. economy because of its focus on smaller companies that focus on the U.S. market. Measurements are not made for individual stocks in isolation. It is the general environment of the stocks in these groups that is being measured. Please be aware that some big-cap blue-chip stocks are in the Dow, in the S&P500, and on the Nasdaq. Each grouping has its own group pressure gradient. Therefore, in such cases, it is best consider each environment but give the strongest weighting to that of the Dow (because the Dow has the greatest relative concentration of investors in blue-chips who also represent the biggest relative concentration of big money). If you are not investing in blue-chips, then you might give more weighting to the S&P 500. If you are investing in a portfolio of technology stocks, then give emphasis to the reading for the Nasdaq. Usually the groups have similar readings, but sometimes they are quite different. It is also important to understand that an index (like the S&P500) may rise on a given day while the pressure gradient of the group of stocks that define the index is still negative. Individual stocks within a group can surge (because of a news event, for example), even when there is a negative pressure gradient.
The indicator is extremely sensitive and can change dramatically from day to day. It might be best to think of it as measuring the current status of the pressure gradient. Earlier, we gave the analogy of an airplane flying with or against the wind. Bear in mind that air currents are constantly shifting in direction and intensity.
A pivot point is a price level that is used by traders as a predictive indicator of market movement. A pivot point and the associated support and resistance levels are often turning points for the direction of price movement in a market. Prices tend to swing between two levels. For example, if a price is right at the first level of support (“Support 1”), the probability is that it will move back toward the “pivot point” These levels are very weak, and have most relevance for intraday action. In an up-trending market, the resistance levels may represent a ceiling level in price above which the uptrend is no longer sustainable and a reversal may occur. In a declining market, the support levels may represent a low price level of stability or a resistance to further decline. Pivot points were originally used by floor traders in setting key levels. Before the market opened, floor traders would calculate the pivot points for the day. With these pivot points as the base, additional calculations were used to set support 1, support 2, resistance 1 and resistance 2. These levels could then be used as trading aids throughout the day. The resistance levels are where sellers are likely to enter the market, depressing prices. Therefore, it is significant if a stock can push its way through the selling pressure. It takes buying demand to push shares higher through levels at which sellers are waiting. Likewise, the support levels are where buyers are likely to enter the market, exerting upside pressure on prices. Therefore, it is significant if a stock declines through the buying pressure. It takes significant share selling for shares to continue dropping, even through levels at which buyers are waiting. The price of a security or Index will remain between pivot support 3 (S3) and pivot resistance 3 (R3) 80% – 85% of the time. Therefore, many traders will wait for a move toward either R3 or S3 to show signs of stalling. When the stalling is evident, they will buy a stock that has been declining toward S3 or sell a stock that has been rising toward R3. In the above discussions of the Dow, S&P 500, and Nasdaq Composite Index, see “4-Stage Indicator and Signals” for R3 and S3.
Trading Result For One Of Our Traders
Long ago we proved to our own satisfaction (by trading with real money) that to obtain gains of more than 50% a year it is not necessary to invest in options, currencies, or commodities. It can be done simply by buying and selling stock. All you need is a good discipline (and that you actually follow your discipline). That is what this site is all about. We do not make a practice of revealing the performance of company traders. There is little reason to do so, and it is nobody’s business but our own. However, one of our traders has given permission for us to share her performance on a one-time basis.
After brokerage fees, her net return for the year was 58%. The same year, the Dow gained 18.8% and the S&P 500 gained 23.45%. All she did to obtain this return was to buy and sell stocks. She simply cut losses quickly, focused on good setups, and looked for trigger events. When it was time to sell, she did not talk herself out of it or “argue” with the evidence. She also did not sit “glued” in front of her computer. She entered her trades and set her stop losses. Often, the only time she could check her positions was long after the market closed. She did not have to agonize about margined positions held overnight because they were not part of her discipline.
It might also be worth mentioning that to optimize liquidity, to minimize the spread between bid and ask, and for risk-control reasons, this trader prefers to avoid stocks that trade for less than $5. Most of the stocks she trades are followed in The Valuator. This trader is a very private person who does not want to report her returns every year, even if her name is not disclosed, so there is no plan to update this performance in future years. This report was posted shortly after the data was available, and it will be left here for future visitors.
Please be aware that she did have major distractions during this year that almost certainly got in the way of her achieving a significantly greater return (there were three traumas that year including a divorce). In other words, this was by no means the best she could do. However, she allowed us to reveal her performance anyway in order to encourage others and to show that returns above 50% are achievable (even under less than ideal conditions).
