Like the advance-decline line, the high-low indicators produce signals when they diverge from the action of the indices like the Dow Jones or the S&P 500. It is considered unhealthy for the market climate if the indices make new highs without many stocks reaching new highs at the same time. Chart technicians use various methods to spot divergences from the major market indices.
The High-Low Differential Index produces good longer term signals when it diverges from the action of the Dow over a prolonged period of time. Daily or weekly data may be used and the calculation of this indicator is very simple; just subtract the daily or weekly new lows from the new highs to get the differential and apply a moving average to smooth out the swings. If you have 479 new highs and 31 new lows on your first week, the reading of your newly created weekly High-Low Differential Index would be 448 (example below).
Date Highs Lows Differential 10-week MA
09.06.95 479 31 448
16.06.95 371 42 329
23.06.95 491 56 435
30.06.95 292 42 250
07.07.95 485 29 456
14.07.95 635 36 599
21.07.95 331 50 281
28.07.95 464 43 421
04.08.95 402 42 360
11.08.95 337 47 290 387
18.08.95 338 53 285 371
25.08.95 336 46 290 367
01.09.95 397 50 347 358
08.09.95 530 31 499 383
15.09.95 664 43 621 399
The High-Low Ratio is the number of new highs divided by the numbers of new lows. Daily or weekly data may be used in the calculation. Readings do get sometimes very distorted if there are for instance about 600 new highs and 5 new lows or vice versa. A long-period moving average should therefore be applied.
This indicator is calculated by dividing the weekly number of highs and lows by the number of total issues traded. A 10-week moving average is applied to smooth out the swings. Like the advance-decline line, this indicator produces signals when it diverges from the action of the indices like the Dow Jones or the S&P 500. It is considered unhealthy for the market climate if the indices make new highs without many stocks reaching new highs at the same time.
The Global Futures Bottom Indicator was developed by R. Koch of Wall Street Courier. To our knowledge there is no previous mentioning of this indicator in any financial publication. It does not appear very often but it is extremely reliable when the market is at a turning point. It prevents long-term investors from buying at the wrong time and works especially well for option traders because of its incredibly perfect timing. Unfortunately this indicator does not tell you when to sell. Set yourself a limit if you trade options, or use trailing stop-loss orders if you are a long-term investor.
Check BARRON`S every Monday for the weekly:
• CALLS ADVANCES
• CALLS DECLINES
• PUTS ADVANCES
• PUTS DECLINES
• (CBOE MARKET REPORT)
• Divide the number of calls advancing by the number of calls declining
• Divide the number of puts declining by the number of puts advancing
• Subtract the result of calls adv./decl. from the result of puts decl./adv.
• Plot the difference on a chart and ignore the decimal.
Example Calls Adv. Calls Decl. Unch. Puts Adv. Puts Decl. Unch. Prev.Week 23000 11000 8000 7000 25000 10000 This Week 9000 26000 6000 24000 8000 7000
You calculate as follows:Date Calls Calls Calls A/D Puts Puts Puts D/A Bottom Adv. Decl. Adv. Decl. Indicator
09.06.95 12656 14215 0,89 9590 13879 1,45 56
16.06.95 17696 9818 1,80 5647 18431 3,26 146
23.06.95 14390 8550 1,68 6014 13839 2,30 62
30.06.95 10933 17902 0,61 12571 11735 0,93 32
07.07.95 21611 7779 2,78 4894 20146 4,12 134
14.07.95 17819 12190 1,46 8627 15531 1,80 34
21.07.95 9071 22844 0,40 15943 9405 0,59 19
28.07.95 18152 7554 2,40 4748 17237 3,63 123
04.08.95 11159 21092 0,53 14649 11905 0,81 28
11.08.95 13081 19336 0,68 12100 14522 1,20 52
18.08.95 19594 12741 1,54 6930 20184 2,91 137
25.08.95 9760 16547 0,59 10368 11238 1,08 49
Any zero or minus reading indicates a bottom. Since this indicator was invented and developed it only failed twice on a minus reading if compared to the Dow Jones. This was due to panic selling on August 3rd and August 24th 1990 when Saddam invaded Kuwait.
• Readings between 1 and 5 are also very reliable and indicate intermediate bottoms in bull markets.
• Readings up to 25 may work but should be counterchecked with other indicators such as the Global Futures Market Timing Indicator.
• Readings above 600 are good breadth indicators and show you that a powerful market move on the upside is to be expected.
• Ignore all other readings.
