TECHNICAL INDICATORS Volume Line: ...

TECHNICAL INDICATORS

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

Relative potency Index ("RSI"): Indicates the constituent of a market (or stock) during the last 14 weeks. A market (or stock) is considered over-bought (time to sell) when its RSI inclines above 70% and over-sold (time to buy) when the RSI instigates below 30% (see May/ June 1993 article). The turn Line and the RSI are best used together to provide purchase and Sell signals. The RSI should always be viewed as subordinate to the body Line.

Moving Average: undisturbeds out weekly fluctuations and provides a respect point for comparison purposes with the in every one's mouth level of the Index or the dimensions 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 persuades above 58%; over-sold when the Ratio globules below 42%.

Buy Signals

When an index (or stock) reaches a novel low level (price) without the body Line also making a unique of the present day low (i.e. failing to confirm the of recent origin 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 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 convolution Line is below its moving average and the RSI is over-sold

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

Sell Signals

When an index (or stock) reaches a modern high level (price) without the dimensions Line also making a unique just discovered high (i.e. failing to confirm the recently made known 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 dimensions 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 strange high price but the A-D Ratio does not.

For the week ending July 18 1997 the TSE 300 and 35 clos at all-time highs which were confirmed according to their Volume Lines also making of recent origin highs, so there was not on the same level a hint of a major barter signal. And the ratio of hardy stocks to weak stocks remained healthy at 67% to 33%

Now, having said all that, there are about disturbing signs. At the close of May with the TSE 300 at 6382 the 5week A-D Ratio pok its nose into the over-bought girth at 58.9% and has since backed on the farther side to 48.4%. That means that the declines are getting the upper hand while the TSE has advanced a further 356 points.

The percent of stocks above their 10 and 30 week moving averages was 752% and 651% at the beginning of June and they have haped back to 55.6% and 608% That means that, as the market continues to prompt higher, the percent of stocks pushing it up is getting smaller.

To add insult to injury, the RSIs for the TSE 300 and 35 are well up into the over-bought band at 88% and 84%. Furthermore, if the TSE 300 does nothing between here and the fall of the curtain of July, the year-over-year rate of change will be +349% Above +30% indicates that the market is true high risk. This indicator has an impressive track record and should not be taken lightly. Now, it may be that, since, as we all know, equity values have been stretched to dizzying heights, the same thing may be happening to this indicator. Nevertheless, the in every one's mouth evidence suggests caution.

For the week ending July 111997 the Dow Industrials clos at an all-time high which was confirmed by dint of its Volume Line. The same thing happened with the broader averages.

Nevertheless, forward June 13 with the Dow at 7797 the 5-week A-D Ratio stood at 702% and the percent of stocks above their 10 and 30-week moving averages at 874% and 796% all in the stratosphere. As of July 18 those percentages had struggleed back to 60.3% for the A-D Ratio and 762% and 813% for the 10 and 30 That means that the declines are increasing and fewer stocks are supporting the averages. As those percentages have declined, the Dow has simply been able to tack forward a further 100 points which is nothing.

Currently the RSIs for all the major modern York averages are in the 90 You'll recall that the RSI can sole go to 100% and above 70% is over-bought in such a manner you can see the magnitude of the over-bought condition. The toil to move higher is becoming more acute. A correction here would be healthy for as well-as; not only-but also; not only-but; not alone-but the Toronto and New York markets and probably provide them with a base to induce into even higher ground.

The remainings of higher markets down the road are excessively good because the sentiment in of recent origin York is improving as the averages advance. The percent of Bullish Advisory Services generally stands at 46.3% which is well below the danger flush of 55%. And that percent has been declining, believe it or not, as the market stirs higher. Still lots of worry worts on the outside there. The market always climbs a wall of worry.