Market Chat With Getting Technical

The Bull Market is confirmed

2012-01-19T09:00:00.000-05:00

A technical analyst will ever rely on one indicator to make a technical call. The key is to use other unrelated studies – so if you use simple moving averages do not use the MACD and if you use a simple rate-of-change to not use another momentum study and so on

The technical evidence to support the call for a new 2012 – 2013 bull market is compelling. Long term cycle work and the simple 50 and 200 day MAs are positive. The short 2011 bear has completed a perfect Fibonacci retracement of the 2008 – 2011 bull and now we have the NYSE advance decline line breaking out. So don’t listed to those doom and gloom idiots – get long and enjoy and most of all avoid those gold bugs

Covered Writing Nonsense

2012-01-17T00:40:00.001-05:00

Here is what Horizon ETFs say about covered call writing, “The Investment Manager of HEX will generally write short-term, slightly out-of-the-money call options on the entire portfolio. Covered call options provide a partial hedge against declines in the price of the securities on which they are written to the extent of the premiums recieved.(misspelled). Historically, during strong bull markets, where the underlying stocks are able to drive through the strike price on a frequent basis, buy-write strategies have lagged. And even then, investors would still have generally earned moderate capital appreciation, plus dividends and a call premium. During historical moderate bull markets, range-bound markets and bear markets, a covered call strategy tends to generally outperform its underlying stocks.”

Let us now name a strategy that compels us to hold declining stocks and if they go up we have to give them away. I guess we would call that a covered writing strategy. We can see from our HEX vs. XIU (TSX60 index) there is no partial hedge with both losing about 11.5% from February 2011 to date – this is with income on both products included. The extra income on the HEX is offset by a greater capital loss. The real test for this failed strategy will come if the markets advance over the next several months. To be continued for sure.

Barrick Gold and Positive Divergence

2012-01-06T10:45:00.001-05:00

I am sure we all recall the Gartman Letter published late last month when Mr. Gartman said he was out of gold, based on a belief that the rally in the yellow metal over the past decade is ended.. He said China has been buying gold aggressively over the past several weeks, which should have sent the price surging. Instead gold has fallen almost 10% since the beginning of December. “One of the oldest rules of trading is simply this: A market that cannot or does not respond to bullish news is a bearish market not a bullish one,” In response Peter Grandich called Gartman one of the ‘three stooges of gold forecasting’’

OK let them go at it but in the meantime why not look for a trading opportunity and I think I see a Barrick Gold trade here. Note our Barrick vs. Gold chart. The support line at (B) was broken in the recent GLD correction, but Barrick posted a higher low – bullish divergence. Note now the pivot level at (A) with the GLD still below and yet Barrick is trading above the relative pivot at (A) this is a display or strong relative performance. I look for Barrick to run up to the old highs of last September

Tax Loss Selling in Bear Market Years

2011-12-22T06:57:00.004-05:00

This strategy is particularly intense during the during bear market years as investors and portfolio managers lock in capital losses for the current trading year. A portfolio manager will engage in tax loss selling to ensure the overall portfolio does not attract a taxable gain in the event of a small per cent of profitable positions.

Important Dates for 2011

Canadian exchanges are closed Dec 26 & 27, 2011. In order to have a sale transaction settle within the 2011 calendar year in Canada, sell orders must be filled on Dec 23rd 2011 for Canadian exchanges. The NYSE is open on the 27th which would be last day for selling in order to settle on Dec 30th.

Any issuer sold cannot be bought back within 30 days, or it will not count as a capital loss. Consider buying a similar investment if you wish to retain exposure to the related sector such as metals, energy or the financials. As an example, if you sold Kinross Gold Corp at a loss you could buy IAMGOLD Corp on the same day. You would be trading a distressed gold stock for another distressed gold stock. If you had a basket of gold stocks to sell you could buy a gold stock related ETF such as the iShares S&P/TSX Global Gold Index Fund (XGD)

IMPORANT: This group has historically printed a significant rally in the first week of the following January. The basket below could produce a one-week return of 15%

Tax Loss Selling Rebound Candidates 14-Dec11

Stocks under $1 and a volume of less than 30,000 are removed

Company Symbol Price Volume

Gold do we hold or fold?

2011-12-16T00:50:00.001-05:00

On my last post I told the gold bulls to cheer up because the worst may be over because the generally bullish Dennis Gartman said he expects the yellow metal to fall to $1,450 an ounce before it breaches $1,800 and Gartman has fully closed his gold position. Since Dec 12 gold has dropped from 1666 to 1575 and so we need to take a look at the technical picture.

Our chart today is the daily closes of the NYMEX gold plotted above the AMEX Gold Bugs Index. So far this looks like a simple A-B-C type correction in both plots. Currently there is a small degree of bullish positive divergence with the AMEX Gold Bugs printing a higher corrective wave low (C) relative to corrective wave low (A). We need these lows to hold in order to avoid a (C) wave extension. When you look at a very long term weekly or monthly gold chart the primary up trend line has not been violated.