The discipline used was extremely low in risk, much lower than the risk assumed by the average mutual fund investor or the buy-and-hold investor in individual stocks. Yes, she could have achieved a much higher return if she had kept her positions highly leveraged. She does not wish to take that route. Greed destroys discipline. 80% of the people who fully leverage their investments in the futures markets eventually lose all their money. The same can be said for some who trade penny stocks and currencies. It is not the use of leverage that makes a winner, but the use of a good discipline. Too many people don’t get that fact.
The discipline used to achieve the above return is our own creation. We do not make it available to the public as part of any service or training program. In other words, we are not providing this performance information to solicit your enrollment in any kind of program. It is provided only to encourage people to be diligent in the development of their own discipline. We will leave this report here to encourage others who may be wondering if working at developing a discipline is worth the effort.
Buy & Sell Signals for 5 Systems
These systems cover different investment time-horizons. Each system uses two moving averages. If the short moving average (MA) is above the long MA, the configuration is considered to be “Bullish” because the current momentum has taken a more positive aspect relative to the longer MA. A bullish pattern is indicated by an up arrow ↗. If the short MA is below the long MA, the configuration is “Bearish” in its implications. A bearish pattern is indicated by a down arrow ↘. Thus, the direction of the arrow indicates the direction of the last crossover event. When the arrow changes direction, a new signal has occurred, and there will be a “◄” at the right to draw your attention to the change. The red arrow will display for only the day on which it is generated. The following day the arrow will be gone when the table is updated. The table should be of interest to short-term, intermediate-term, and long-term investors. For example, when the outlook for the S&P 500, Dow, or the Nasdaq Composite Index is “Bullish,” the general trend of the Index is supporting bullish positions in those and stocks similar to those in the indexes. Also, some people may use the signals of one of the following systems to time entries and exits for their Index-tracking ETFs. That is, these signals may be of use in timing when to be in and when to be out of the market, based on the preferred system or investment time-horizon.
Chande Momentum,Stochastic Oscillator, Relative Strength,
& CCI for the Dow, Nasdaq, and S&P 500
Do not click on image to enlarge. Instead, press “Ctrl” and “+” simultaneously.
The Interest Rates charted above are the long-term (10-year) and short-term (13-week) interest rates over recent months. The last reading (in percent) is inserted in the scale on the right side of the chart in a colored box. The spread between the two is shown in the right chart. When the spread between short-term rates and long-term rates is +1.3% to +2% (short-term lower than long-term), the economy is thought to be in for a normal growth rate in the vicinity of 2% to 3%. If the difference is more than that, it is probably because the Central Bank is making money more easily available and the economy will likely undergo accelerated growth. When companies can get cheap money, they can more easily afford to invest in projects, facilities, and equipment that will expand business or improve operations. If the interest rate spread is negative (short-term money more expensive than long-term money, then money is being made more difficult to obtain by the Central Banks (they are attempting to reduce the rate of inflation). This will, of course, slow down the amount of capital investment made by companies. Economic expansion will be mitigated. If the spread is a negative 1.5% (or even more), then the probability is 70% that economic recession will occur within a year. This information can be the basis for some general guidelines. If the spread is negative, make stop losses hug price action more snugly and use other techniques you may be aware of to guard or enhance assets in the event of market decline. If the short-term rate is enough higher that the interest rate spread is -1% or more, cash might be your best option. If the chart indicates that the current spread is .76, then the current spread is a little more than ¾ of 1%. The fact that the number is positive (the line is above zero) means the long-term rates are greater than the short-term rates. If the number is negative (the line is below zero) it means the short-term rates are greater than the long-term rates. a.) If the spread is negative, tighten stops or take other protective measures. b.) If short-term rates are 1% or more higher than long-term rates, cash might be a more appropriate investment (Remember that the bear market that began in 2000 started under these conditions). c.) When the spread between short-term and long-term money is less than 1%, higher-quality growth stocks are better candidates. d.) When short-term money costs 1% to 3% less than long-term money, stocks are generally even more likely to be profitable. A greater variety of stocks will advance in valuations. e.) If the spread is more than 3%, assume that inflation is just around the corner.
The McClellan Oscillator is a breadth-of-market indicator that is effective for interpreting short-to-intermediate-term market moves.
