The McClellan Oscillator, Summation Index, volatility measurements, the CCI, Chande Momentum Oscillator, Chaikin's Money Flow indicator, Chaikin's Advance/Decline Oscillator, MACD, interest rate spread, stochastic oscillator, and the gold & silver charts and their explanations are now on this page. All indicators can be reviewed by simply scrolling down this page.
Notice: We previously urged all trainees to learn how to read the indicator charts on the lower portion of this page. They are updated daily. Now we urge all subscribers to do the same. Use the charts to perform your "market review" every day. The comments of media "gurus" have distortions and biases (in addition to their very poor timing) that will cause you to make decision errors if you take what they say at face value. The charts are extremely important tools by which a person can gain insights that can be very helpful to both the short-term trader and the long-term investor. We also suggest that you review the explanations periodically so your comprehension will be instant on viewing the charts. Note to visitors: We are not accepting new trainees.
Use the "Directory" to see what else is on this site.Directory
1. A free daily list of high-momentum stocks is at Momentum List 2. A free daily list of stocks with high Relative Strength High RSI Stocks 3. A free list of stocks with a volume surge is at Volume Surges 5. Free interactive stock charting is at Charts.
Dow Jones Industrial Average (2 Days at 5-Minute Intervals)
The blue line is the opening level.
In the above chart we have placed a horizontal blue line at the opening level. Also, we have inserted a small red line at the midpoint of the trading range for each day. Press the Ctrl key and the + key to magnify (or - to reduce).
Daily Chart of The Dow Jones Industrial Average
We decided it would be informative to demonstrate here R.C. Allen's system. An "UP" alert occurs when the 4-day MA (green) is above the 9-day MA (blue). The actual "buy" signal occurs when the 9-day MA crosses above the 18-day MA (red) while the 4-day MA is still above the 9-day MA. If the 4-day MA is not still above the 9-day MA, there is no signal until it crosses back above the 9-day MA. Signals occur only if all moving averages align correctly. The opposite conditions generate a "DN" alert and "Sell" signal. Please use the "R.C. Allen Alerts" tab on the left of your screen for a more complete explanation of the system. This chart shows only a few months so you can more easily see details of recent action and a clearer view of the moving average alignments. At the top of this page the Dow is shown over a greater time-span.
Updated after close on Fri, 6/23/17 -- In general, stocks closed higher on Friday, as energy and technology shares advanced. The Nasdaq Composite Index closed up 28.64 points or .46%. The S&P 500 had a modest gain of only 3.80 points or .16%. The Dow Jones Industrial Average closed virtually unchanged at 21,394.76 (a loss of 2.53 points or .01%). For the week, the S&P 500 gained 0.2%, the Dow was flat, and the Nasdaq gained 1.8%. Oil futures rose 27 cents, or 0.6%, to close at $43.01 a barrel. ~ The report from the Fed on the health of the banking sector showed that all 34 banks assessed have “strong” levels of capital and would be able to keep lending during a severe recession. ~ The Commerce Department reported that new-home sales were at a 610,000 seasonally adjusted annual rate in May (greater than forecasted). ~ The St. Louis Fed President said the Fed can afford to stop raising short-term interest rates and take a wait-and-see approach to see where the economy is headed. The Cleveland Fed President said the Fed must continue raising interest rates to avoid inflation getting out of hand and causing a recession. Fed Gov. Jerome Powell said that the Fed may consider overhauling central clearing rules as the current system makes banks vulnerable to risks. ~ The S&P 500 continues to get support from its 20-day moving average. The Dow is likely to test support at is 20-day moving average. Today it got support as it approached that average. As expected, volume increased today on the Dow's decline. Do not read too much into that. See yesterday's comments for an explanation. Subscribers should be looking for setups that may give a trigger-event soon.