The Gartman Track Record

2011-12-13T00:14:00.001-05:00

Gold bulls cheer up, the worst may be over. I just found this on Forbes.com 12/12/2011 @ 2:00PM. “Gold prices continue to tumble in the face of a stronger dollar, prompting the generally bullish Dennis Gartman to say he expects the yellow metal to fall to $1,450 an ounce before it breaches $1,800. Gartman has fully closed his gold position.”

According to Horizons Exchange Traded Funds. The Horizons Gartman ETF (TSX-HAG) gives investors direct exposure to the investment strategies of The Gartman Letter. They go on to say Dennis Gartman likely doesn’t need any introductions. Author of The Gartman Letter a highly regarded daily macro-economic and trading-oriented newsletter which is read by the investment community including leading global banks, brokerage firms, hedge funds, mutual funds and commodity trading companies

Gartman is a perfect contrarian indicator - look at his “real money” track record. From inception March 26, 2009 (that is when the global equity markets bottomed) the HAG is down 23% or negative 9.21% annualized. The bid at the close Dec 12, 2011 @ $7.65 would be another new 52-week low.

Our chart today is the daily closes of the HAG plotted above the TSX60 Index. The relative perform vs. the TSX60 is “disturbing”. Note the position of the 10 & 30 week MA with the 10 week for the most part below the 30 week MA over a 140 week period. That is a down trend. Go figure.

Is it a Bull or a Bear?

2011-12-08T08:48:00.002-05:00

The big technical question right now is; are we in the early stages of a new bull market or are we about to print another leg down in the global bear that has operating since April 2011?

As technicians we need to know the dominant North American sectors – in the U.S. they are financials, technology and the industrials. In

Canada

the dominant sectors are financials, energy and materials. Note one common sector, the financials. This should be of no surprise because there has been no modern bull market that has operated without participation or leadership of the financials. If you know of one, let me know

Our chart today is the daily closes of the CDN bank sector plotted above the U.S. bank sector. Note that our healthier CDN banks briefly traded below their Sept-Oct lows while the “riskier” U.S. money center banks did not confirm the CDN bank breakdown. I blame the selling in the CDN banks on those young and inexperienced portfolio managers who watch too much business television. I believe we are in the early stages of a great new bull market and our CDN banks are a buy at these levels. If I am wrong I will convert to the temple of noted bear and economist David Rosenberg.

Canadian Securities Institute Item Jan 2006

2011-12-06T00:29:00.004-05:00

Good educational value - this is a clip - Technical analysis is the best way to determine the trend. The most common tools are trend lines and moving averages.

Some time ago I adopted a modified version of the "True Range" to determine the trend because the same system can also be used to set trailing stop loss settings.The original True Range was described in 40 year old publication by J. Welles Wilder Jr. entitled New Concept in Technical Trading Systems, When the True Range bands are applied to Tembec Inc. we can easily see the trend

When the True Range bands are applied to Sino Forest Inc. we can easily see the trend

The technical rule is simple; do not buy anything in a down trend no matter what anybody says - period.

The formula:

The true range is: the absolute value of the largest of the following – (I use weekly data)

· Distance between today’s high and today’s low

· Distance between today’s high and yesterday's close

· Distance between today’s low and yesterday’s close

Once you have the true range, you then calculate the upper and lower bands.

The upper band is the trading HIGH plus the TRUE RANGE. (10 period smoothing)

The lower band is the trading LOW minus the TRUE RANGE. (10 period smoothing)

Bill Carrigan

Last BNN Sept 30, 2011

2011-11-30T15:43:00.001-05:00

This is the text word for word setup for Market Call appearance September 29, 2011

TO: BNN – "Franklin Cameron"

From: Bill Carrigan

RE Market Call Sept 30, 2011

Current activities:

Editor of the Getting Technical Market letter (and)

Business columnist Toronto Star

A sub-advisor to Stonebrooke Asset Management Ltd and Union Securities

Top Picks for September 30, 2011

Over sold assets to out perform through year -end

BMO Equal Weight US Banks Hedged to CAD Index ETF (ZUB) @ $10.00 – a TSX listed ETF that gives you exposure to the large beaten up U.S. banks

BMO Nasdaq 100 Equity Hedged To CAD Index ETF (ZQQ) @ $17.27 a TSX listed ETF that gives you exposure to the important

U.S.

technology sector

iShares S&P/TSX Capped Energy Index Fund (XEG) @ $15.40 a TSX listed ETF that gives you exposure to the beaten up CDN energy producers and oilfield service co’s

Disclosure:

Direct ownership of ZUB

Indirect - Client /firm (Union portfolios) have direct ownership of All selections

The Markets:

I recall Warren Buffet saying during a televised interview, "If you wait for the robins, spring will be over." Mr. Buffet was referring to the relationship between stock prices and the economy. Buffet believes the stock market will move higher well before either the sentiment or the economy turns up.

This relationship is being tested once again as fears of a new recession are putting pressure on the stock markets which in spite of a recent rally are struggling to remain above the year-to-date lows posted last August.

