The Morning Cup of Jo
A Mind is a terrible thing to waste.
With yesterday's pullback, I thought it appropriate to show some other road signs most Techies look at when determining ST, IT, and LT trading patterns. However, as Brodsky so eloquently put it Monday at 'Breakfast', "Let us not forget that is the point of this business. To make money. Not to be right theoretically." He could never be so right. We can look at charts and patterns all day, but if that doesn't lead to profit, what good is it? Remember, these road signs I'm showing you are only to be used to help determine the speed of the traffic and what "May Possibly" lie ahead in the road. In other words, it keeps your wits about you instead of just running blindly in the woods. Don't get caught up in not being able to see the forest through the trees.
On the other hand, Knowledge is Power, and I believe the more technically informed you are, the better trader/investor you will become!
So let's take a look...
The top graph is the SPX's RSI, 2nd is the MACD, 3rd is the Stochastic, 4th is Price/Volume, 5th is % of NYSE stocks trading above 150-Day MA, and the bottom is a 10-day MA of NYSE new highs.
1. RSI (Relative Strength Indicator) - this compares price in relation to itself - not to be confused with the RS of an issue in comparison to an index. This only measures momentum (velocity) of itself compared to its Relative Past.
You'll notice the RSI of the SPX is trading much lower on new highs in price (Divergence)
2. MACD (Moving Average Convergence/Divergence) - once again, another way of measuring momentum - discussed in a prior 'Jo."
This is also showing a Divergence.
3. The Stochastic - also a momentum measurement - compares the current closing price and its position within the spread (Relative High - Relative Low) over a period certain.
4. This one is simple - Price/Volume
5. % of NYSE stocks trading above 150-Day MA - this one is mainly used to help determine the 'Heat' of the market. In other words, it can help determine if the market is getting overvalued.
When a large % of stocks are all on the same side, things have a tendency to revert to the mean.
6. Lastly, this is the 10-day MA of New Highs in the NYSE. Somewhat the same principle as the % of stocks above the 150-Day MA. However, this can be used to help determine the amount of stocks pushing the market higher.
This graph shows as the market has hit new highs, and is approaching again, the amount of stocks pushing it is much less.
With all of this said, I'll revert to Professor Brodsky - none of this matters if you're not making any money.
Until next time...
The information on this website solely=
reflects the analysis of or opinion about the performance of securities an=
d financial markets by the writers whose articles appear on the site. The v=
iews expressed by the writers are not necessarily the views of Minyanville =
Media, Inc. or members of its management. Nothing contained on the website =
is intended to constitute a recommendation or advice addressed to an indivi=
dual investor or category of investors to purchase, sell or hold any securi=
ty, or to take any action with respect to the prospective movement of the s=
ecurities markets or to solicit the purchase or sale of any security. Any i=
nvestment decisions must be made by the reader either individually or in co=
nsultation with his or her investment professional. Minyanville writers and=
staff may trade or hold positions in securities that are discussed in arti=
cles appearing on the website. Writers of articles are required to disclose=
whether they have a position in any stock or fund discussed in an article,=
but are not permitted to disclose the size or direction of the position. N=
othing on this website is intended to solicit business of any kind for a wr=
iter's business or fund. Minyanville management and staff as well as co=
ntributing writers will not respond to emails or other communications reque=
sting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.= span>
Daily Recap Newsletter