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The Valuator
For more information, see The Valuator See history, The Valuator
The Dow, S&P 500, & Nasdaq
Click on chart to enlarge it
M
Note: See a list of high momentum stocks near the bottom of this page.
Comments:
As we suggested yesterday, the line labeled “D” in all three benchmarks charted above, acted as support. Negative momentum continued early in the day, but the support in the vicinity of “D” was sufficient to absorb the shares being sold and stop the decline. Near term, we now expect the Dow, S&P 500, and Nasdaq to gradually climb to their previous highs. The dashed red lines above current levels will likely give some resistance before the reach their previous highs, but that resistance will likely be overcome. What we have seen then is that the news event that triggered the decline was simply an excuse for nervous people to take of toke profits off the table, a normal adjustment after a strong move higher.
The PAL Report and Trading Forecasts
What is PAL? One-Day Probabilities
• Today, the Dow closed at 42840.26, up 498.02 points or 1.18%, the S&P 500 closed at 5930.85, up 63.77 points or 1.09%, and the Nasdaq Composite Index closed at 19572.59, up 199.8289 points or 1.03%. The S&P 500 data previously shown here has been moved to the KISS information lower on this page.
• The Dow has had a sell signal, and there is now a negative bias against large-cap high-quality stocks like those in the Dow. According to the R.C. Allen system, such stocks are now in a down-trend, and sellers are on the right side of the market. This is a general outlook. Of course, some of these stocks will go against the general trend. The last signal generated by Donchian system was a “Sell.” The 5-day average is declining. There will be increasing overhead resistance that begins to build at about 43,681 This support and resistance referred to here are not defined by fine lines. Rather, the odds of support or resistance gradually increase at these levels. There will be increasing resistance to decline that begins to build at about 42,000. One-day probability: the Dow is most likely to be down early on Monday
• The S&P has had a sell signal, and there is a negative bias against the larger-cap stocks that dominate the weighting of the S&P 500. This does not mean that all such stocks are declining or that they should all be sold. It is an indication for the Index as a whole. That is, the majority of such stocks are likely to be relatively weak at this time, and many are sell candidates. The last signal generated by the Donchian system was a “Sell.” The 5-day average is declining. There will be increasing overhead resistance that begins to build at about 6,005 There will be increasing resistance to decline that begins to build at about 5,857. One-day probability: the S&P 500 is most likely to be down early on Monday
• The Nasdaq has had a preliminary or weak sell signal. The fact that The 4-day moving average has crossed below the 18-day moving average indicates a momentum counter-current is building and that a bearish bias is in an early stage of development. The last signal generated by the Donchian dual moving average system was a “Buy.” The 5-day average is declining. There will be increasing overhead resistance that begins to build at about 19,817 There will be increasing resistance to decline that begins to build at about 19,328. One-day probability: the the Nasdaq is most likely to be down early on Monday
• Key Intraday Levels: PAL estimates that if a stock benchmark is above its indicated target level for more than 30 minutes of the first hour of trading, that benchmark has a very high probability of closing higher. The bullish target value for the Dow is 43,084. The bullish target for the S&P 500 is 5,961. The bullish target for the Nasdaq Composite Index is 19,678. On the other hand, if a stock benchmark is below its estimated bearish target level for more than 30 minutes of the first hour of trading, that benchmark has a very high probability of closing lower. The bearish target value for the Dow is 42,596. The bearish target for the S&P 500 is 5,901. The bearish target for the Nasdaq Composite Index is 19,467. [12/20/24]
Pivot points and Fibonacci retracement levels are posted lower on this page
Market Status Report
See interpretation of interest rates.
Money Flow Projections
Probability Alignment Monitor
This monitor is looking at present and emerging probability alignments. [Note: An index may rise while its indicator as displayed here may decline, because there is more to these indicators than changes in the the closing price].