Updated after close on Thu, 6/22/17 -- Friday’s session is likely to be one of the busiest of the year for stocks as the annual Russell reshuffle is scheduled to occur then. In four of the last five years, the day of the "shuffle" has been among the 10 busiest trading volume days. However, the record does not show big moves in prices. Since 2008, the S&P 500 has moved more than 0.5% on the day of the shuffle only twice, in 2011 and 2016. Nevertheless, some individual stocks could undergo significant moves. Of particular interest will be energy stocks (some companies will be added into the Russell 2000). Financial stocks may get some attention as well. It has been estimated that about $8.5 trillion is invested in the Russell indexes in the U.S. ~ The S&P 500 is lingering near support at its 20-day moving average, while the Dow is continuing to get support at its 10-day moving average. There is not likely to be significant decline from these levels, but there may be additional testing of support on Friday. Both the Dow and the S&P 500 are poised for a rebound off their respective supports soon, either on Friday or Monday. The moves may not be large, even though volume is likely to surge.
Updated after close on Wed, 6/21/17 -- See the table below for a list of the top gainers and losers among the Dow stocks. Both the S&P 500 and the Dow industrials ended slightly lower, pressured by losses in the energy sector as oil prices continued to slide. ~ Heath-care and technology shares were strong. The rebound in biotech is caused by signs that the Trump administration is softening its stance on drug pricing. Also, breakthroughs in cancer treatment have caught investor interest, helping the biotech stocks. The recovery in biotechnology shares nudged the Nasdaq Composite Index to moderate gains. ~ Crude-oil futures extended their losses, declining more than 2% as traders focused on an increase in domestic production. U.S. producers increase their drilling and pumping whenever oil prices rise over $50. Consequently, Brent crude dropped has below $45 a barrel. Another factor is that Libya has resumed some production. ~ The media tends to hype events. With regard to the market, they often exaggerate the importance of minor moves. The S&P 500 received support from its 20-day moving average. Today's decline was virtually meaningless. The uptrend is still intact. In fact, the 10-day CMO for the Index is only 3.9 (nearly neutral). From a technical perspective, there is still room for the advance to continue. The Dow got its support as it neared its 10-day moving average. Again, the uptrend is still intact. The Nasdaq Composite Index did advance more than 45 points today, but we are not excited about it. The Nasdaq merely recovered what was lost yesterday. The bottom line is that The Nasdaq appears to be consolidating. The Dow and the S&P 500 have experienced support. The market configurations suggest to us that the direction of least resistance is upward.
Updated after close on Tues, 6/20/17 -- Stocks fell from record territory as investors dumped energy shares as crude-oil prices declined to a 10-month low. Oil companies were among the worst performers. Transocean was off -4.21%, Marathon Oil Corp was off 3.44%, and Hess was off -3.19%. The S&P 500 was off 16.43 points or 0.67%. The Dow Jones Industrial Average fell 61.85 points, or 0.29%, to 21,467.14 after touching an intraday record of 21,535.03. Chevron fell 0.91%, while Verizon Communication fell 1.35%. The Nasdaq Composite Index was down 50.98 points, or 0.82%, to 6,188.03. ~ Investors are paying careful attention to what members of the Fed are saying. Boston Fed President Eric Rosengren said lower rates may be a more permanent feature on the economic landscape because they reflect broad population trends. Chicago Fed President Charles Evans said late Monday the central bank could be through raising rates this year. He said he supports the current policy of “very gradual” interest-rate hikes and a slow reduction of the balance sheet. On Monday, New York Fed President William Dudley argued against slowing the pace of interest-rate increases. House Speaker Paul Ryan indicated that the Republicans could deliver on promises of a major tax overhaul this year. ~ Today's market was a non-event. By that we mean that the market merely paused today. In general, the trend is still toward higher levels.