For your convenience there is a track record attached (377 kb) back to 1985 for you to check the value of this indicator. Plot the numbers on a chart and compare it with previous market action. Feel free to make use of our indicator if you find it useful. Feel also free to publish it as long as you mention the source and call it the Global Futures Bottom Indicator. Download the track record at http://www.wallstreetcourier.com/technician/timingindicators/track-record.htm
Cycle analysis has a long history and is also part of technical analysis. All markets appear to be subject to cyclical patterns and forces caused by economic influences and countless other factors. Stock market movements seem to take place with cyclical regularity and timing your trades to coincide with anticipated cyclical movements can be very rewarding. Wall Street Courier offers some very reliable cycles for subscribers.
The Large Block Index is calculated from the number of upticks and downticks in large block transactions of single trades of 10 000 shares and over. An uptick is at a price higher than the last previous trade and initiated by a buyer. A downtick is at a price lower than the previous trade and initiated by a seller. The rationale behind the Large Block Index is quite simple. It measures activities and extremes in institutional sentiment and behavior. When the ratio of upticks rises to very high levels, it indicates that the institutions are buying heavily, reaching a fully invested position and therefore lowering their cash reserves.
Conversely, when the ratio of downticks rises to high levels, it indicates that the institutions are selling and are raising cash. When the institutional behaviour reaches extremes, the market will turn in a contrary direction. This indicator has often signaled major reversals and has also prevented investors from plunging into the market at the wrong time. The chart below shows you this indicator on a 10-day moving average.
The Short Term Trading Index was invented over 30 years ago by Richard Arms and is also known as ARMS Index. It is calculated by dividing advancing issues by declining issues and advancing volume by declining volume. The first result is then divided by the latter and the result is the TRIN. If the index is above one, the average volume of stocks that fell on the NYSE was greater than the average volume of stocks that rose and vice versa. But it is most confirmative when it reaches extremes. This indicator rises sharply when the market is most depressed and selling is climaxing, and falls to very low levels during buying frenzies.
Date Adv. Decl. A/D Upvol. Downvol. U/D Vol. TRIN 10- MA
13.06.01 1521 1561 0,97 384035 657357 0,58 1,67
14.06.01 927 2150 0,43 218634 997425 0,22 1,97
15.06.01 1437 1588 0,90 649006 904083 0,72 1,26
18.06.01 1309 1776 0,74 408501 682268 0,60 1,23
19.06.01 1498 1541 0,97 543321 615409 0,88 1,10
20.06.01 1823 1269 1,44 716273 610436 1,17 1,22
21.06.01 1738 1352 1,29 905813 547728 1,65 0,78
22.06.01 1243 1814 0,69 439011 722679 0,61 1,13
25.06.01 1301 1777 0,73 332607 682239 0,49 1,50
26.06.01 1778 1294 1,37 577414 605567 0,95 1,44 1,33
27.06.01 1811 1268 1,43 462680 657256 0,70 2,03 1,37
28.06.01 1882 1211 1,55 877241 423609 2,07 0,75 1,24
29.06.01 1938 1141 1,70 964950 759013 1,27 1,34 1,25
02.07.01 1598 1468 1,09 694667 399965 1,74 0,63 1,19
03.07.01 1592 1349 1,18 307258 304648 1,01 1,17 1,20
Why are some traders more successful than others? There are probably as many answers as there are traders out there. But you will undoubtedly agree that most of the money is being made in a trend, especially as far as options and futures are concerned. In options trading your biggest enemy by far is time. You need to have the patience and discipline to wait for a trend in the market in order to succeed on the long run. The same rule applies to any short-term oriented trader. The Global Futures Trend Index shows you clearly when to enter the market. This index is computed by dividing the daily highs by the sum of the daily highs and lows. A 10-week moving average is applied to smooth out the swings. As long as the readings of this index stay above the 80%-level there is a solid bullish trend in progress. Any weakness should be used to go long or to buy call options, preferably of stocks which are in a clear uptrend, or stock index options. Readings below 20 indicate a bearish trend. Strong days should be used to short stocks which are already weak, or to buy put options. As long as this indicator is in neutral territory don't do anything unless you are a savvy stockpicker, insider or a long-term value investor.
VIX computes volatility of four OEX contracts in two nearby months and is published daily by the CBOE. Options selected for this index are one call and one put just out of the money, and one call and one put just in the money, for each of the two front months of the OEX (S&P 100). Extremely high readings of VIX indicate bottoms and low readings tops.
This indicator is calculated by dividing the weekly volume of S&P 100 call options by the weekly volume of S&P 100 put options. Big call volume appears at market tops and big put volume at bottoms. But call/put ratios of the indices like OEX and SPX are distorted and clouded by arbitrage and hedging and do therefore not always reflect true investor sentiment.
This indicator is calculated by dividing the daily or weekly volume of call options by the daily or weekly volume of put options. Big call volume appears at market tops and big put volume at bottoms. Only CBOE equity options or all CBOE options should be used for this indicator. Call/put ratios of the indices like OEX and SPX are distorted and clouded by arbitrage and hedging and do therefore not always reflect true investor sentiment. The chart below shows you the weekly call/put ratio on a 4-week moving average to smooth out the swings.