Group Pressure Gradient
The market has an effect on shares analogous to the effect of air currents on an airplane. The greater the speed of the wind counter to the direction of the plane, the more difficult it is for a plane 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 and sentiment 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.” A Group Pressure Gradient 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 to100 on the pressure gradient scale. 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 three groups of stocks: stocks in the Dow, stocks included in the Nasdaq Composite Index, 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). 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 all three of our benchmarks (the Dow, in the S&P500, and on the Nasdaq), and each grouping has its own group pressure gradient. Therefore, when a stock is in more than one group, it is best to 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. The GPG of a group may decline while the corresponding Index rises, or rise wile the corresponding Index declines. Also, 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. An airplane often encounters gusts of wind. Similarly, this indicator will occasionally reflect “gusts” and reversals. In other words, the indicator can sometimes be volatile on a daily basis. After observing it for a few days, a general pattern may emerge. It may become evident that the indicator tends to show pressures more often in one direction than in the opposite direction. The pressure gradients can become progressively stronger or weaker. This can be very helpful information for short-term to intermediate-term investors. While it is possible to smooth the readings (make them less volatile), doing so would reduce sensitivity. The indicator is relatively new (first introduced on 6/3/15). If we get enough requests for less sensitivity, we can modify it to accomplish that. We wanted to make the indicator sensitive initially because the high sensitivity suited our own purposes at the time. Computational details are currently proprietary.
This is updated daily. When the black line with dots (the indicator line) is above the horizontal blue line, this indicator is telling us that the market has a positive or bullish bias (in the short-term to intermediate-term, even if not in the long-term). If the black dotted line is declining toward the horizontal line, bullish sentiment is decreasing but still present. A negative or bearish bias will be indicated when the black line crosses below the horizontal line.
Assume, that the market has a positive bias (the black line is above zero). If the green line is rising, it is confirming that the environment is supporting bullishness. In this case, long-term and intermediate-term investors who take bearish positions will be in an environment that is working against them. A declining green line in a market with a positive bias means the positive bias is not currently being confirmed … the MBI is detecting counter-currents of negative momentum that are not yet significant enough to change the market’s positive bias status. That means investors may find situations where bearish positions can be taken with somewhat less risk than when the market has a confirmed bullish bias, but because the general environment is bullish, there is still risk in taking bearish positions. Great caution is recommended. Money can be made only on carefully selected bearish positions taken by short-term or intermediate-term investor/traders who know how to trade bearish positions in a market with a positive bias. If the black indicator line crosses below the dark red dashed line, it means that the bearish sentiment is becoming more significant, but since the black line is still above zero, probabilities still favor bullish positioning. In this environment, carefully selected bearish positions are more likely to be profitable than before the black line crossed below the dashed line. From the perspective of an experienced short-term trader, the non-confirmed reading is giving a “go-ahead” for quick bearish trades. Here, the indicator would be giving nuanced information a level deeper than most indicators. If the market has a positive bias, a green line turning down merely means the conditions are not “optimal” for short-term bullish positions. That does not mean they cannot be very profitable if carefully chosen. However, a downturn of the green line in a market with a negative bias is much more problematic for bullish positioning, even for very short-term traders.
Assume, that the market has a negative bias (the black line is below zero). If the green line is declining, it is confirming that the environment is supporting bearishness. In this case, long-term and intermediate-term investors who take bullish positions will be in an environment that is working against them. A rising green line in a market with a negative bias means the negative bias is not currently being confirmed … the MBI is detecting counter-currents of positive momentum that are not yet significant enough to change the market’s negative bias status. That means investors may find situations where bullish positions can be taken with somewhat less risk than when the market has a confirmed bearish bias, but because the general environment is bearish, there is still risk in taking bullish positions. Great caution is recommended. Money can be made only on carefully selected bullish positions taken by short-term or intermediate-term investor/traders who know how to trade bullish positions in a market with a negative bias. If the black indicator line crosses above the dark red dashed line, it means that the bullish sentiment is becoming more significant, but since the black line is still below zero, probabilities still favor bearish positioning. In this environment, carefully selected bullish positions are more likely to be profitable than before the black line crossed above the dashed line. From the perspective of an experienced short-term trader, the non-confirmed reading is giving a “go-ahead” for quick bullish trades. Here, again, the indicator would be giving nuanced information a level deeper than most indicators. In a market with a negative bias, a rising green line is letting an investor know that if they are very careful, there are some opportunities. For example, a setup pattern could offer a good opportunity for a 1-week price surge [a pre-surge “setup” pattern is meant here. For more on these patterns see the bottom half of the Stock Alerts page on this site]. A swing-trader may take such a position to participate in the surge and sell immediately as the surge loses momentum. These trades can enable a person to capture a gain of maybe 3% to 12% and sometimes much more than that (we have captured more than 30% in a single day).
