TECHNICAL INDICATORS Volume Line: ...

TECHNICAL INDICATORS

Volume Line: Indicates changes in the amount of wealth coming into, or leaving, an equity market (or a stock). riches coming in is bullish because it portrays accumulation of stocks-presumably by informed people; coin leaving is bearish because it exhibits 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 persuades above 70% and over-sold (time to buy) when the RSI propels below 30% (see May/ June 1993 article). The whirl Line and the RSI are best used together to provide pervert with money [i]or[/i] gain and Sell signals. The RSI should always be viewed as subordinate to the body Line.

Moving Average: polisheds out weekly fluctuations and provides a intimation point for comparison purposes with the existing level of the Index or the body Line. Calculated as the average of the last 30 weekly closing prices.

Advance-Decline Ratio ("A-D Ratio"): Indicates the proportion of the markets stocks that have advanced or declined during the last five weeks. A market is considered over-bought when the A-D Ratio instigates above 58 %; over-sold when the Ratio small quantitys below 42%.

Buy Signals

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

A major advance can be count uponed when both the Volume Line and RSI fail to confirm a fresh 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 book Line is below its moving average and the RSI is over-sold

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

Sell Signals

When an index (or stock) reaches a of the present day high level (price) without the bulk Line also making a unique recently made known high (i.e. failing to confirm the recent high level) and the RSI is over-bought (i.e. above 70%)

A major market decline can be look fored when both the Volume Line and RSI fail to confirm a of the present day 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 bulk Line is above its moving average and the RSI is over-bought

A market sell-off can be look fored when an index reaches a fresh high price but the A-D Ratio does not.

For the week ending May 23 1997 the TSE 300 and 35 one as well as the other made new all-time highs (at 642151 and 34598 respectively) which were confirmed by dint of their Volume Lines. The ratio of able stocks to weak stocks also came in with a healthy showing of 70% to 30% This ratio has gradually been improving since the beginning of the year and indicates convenient underlying strength in the Toronto stock market.

Having said that, the market is formerly again approaching the over-bought plain with the 5-week Advance-Decline Ratio at 576% (58% is over-bought) Additionally, the percentage of stocks above their 10- and 30- week moving averages are at 672% and 617% respectively (70% is over-bought in the pair cases). So, it would not be unreasonable to look for a pullback but I doubt it will be a great quantity [i]or[/i] amount of more than 3-5%.

This is a same strong and persistent bull market. Witness the fact that it corrected for five weeks from March 7 to April 11 and, alone six weeks later is right back to a of the present day high by almost 200 points. That's power! Furthermore, when the TSE bottomed in succession April 11 at 5684, the 5 week A-D Ratio dropp all the way down to 336% (42% is over-sold) That almost reached the plain of the 1987 crash, in the same manner it was an excellent buying opportunity.

Last unless not least, the year-over-year rate of change (ROC) did not exce 30% from May 1996 to May 1997 I explained this indicator (popularized on Leon Tuey) once before still it bears repeating. The ROC is calculated at the completion of each month and compared to the horizontal of the TSE exactly individual year ago. Whenever the TSE has advanced more than 30% in a one-year period, it is high risk and a major top is not far opposite This indicator has an impressive track record and, as lengthy as it remains under 30% you can be nice confident that the market will continue to rally. by the agency of the way, the ROC does not work well in other markets. more [i]or[/i] less indicators just don't transpose.

Now permits look at some comparisons with the "Big Board." At the fall of the curtain of last week, we saw just discovered highs for the Dow Industrials, Dow Transports, modern York Stock Exchange Composite, Value Line, and the Nasdaq-all confirmed through their Value Lines.

New York's 5-week A-D Ratio at 660% and the percent of stocks above their 10-week moving averages at 791% are "way up there." And stocks above their 30-week moving averages at 677% are true close to the over-bought of the same height of 70%. So, the likelihood of a pullback is on a level more pronounced here but again, in my view, barely about 3-5%.

Sentiment is still favourable with the existing Bullish Advisory Services at 457% and the Bears at 310% (You can achieve those figures from Barrons each week). Worry time doesn't begin until the gross mistakes exceed 55% for two or three weeks, back-to-back. In my view, sentiment is single in kind of the most important indicators in the recent York market and I check it religiously each week. It is a contrary indicator, that is, when too many family think the market is going to rally, it's liable to decline!