The Global Futures Put/Volume Ratio is a market sentiment indicator. It is calculated by dividing the volume of CBOE equity put options by the NYSE volume on a weekly basis and is interpreted in a contrary fashion. High readings signify extreme pessimism and fear, sometimes outright panic and indicate very often bottoms. Low readings of this indicator result from the anticipation of higher prices ahead and are therefore considered bearish. It is in our opinion more affirmative than the widely used put/call ratio which has gained widespread notice.
The Smart Money Flow Index has long been one of the best kept secrets of Wall Street. Everybody knows the importance of a closing price and other last hour indicators like the Closing Tick, which we publish daily for free on our portal. The Smart Money Flow Index is therefore calculated by taking the action of the Dow in two time periods: the first 30 minutes and the close. The first 30 minutes represent emotional buying, driven by greed and fear of the crowd based on good and bad news. There is also a lot of buying on market orders and short covering at the opening. Smart money waits until the end and they very often test the market before by shorting heavily just to see how the market reacts. Then they move in the big way. These heavy hitters also have the best possible information available to them and they do have the edge on all the other market participants. The Smart Money Indicator is calculated like the Advance-Decline Line. You can easily do it yourself if you don't want to pay our subscription rate of $1.50 weekly (based on a 6-month membership). Just start at any given day, subtract the price of the Dow at 10 AM from the previous day's close and add today's closing price. The result is plotted on a chart, together with the closing price of the Dow only. Whenever the Dow makes a high which is not confirmed by the SMI there is trouble ahead (chart below). Watch the divergence around June 1998, February 2000 and September 2000. Watching this indicator is like being on a plane and see the pilots jumping off with parachutes. This indicator is suitable only for investors with a longer time horizon. Such investors should buy blue chips when the indicator gives a buy signal, and sell and sell short on a divergence.
This indicator, like the Global Futures Bottom Indicator, is unknown until now to the investment community and is not available anywhere else. To our knowledge there is no previous mentioning of this indicator in any financial publication. It was also developed by R. Koch of Wall Street Courier. The Global Futures Timing Indicator gives buy signals more often and is an excellent supplement to the Global Futures Bottom Indicator, especially when this one has readings between 6 and 25. It prevents investors from buying at the wrong time and it works also very well for option speculators and position traders because of its expert timing.
Both indicators together should improve your trading substantially and will build you an estate in the years ahead. Just start buying good value stocks whenever the readings of the Global Futures Timing Indicator shrink to single digit numbers. This takes of course a lot of guts because the opinions of the widely quoted gurus are usually contrary at this time. Minus readings indicate an intermediate bottom.
The Global Futures Market Timer Index is a proprietary indicator of Global Futures and not available anywhere else. It was unknown until now to the investment community and to our knowledge there is no previous mentioning of this indicator in any financial publication. The Global Futures Market Timer Index gives buy signals when it has readings below 1,00 and sell signals above 1,20. Start buying good value stocks whenever the readings of this index fall below 1,00. This takes of course a lot of guts because the opinions of the widely quoted gurus are usually contrary at this time. Place close stops when readings go above 1,20.
The Global Futures Fear Indicator is a proprietary indicator of Global Futures and not available anywhere else. It was unknown until now to the investment community and to our knowledge there is no previous mentioning of this indicator in any financial publication. The Global Futures Indicator gives buy signals when it has readings between 0 and 10.
Start buying good value stocks whenever the readings of this index fall below 0. This takes of course a lot of guts because the opinions of the widely quoted gurus are usually contrary at this time. Unfortunately this indicator does not tell you when to sell. Set yourself a limit if you trade options or use trailing stop-loss orders if you are a long-term investor.
The Wall Street Courier Index gives you a longer term picture of the stock market. Readings below 40 indicate a heavily oversold market which is ripe for an upturn. Readings above 50 flash a warning signal and you should use trailing stop-loss orders to protect your profits. This index serves longer-term oriented position traders very well. It is also a contrarian indicator and once again we would like to remind you that charts usually look most bullish at tops and most bearish at bottoms.This indicator has an excellent track record as you can see.
The Global Futures Trading Index is a proprietary indicator of Global Futures. It shows bottoms and tops in trends and should be used together with the Global Futures Trend Index for exact timing. If the market is in a clear uptrend according to our trend index, go long if the Global Futures Trading Index shows a reading below 35. The reverse is true in a downtrend. Go short or buy puts if the index gives readings of 55 or above when the Global Futures Trend Index is below 20. Cover all your shorts if the index trades below 35 in a bearish trend. Please bear in mind that this index is a contrary indicator and therefore when these signals are given, they will be most likely contrary to most of the news of the moment and the opinions of the well known and most widely quoted gurus of Wall Street.