As for the green line, its position above or below either the black Indicator line (or Dashed red line) is not relevant. It is the direction of the green line, not its position, that is relevant.
The dashed red line can be used in combination with the black dotted line as a short-term buy/sell signal generator, but all signals must be confirmed by the green confirmation line. For example, say the black dotted line is below the horizontal line (indicating a negative market bias), and it crosses above the dashed dark-red line. If, at the same time, the green line is rising, then a cross above the red line may be interpreted as a buy signal in a negative environment for a short-term trade. All such signals must be viewed with respect to the prevailing context and the risks implied by the current configurations. Nothing on this Website should be interpreted as a buy or sell recommendation. Our indicators may generate buy or sell signals, but never buy or sell recommendations.
So, what if the Indicator line is above zero (indicating a positive bias), but it has crossed below the broken red line? If the green line is declining, it is confirming that bearish positions can be taken within the bullish environment. However, it must be remembered that risk is higher than if the market has a bearish bias. If the green line is rising, it is not confirming the short-term sell signal created by the Indicator line crossing below the red dashed line. Instead, it is confirming the positive bias indicated by the black indicator line’s position above the zero line.
On the other hand, if the Indicator line is below zero (indicating a negative bias), but it has crossed above the broken red line, simply reverse what was said in the above comments. This indicator is sensitive. For example, it gave a “sell signal” two days before the market meltdown in 1987. More information on MBI
Pivot Points
Explanation Of Pivot Points
A pivot point is a price level that is used by traders as a predictive indicator of market movement. Pivot points, and their associated support and resistance levels, are often turning points in the direction of price movement. Prices tend to swing between two pivot point 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 next higher “resistance pivot point” These levels are very weak, and have most relevance for intraday action. In an up-trending stock or index, the next higher pivot point (a resistance level) 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 next lower pivot point (a support level) 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.
Fibonacci retracements
Fibonacci retracement levels are weak and should be used with other technical analysis indicators to confirm or validate potential trading opportunities.
McClellan Oscillator and Summation Index
(Click to enlarge)
The McClellan Oscillator (left chart) is a breadth-of-market indicator. It is effective for interpreting short-to-intermediate-term market moves. The McClellan Summation Index (right chart) is a running total of each day’s McClellan Oscillator value. The Summation Index is effective for interpreting intermediate-to-long-term market moves. Together, they can be useful in evaluating the dynamics of the ebb and flow of the market, and in planning entry and exit points.
Oscillator readings of 150 (plus or minus) are extreme and tend to correlate well with buying and selling climaxes in the market. The 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. The type of action to be taken, if any, depends on the major trend of the market (as indicated, for example, by the Summation Index) 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 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 put 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 trend-line 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.
If the Summation Index is rising (or declining), it is intermediate-term bullish (bearish if declining) and the market’s trend is up (down if the Index is declining). If the Index is declining, the first positive sign will be a slight narrowing of the gaps between postings. The second positive sign is a flattening out of the entries (but this stage is sometimes skipped). The third positive sign is a reversal in direction. Some investors use the second posting in the positive direction as an early buy signal). They view the opposite conditions as negative, culminating in a sell signal.
Keep It Simple Strategy
First, consider the S&P 500. It consists of a mix of small-cap, mid-cap, and large-cap stocks. More than half are mid-cap or small cap. However, because of the way they are weighted in computing the Index (more weight is given to the large cap stocks), the S&P500 is considered by many to be a large cap Index. However, with the following strategy, you are not investing in the Index as it is weighted. Instead, you would be investing in individual stocks drawn from a pool consisting of stocks having a wide range of market capitalizations. As of August 2024, the S&P 500’s total return over the last 10 years is 325.1%, with an average annualized return of 15.6%. This does NOT include dividends. There can be a great deal of fluctuation from year to year, but historically, average returns over various stretches of time have been respectable.