Updated after close on Mon, 6/19/17 -- Stocks rose on Monday. The Dow and the S&P 500 reached new intraday record highs as technology shares rebounded from their recent sharp declines. The Dow Jones Industrial Average rose 144.71 points to 21,528.99, with an intraday record high of 21,528.99. The S&P 500 gained 20.31 points to 2,453.46, with an intraday record high of 2,453.82. The Nasdaq Composite Index rose 87.25 points to 6,239.01, its biggest one-day move since April. Apple rose 4.07 points or 2.86%, Facebook advanced 2.23 points or 1.48%, Amazon.com rose 7.46 points or .76%. Hawkish comments from a Federal Reserve official boosted the dollar and Treasury yields. William Dudley said halting the tightening cycle now would imperil the economy. Treasuries fell after his comments. The rebound in tech shares revealed the risk-tolerant mood among investors. Do you want to know where the strength is in the market? Look at the charts of the Dow stocks lower on this page. Shares in the same industries as the strong stocks shown are most likely to be strong. The very short-term (10-day) CMO for the S&P 500 is still only 31.29. That means from a technical perspective, it is not yet overbought. For the Dow, it is 63.58. That is overbought. It does not mean the Dow is about to plunge. The Dow could stay in overbought territory for several months. The reason for pointing this out is to underscore the importance of keeping stop loss orders in place and up to date. Our view is the the Dow has a high probability of rising again tomorrow.
Updated after close on Fri, 6/16/17 -- Stocks made a small advance, while the dollar weakened with Treasury yields after a report that housing starts fell 5.5% to the lowest level in eight months, and poor consumer sentiment (the University of Michigan consumer-sentiment index was the weakest since November as it fell to 94.5 in the early June reading) added to the indications that the American economy’s growth rate will be slower than previously forecast. ~ In the last 45 minutes, the Dow pushed its way higher, powered by a rise in energy shares. The S&P 500 inched into the green also in the final minute of trading as futures and options contracts approached expiration. Food retailers were losers in the S&P 500 Index after Amazon.com agreed to buy Whole Foods Market. The S&P 500 rose 0.69 of one point to 2,433.15 for a gain of about 0.1% for the week. Tech shares continued their decline, pushing the Nasdaq Composite Index lower (it lost 0.22% to close at 6151.76). It lost 1% over the week ~ France completes its election on Sunday. ~ We expect the market's action to continue to be positive next week.
Updated after close on Thu, 6/15/17 -- Stocks declined as large-cap names in the technology sector continued lower, weighing on the general market. On the other hand, the Dow pared some of its earlier loss as several heavyweights advanced strongly. A more hawkish tone from the Fed, and reports that a special counsel was investigating whether Trump obstructed justice, created uncertainty, and a more cautious outlook on the part of investors. The Dow Jones Industrial Average fell 20 points. A rally by Caterpillar, Boeing, and Procter & Gamble helped to cushion the Dow's decline. The decline in the Nasdaq was due to the index’s concentration of technology shares. Earnings have been good, prices have risen, so there is now some profit-taking, and that should be expected. Today the Dow got support at its 10-day moving average. The recent uptrend is intact and likely to continue. Look for trigger events among stocks in good setup configurations.
Whether the market is weak or strong, there are always opportunities for profit in the market. Here are a few examples of stocks that have had a recent surge. Just because they have already had an advance does not mean that their advance is over. If any have just declined, they may simply be offering a better entry point. There are those who know how to take advantage of such situatons. We make no recommendations regarding these stocks. We only wish to assure you that there are plenty of opportunities in the market. The following five stocks are taken from the bottom of the "HotStocks" subscriber list. Obviously, the more highly ranked stocks are likely to be more interesting, but they are reserved for subscribers only. We do not pick the best stocks from the bottom of the list, but simply the bottom five. So, sometimes there may be unattractive stocks listed here. This short sample is updated daily. Information on the HotStocks list . yyyy
The Dow has risen over the short term, but it has declined over the last four days. If that counter-move continues, a new negative short-term trend could develop. Support is nearby. News events could cause a change in investor sentiment. To get a better fix on the prevailing sentiment for Monday, monitor the action of the Dow relative to the following Key Intraday Levels calculated by PAL. The Key Bullish Intraday Level to watch for Monday is 21,407. The Key Bearish Intraday Level to monitor is 21,382.47. If the Dow is above the Key Bullish Level (or below the Key Bearish Level) for more than 30 minutes of the first hour of trading, it will have an 80% probability of closing higher (or lower) for the day. These probabilities assume there are no news events that modify investor sentiment between now and the close on Monday.