McClellan Oscillator readings of ±150 are extreme and tend to correlate well with buying and selling climaxes in the market. The McClellan Oscillator reaches these extreme values, measuring overbought and oversold conditions, in advance of market turns. It then passes through zero at or very soon after market turning points (to put this in perspective, extreme readings occur much less frequently than a pass through zero. McClellan Oscillator passes through zero tend to indicate market reversals at approximately 2 to 6 week intervals). The type of action to be taken, if any, depends on the major trend of the market (as indicated, for example, by 50 and 200-day moving averages) and on whether the move originated from an extreme reading. Thus, in the early and middle phases of a bull market emphasis might best be placed on buy signals. In a bull market, buy signals occur earlier, and positions can be taken when the McClellan Oscillator clearly moves out of its basing pattern, even if it is still negative. In a bear market, sell signals occur when the oscillator moves clearly out of a topping formation, even if it is still positive. The amplitude of the oscillations above and below zero correlates with the general volatility of the market. The oscillator shows distinct cycles (lasting 22 to 24 weeks) between significant bottoming formations. Divergence between oscillator moves and conventional market indicators forecasts an impending change in market direction. Conventional trendline theory can be applied to oscillator patterns. For example, a triple top formation in the McClellan Oscillator forecasts a termination of the preceding up-trend.
The above charts may take on a different appearance at times. That’s because we use several sources, and when one is late in getting the data out we may switch to another source.
The Market Bias Indictor (MBI) consists of three panels, the Bias panel containing the broken black indicator line, the Buy/Sell panel (the red line) and the Confirmation panel (the green line). The horizontal purple line in the first two panels is the zero line. This indicator is useful in evaluating the general status of the market and the nature of any investment strategy shifts that may be necessary to adjust to the prevailing market environment. We have recently “tweaked” the Market Bias Indicator in a way that makes it easier for the user to understand. We believe the second panel is more sensitive than the equivalent configurations in the original MBI. We have also modified the time frame for visual simplification. If you have used the MBI before these changes, please give us feedback. Do you prefer this configuration or the original? Simply send an email that says “I like the new MBI” or “I prefer the old MBI.” Thank you. To see the old version, go to MBI.
For example, when the market has a negative bias (as shown by the Market Bias Indicator), it might be wise to move to cash, switch to a fund that goes up while the market goes down, place stop-loss orders on all positions, or to be extra cautious about taking new positions. When the Market Bias Indicator “says” the market is favoring buyers, the market is not as likely to punish investor aggressiveness (equity growth is expected).
If the broken black line in the left panel of the Market Bias Indicator (the indicator line) is above the solid purple zero line, the MBI is saying the market has a positive bias. It is favoring buyers. That is, the Market Bias Indicator is “bullish” (it is probably okay to hold our positions or to take new ones). In this market environment, ignore the red line in the middle panel unless you are an intermediate-term or short-term trader. If you prefer to manage your portfolio more aggressively, while the black line is in “positive territory,” a move by the red line above (or below) the purple zero line is a buy (or sell) signal respectively. [Red below purple line = Sell, Red above purple line = Buy] However, a rising green line (the right end of the line is higher than the left end of the line) must confirm a buy signal and a declining green line must confirm a sell signal before action is taken. If the black line falls below the purple line, the indicator is saying that the market is favoring sellers (it has a negative bias). That is, extra caution is in order. Even with a negative bias, the Market Bias Indicator (MBI) suggests a “sale attitude” only if the red line (middle panel) is below the purple zero line and the green line green line in the third panel is pointing downward. While the black line in the first panel is in “negative territory,” a move by the red line above (or below) the zero line is a buy (or sell) signal respectively. Again, a rising (or falling) green line must confirm either of these signals before action is taken. The relative placement of the green line is not relevant. Only its direction is important. A buy signal when the MBI is indicating a negative bias may be of very short duration, and should be implemented only by those who know how to trade in a negative environment.
The Market Bias Indicator is sensitive. For example, using this configuration of the MBI on the Dow back in the 1980’s, it was able to give a “sell signal” five days before the meltdown that occurred on October 19, 1987. Though it is sensitive, it avoids whipsaws better than most indicators. While there are numbers that determine line placements in this chart, this indicator was intended from the beginning to be a visual indicator only. The story is told by position above or below the zero lines, not by the exact numbers for the distances. It does not add any more useful information to know that one day it is 25 points above the line and the next day it is 15 points above the line. We can visually determine that it is closer to the line and estimate its rate of approach. The same thing applies to each of the lines in the indicator. Placement above or below the zero line and the direction of the green line are the important issues rather than the quantitative readings for each. We want people to be able to glance at the chart and see a “picture” that tells them all they need to know. We do not even look at the numbers ourselves when we use the indicator. If we ever decide to place the indicator in the public domain, it will be necessary to divulge the equations used and the data needed. However, the indicator is available nowhere else on the planet, and that serves our purpose at this time. Systems and strategies tend to lose their power when they are widely distributed.