Consider the fact that the return for each year is the result of the pluses and minuses contributed to the Index by each of the stocks in it. An index return of 15% might be the result of some stocks rising 20% or 30% or more and other stocks declining enough to drop the total gain of the Index to 15%. The net return would be the result after falling stocks have canceled out some of the performance of the rising stocks. There may even be more declining stocks than rising stocks, causing the Index to have a negative return even though many of the stocks in the index rose during the same period. Now, what do you think the average returns would be if an investor always had the strongest stocks in his portfolio, and there were no losers to cancel out the performance of the strong ones?
The Strategy
Each day we rank stocks that make up the S&P 500 and provide a list of the top 50 in strength. The investor can use the list in several ways. He might select the top ten out of the fifty for investment if he thinks they are suitable (the top 10 would be the strongest 2% of the 500 stocks in the Index). Once a week (or daily), he could replace any that fall out of the top 10, 20, 30, or whatever, with the stocks that have moved up to the top 10 (or 20). As you can see, there are many variations possible for the basic strategy. For example, you could keep the selected stocks until they fall out of the top 50 and then replace them with those in the top ten that you do not have. Or, you could make these adjustments once a month or once a quarter rather than once a week. Another approach is that you could pick and choose whatever catches your fancy from among the top 20, and replace them when they fall out of the top 20 or 50. An alternative sell strategy would be to sell those stocks that close below their lowest closing price of the previous 10 or 20 days, on the rationale that such stocks would probably no longer be in an uptrend. The could then be replaced by stocks in the top 10, 20, or whatever.
To cut down on excessive and meaningless trading, these strategies depend on a strength algorithm that finds more persistent strength than what is found by the Relative Strength Index (RSI). It should find stocks that are trending or beginning to trend. Also, we want the trend to have relative consistency of behavior. That is, we prefer to avoid having lists of stocks that have spiked up 50% overnight, though it may not be possible to filter out all of those. The RSI cannot satisfy these requirements, but we do have an algorithm that does. The other part of the strategy requires a universe of limited size but made up of respectable stocks (not a lot of penny stocks or new issues). That is why we focus on the S&P 500. It should be limited in size because using this strategy on a list of several thousand stocks would probably mean excessive (and meaningless) turnover. There would be too many candidates for each position, and rankings would probably change too often on unimportant differences.
Managing The List
We keep the basic list more stable than the makeup of the S&P 500, because the managers of the Index sometimes remove stocks that have excellent performance and outlook (because of weighting and balancing considerations). If they want one more stock in Finance, they might throw out a perfectly fine stock in Technology so the weightings would balance right for their model. Keeping the database more stable enables us to give better follow-up on stocks in which you may have invested (and stocks are less likely to disappear from the list suddenly without warning or obvious reason). Of course, if a stock is delisted or if its company is merged with another company we would want to replace it with another from the S&P 500. We just do not want to add or subtract stocks simply because of Index balancing considerations, because those are “artificial changes,” having no bearing on the quality of the company or the attractiveness of its stock. Also, we are not investing in the Index, but in individual stocks of relatively high quality. A few companies have more than one class of shares. We track one class of shares for each of those companies, limiting our list to 500 stocks. Also, if a stock is dropped from the S&P 500, we may not replace it immediately, so the list could consist of less than 500 stocks for some of the time between list updates. The lists are not recommendations to buy or sell. They are simply lists of stocks, having the highest ranking scores. Reports may be created mid-day, so prices are not always closing prices.
High Momentum Stocks
What’s In The Valuator?
Stocks With Highest Persistent Strength Ranking
See what this means
Stocks With Lowest PE-Ratios
Probable High and Low Price Range For Each Stock
Stocks With Lowest and Highest RSI
10-Day Momentum For each Stock
The ATR (Average True Range) For Each Stock
What Can I Do With The Valuator?
SETUPS: 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.
The 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%. All she did to obtain this return was to buy and sell stocks in a very bad market. 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, she 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, 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. 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). [Portfolio returns above 50% per year can be achieved by trading relatively high quality stocks priced above $5 in a cash account.
The discipline used by this trader is 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. Here is a little known fact worth considering. 80% of the people who fully leverage their investments in the futures markets eventually lose all their money. Some people do well in the futures markets. The same can be said for some who trade penny stocks and currencies. However, 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.
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Silver – Gold – Platinum – Paladium
According to the source for the following, the spot price of gold is determined by the London bullion market twice a day – at 10:30am and at 3pm – London time (2:30 am & 7am Pacific time).