The total number of issues traded on the NYSE was 3033. Of those, 1974 advanced, or 65.08% of the total. That is a change of 16.32%. There were 921 issues that declined, or 30.36% of the total, a change of -23.12%. The total volume of shares traded on the NYSE rose 143.54%. The percentage of S&P500 stocks that advanced was 58.93%. The percentage of S&P500 stocks that declined was 41.07%. The average gain of rising stocks in the S&P500 was .53%. The average loss of declining stocks in the S&P500 was -.36%.
Chaikin Money Flow and A/D Oscillator
The left chart above is the Chaikin Money Flow indicator. It attempts to measure money flowing in and out of a security. The movement of money into or out of the market can give us clues about the meaning of price movement. Look for divergences between the Chaikin Money Flow indicator and price action. For comparison purposes, we have placed a line graph of the Dow (light gray) on the chart. If the price moves higher and Chaikin's Money Flow indicator moves lower, the rise in prices is not supported by an influx of money, and the rally is likely to be short-lived. If Chaikin's Money Flow indicator is between zero and .10 (0 is marked by the solid horizontal black line and .10 is marked by the upper dashed horizontal black line), then it is thought to be reflecting weak buying and is not particularly bullish. However, Chaikin Money Flow readings above .10 are bullish. If Chaikin's Money Flow is between zero and -.10 (the lower dashed horizontal black line), then it is considered to be weak selling and it is not particularly bearish. Readings below -10 are normally considered bearish. Readings of .20 are bullish (-20 is bearish), and these levels are marked with dashed green lines. Readings above .25 (the upper horizontal blue line) are very bullish and indicate higher prices are probably ahead. Readings below -.25 (the lowest blue horizontal line) are very bearish and indicate that lower prices are probably ahead. Please note how the flow of money often precedes price action. However, money flow and price action will sometimes diverge. When that happens, do not trust that the current price action of the Dow will continue. When money persistently flows into the Dow, expect an advance.
You may wonder why we always talk about resistance and support. The fact is that nobody knows what the market will do next. However, knowing the location of support and resistance can be extremely helpful to tactical positioning, regardless of what the market does. It is the most important, useful, and reliable information a trader/investor can have. For example, placing a stop loss just below support can minimize loss if the market works against a 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 minimal 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 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, 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, 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 to100 on the pressure gradient scale. The scale ranges from -100 to +100. The Group Pressure Gradient has both magnitude and direction. Hence, it is a vector.
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.
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, Wendy has given permission for us to share her performance on a one-time basis. That means by the time you read this, the performance date may be long past. That cannot be avoided without regular updates, and this is a one-time report.
The Buy and Sell Signals of 6 Systems
These systems cover different investment time-horizons. Each system uses two moving averages, with the exception of the R.C. Allen system, which uses three 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 a signal is generated, the word "Buy" or "Sell" will appear. These signs are not recommendations. They merely indicate the crossover event (the short MA has just crossed the longer MA), indicating a change from a bullish to bearish outlook or from a bearish to bullish outlook. When the signal is generated, there will be a "◄" at the right of the word "Buy" or "Sell" to draw your attention to the event. 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, and the up arrow or down arrow will replace the word "Buy" or "Sell." The down arrows are shifted to the right to make it easier to spot the difference at a glance. 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.
Stocks In The Dow
The following charts cover the last 9 months. The red line in each is the 50-day moving average. Because there are so many stocks in a small space, we have not included the names of the companies. However, the symbol for each is in the lower right corner of each chart. The closing price for each is in a box on the right side of the chart. The charts are intended to give you a quick overview of the Dow stocks and an idea of which industries may be doing well or poorly. You can get a close-up of these charts by pressing the "Ctrl" key and the "+" key at the same time (pressing the "-" key will shrink the image). Most of the items in the table below the charts are self-explanatory. The "Up Volume" entry is the percentage of the total volume that is associated with an advance. Therefore, "Up Volume = 65%" means that 65% of the total volume of the Dow stocks was up volume and 35% of the total was down volume. Note, also, that in the lower right-hand corner of the table the Tick and TRIN are indicated for the NYSE.