All indicators, including this one, should be used in conjunction with other methods of analysis. Bear in mind that an MBI buy or sell signal is not necessarily a buy or sell signal for individual stocks in your portfolio. These signals are merely indicators of market bias. Individual stocks should always be bought or sold on the basis of their own merit or lack thereof. For more information, go to MBI.
The MACD The MACD (Moving Average Convergence/Divergence) is a popular buy/sell indicator. Here, we want to present the MACD chart for the entire market, so the above chart is referencing the Russell 3000, because it represents about 98% of all U.S incorporated equity securities rather than just those in the Dow, the S&P500, or Nasdaq. . The MACD is the blue line. The “trigger line” is the dotted red line. The basic MACD rule is to sell when the MACD falls below the broken signal line and buy when it rises above its signal line. A crossing of the zero line is a confirmation of the signal. The MACD can give buy/sell indications in three ways: signal line crossovers (the indicator is bullish if it is above its broken signal line and bearish if it is below this line), overbought and oversold conditions (the MACD is in an Overbought/Oversold range when it pulls dramatically away from the broken line; when this occurs, it is likely that the market is overextending and will soon reverse direction), and divergences. Divergences occur, for example, when price makes a new swing high or a new swing low, but the MACD histogram does not, indicating a divergence between price and momentum. Bar Colors: Red = Negative & Down, Purple = Negative & Up, Blue = Positive & Down, Black = Positive & Up
Gold & Silver Spot Prices
Today’s Action & Last Spot Bid Prices
We Test Common Assumptions Of Market Participants.
We test assumptions commonly made by market “gurus” to see if they are valid. On the Q & A page (item 14), we explain why we use the Dow rather than the S&P500 in our analysis, even though it consists of only 30 stocks. Another example is that a lot of people who like to consider themselves expert traders/investors, prefer exponential moving averages over simple moving averages. It is part of the “popular wisdom” of the market that exponential averages are better than simple averages because of the greater sensitivity of exponential moving averages to the most recent price behavior. However, few have really conducted more than superficial tests of the assumption that exponential is better than simple. It turns out that the very fact that they are more sensitive to recent price action can actually be detrimental. Like nearly everything else that really works in the market, the truth is counter-intuitive. We have rigorously tested the profitability of simple against exponential averages. After conducting thousands of tests on thousands of stocks in large databases using every moving average from 3 days to 200 days, and testing them over decades of market behavior, we have proven to our satisfaction that the simple moving average is just as good if not better than the exponential moving average as a signal generator (in terms of bottom line profitability). Any gain in sensitivity of an exponential average can often be more than compensated for by simply using a slightly shorter simple moving average. Often the simple moving average allows more time for momentum to build in support of a signal before the signal is actually given, and that often results in fewer whipsaws or false signals. Please do not get the wrong impression. Generally, the differences were not major, and sometimes exponential averages worked better. However, we were trying to determine which worked best most of the time on most stocks in most types of market environment. Our general observation is that being faster on the trigger is not necessarily better. Our studies confirmed the studies conducted by Merrill Lynch in 1978. Those studies showed that simple moving averages were superior to exponential moving averages. For more on the nature of our testing procedures, see our report on selling strategies (a link at the end of the report leads to a report on the Merrill Lynch study). Sell Strategy See also Item #11 at Q & A
Read these terms.
“But thou shalt remember the Lord thy God, for it is He that giveth thee power to get wealth.” Deut. 8:18
“For God so loved the world, that He gave his only begotten Son, that whoever believes in Him should not perish, but have eternal life.” John 3:16
“I am the one who raises the dead and gives them life again. Anyone who believes in me, even though he dies like anyone else, shall live again. He is given eternal life for believing in me and shall never perish.” John 11:25
“I am the way, and the truth, and the life, no one comes to the Father but through me.” John 14:6
Did the ancient prophets predict the coming of Christ, his life, and his crucifixion?
Click here to see the prophecies and their fulfillment.