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I haven't downloaded yet but just wanted to send the charts while I had
time tonight. I don't like it. Well if I'm short then it's actually
looks pretty good :).
New highs minus new lows declining. This is one of the conditions we
look for at the top of a market that has been moving up.
Total volume is increasing. From CANSLIM we want price & volume to move
together. Here they diverge. For a bullish correction we are looking for
prices to move down after volume drifts lower. And looking for prices to
move higher from a correction with increasing volume. So this is the
area that causes the greatest concern.
Since we have volume increasing as prices decreased over the last few
days, then this might cause an even deeper correction down the road.
If we get a good upward surge in up/down volume with in the next couple
of weeks we should be ok. (Remember all 4-5 conditions must also be
present). If not & prices move higher be careful.
Here is some food for thought: If all 4-5 conditions are true then we
can go back into the market with confidence.
Review->
coming off of a correction:
1-NH-NL increasing
2-total volume increasing
3-surge in up/down volume where 10 day MA >> 50 day MA
>> - means "much greater than"
4-upper channel of down trending channel is broken
Going into a top:
Reverse the above conditions.
Ok, using a little bit of logic:
If 1 and 2 and 3 and 4 (from above) are true then it is safe to go back
into the market with confidence.
But 2 (increasing volume) can't be assumed to be true given that volume
has increased to a record level over the last few days. In essence, we
would have to assume that for many weeks in a row that volume will
continually move to record levels as prices move higher.
Hence the hypothesis is false. Which implies that the entire statement
is 'vacuously' true. But we are not interested in 'vacuously' true
statements.
So is it reasonable to assume that 2 (increasing volume) can be true
given the current level of volume?
Now if volume decreases to a more reasonable level (average over 50
days) then prices will more than likely decrease (observations from
William O'Neal & CANSLIM). More than likely under the current
conditions, the market might become even more nervous.
Hence we could move lower.
Q.U.E.D.
In closing. After skimming Greenspan's speech I will say that we might
be headed to lower levels. I will re-read it because it was very
informative with respect to global markets. But when he & Alice Revlin
act as cheer leaders and when I hear Alice make comments that investors
are in it for the long run. To me she is saying. Hey it is ok if the
market moves lower because investors are willing to stick it out and not
panic. (Greenspan's fear).
In Greenspan's speech he also stated that growth in earning would be
slower than previous years, but still growing. Just not at the same
pace.
One more side note: On Nightly Business Report several weeks ago, there
was advice given that one should add to there portfolio. A small portion
of short positions, to offset losses from a market decline. Might be
some good advice.
Harley Meyer
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