Traders and investors are advised to make frequent reference to the following charts and their explanations until the meanings of the charts are immediately apparent with only a glance. At the beginning of the day, make it a regular practice to perform a market review by checking the status of each indicator. At some times the charts evolve slowly. Even when the charts are evolving very slowly from one day to the next, however, the daily review will help "anchor" in your mind the market environment and the general context for your trading/investing decisions. A daily review will also help you to become sensitive to evolving market "setups" and signals. There are times when one or more charts will alert the careful observer to a significant change in the market that calls for a change in approach. Also, the charts do not always change slowly. The point we are making bears emphasis. You should always develop your strategy for the day only after evaluating the general status of the market and the context it gives for any trading plans you may devise. These charts are updated daily. Below the charts is a set of blue links. Each link will take you to an explanation of a chart. At the end of the explanation is a blue link that will take you back to the charts.
Market Bias Indicator
Interest Rate Spread
The Interest Rate Spread chart shows the pattern of change in the spread between short-term and long-term Interest rates over recent months. The last reading (multiplied by 10) is inserted in the scale on the right side of the chart in a yellow box. Simply move the decimal point one place to the left to get the current reading. 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. Back to charts
The Stochastic Oscillator chart above is referencing the NYSE Composite Index. This Index includes all stocks listed on the New York Stock Exchange. The Stochastic Oscillator is a short-term indicator. It can be helpful in estimating when a security (or index) is likely to change its direction in the near future. Most technicians consider it a "buy" signal when the Stochastic Oscillator falls below 20 (a few technicians use 30) and then moves above that level, and a "sell" signal when the Stochastic Oscillator rises above 80 (a few technicians use 70) and then falls below that level. The Stochastic Oscillator can remain above 80 (or below 20) for prolonged periods while the stock or index continues moving to higher (or lower) levels. If the stock (or market) is non-trending (moving sideways confined within upper and lower parallel boundaries), then trades based on overbought or oversold levels should produce the best results. However, if the market is trending upwards or downwards, then the Stochastic Oscillator can be used to enter trades in the direction of the trend. There are also more aggressive traders who consider it a "buy" signal when the blue line rises above the dotted line and a "sell" signal when it falls below it. Also, look for divergences. When the market is making a series of new highs and the Stochastic Oscillator is failing to surpass its previous highs, the oscillator is giving us a warning signal.
Commodity Channel Index or CCI (NYSE Composite)
The Commodity Channel Index (CCI) measures the deviation of a security's price from its statistical mean. The above chart is the 20-day CCI. High readings indicate that prices are relatively high in comparison to average prices, and low readings indicate prices are relatively low in comparison to average prices. The name of this indicator is somewhat misleading, since it is not limited in its usefulness to only commodities. It can be used with any security. Traders often check the CCI to see if there is divergence between it and its underlying security. They also use it to detect overbought and oversold conditions. If the Dow is making new highs but the CCI is not, for example, then the Dow is likely to undergo a correction. 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.
McClellan Oscillator & Summation Index
The Chaikin Volatility Indicator is shown above on the left. It is based on the S&P100. This indicator calculates the 10-day moving average of the difference between the high and low for each day and then computes the percent rate-of-change of that moving average over the last 10 days. The premise is that a widening of the range between the daily high and low indicates an increase in volatility. Some believe that market tops are associated with an increase in volatility (because investors are expressing nervousness due to their increased internal conflict between fear and the desire for more gain). Market lows are supposed to be associated with relatively low volatility because investors have been disappointed so often that they don't expect much. Mr. Chaikin looks at it differently. He believes that if his volatility measurement indicates there has been a significant increase in volatility over a short time that a bottom is near (because it is a 10-day measurement, it is sensitive to a panic-like selling climax). He also believes that a gradual decrease in volatility over a long time is what you should expect as a bull market ages and approaches a top.
We Test Common Assumptions Of Market Participants
We test assumptions commonly made by market "gurus" to see if they are valid. At the top of this page 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
Quotes For Gold & Silver
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