The opinion among many experts is always mixed at these important junctures because during periods of confusion and panic traditional forms of fundamental and technical analysis fail to work. Stock valuations are trashed, moving averages and trend lines are broken and safe havens such as the U.S. dollar and U.S. T-bonds with negative returns are nonsensical.

What I look for technically during difficult times like this is divergence.

Currently there is positive divergence between the Dow Industrials and the Dow Transports see CHART (1)

There is also internal positive divergence in the DOW 30 and the TSX60 components with more components now higher now than back at the last August lows. CHART (2)

Chart #1

Positive diverge and DOW THEORY – the averages must confirm

Chart #2 the DOW Industrials Internal Strength

HD is one of 22 components well above the August low

Fibonacci retracements of the 2009 – 2011 Bull are text book

We are Technically OK

2011-11-21T13:24:00.002-05:00

Here I am on Monday November 21 about 1pm and the Dow is down 296 and the TSX Comp is down 185. Panic now as investors sell to raise cash. Business television as usual is loaded with doom and gloom.

Technically we are still OK. The NYSE advance / decline line at mid-day is still holding above the early September peak and the A/D line is also well above those early August – late September lows. For more bullish evidence look at the iShares Dow Jones US Regional Banks (IAT) $19.94 which seeks investment results that correspond generally to the price and yield performance of the Dow Jones U.S. Select Regional Banks Index

Top 5-holdings by weight

U.S.

Bancorp Common Stock USB

PNC Financial Services Group PNC

BB&T Corporation Common Stock BBT

Fifth Third Bancorp FITB

SunTrust Banks, Inc STI

The regional banks lead the SPDR Financial and so far there is no technical damage. Note the recent breakout on the relative spread. As of to-day the IAT at $19.35 is just down to support at the 50-day MA – now or never.

Dominant Theme Investing

2011-11-11T15:49:00.000-05:00

To identify and ride a dominant theme is the best way to generate above average returns for at least a 10-yr home run. In the mid 1980’s we had the likes of Walmart, Microsoft and Intel all 1000% winners. In the mid 1990’s the financial and energy stocks began to run and in 2003 the commodity sector took off.

Not all dominant themes pan out such as infrastructure and alternate energy

A new dominant theme is now just getting underway – an “echo” or global technology boom. The first tech boom ran from 1985 to the bust of 2000 and was confined to the English speaking counties. The new global tech boom will be enjoyed by the survivors of the first tech boom and bust.

Technically after a bubble a long congestive secular period will follow in order to repair the damage. Usually there are three bull and bear cycles that span a total of about 12+ years – much like the 1968 – 1980 secular down period. The fourth cycle is usually the breakout cycle. Watch for Cisco Systems to finally break out and up from here – note the new 4^th cycle

A Levered Barrick Play

2011-11-06T21:42:00.000-05:00

The Horizons BetaPro S&P/TSX Global Gold Bull+ ETF (HGU) and the Horizons BetaPro S&P/TSX Global Gold Bear+ ETF (HBP Gold Bear+ ETF) seek daily investment results equal to 200% the daily performance, or inverse daily performance, of the S&P/TSX Global Gold Index. The Index consists of securities of global gold sector issuers listed on the TSX, NYSE, NASDAQ and AMEX

This product is highly correlated now with heavy weight Barrick Gold and is basically a levered call on Barrick. OK if you like ABX like I do manly because of the recent higher low put in following 9-months of bullish price congestion the HGU at $16.52 is a lower cost way to participate in Barrick.Gold – think of the HGU as a call option with no expiry

On Selling RIM and owning ABX

2011-11-02T15:48:00.000-04:00

A few posts ago I observed that Research In Motion at $23 was almost a joke – unless the market knew something we don’t know - but I don’t think RIM is going bust anytime soon. The technical view of RIM is one of the worst big cap train wrecks I have ever seen. RIM was so bad it had to be good. So here we are with RIM at another 52-week low. I planned to sell on a weekly close below the August 8 low of $21.40 and so I now am done with RIM.

The big cap gold stocks are not only lagging the bullion they have not yet attracted the investment sheep. They are raking in the cash and are retuning some to shareholders. Technically on the TSX Gold index there is much price congestion through 2011 but the relative perform vs. the TSX60 is bullish. The price is above the 40-week MA and we have a rising primary trend line. A move above the 420 level should attract some sideline cash. Enjoy with ABX or the basket iShares S&P/TSX Global Gold Index Fund (XGD).

Stop Watching Television!

2011-10-24T20:57:00.000-04:00

Some business television programming could cause damage to your investing strategy. To-night I caught a portion of Howard Green’s Headline, and I was mortified by the doom and gloom vacant content. His guests were Dumb & Dumber (I think they go by Randy and Brian). These two wouldn’t recognise a bull market if it bit them on the ass. What babbling – Greece this, the Euro Zone that, the U.S. credit down grade, please! All this has no relevance to investing.

Almost every stock component in the Dow Industrials is a beneficiary of the global growth story. China grows a new Greece every year. A recent CNBC commercial has this wise tip, “opportunities don’t come gift wrapped, they come in storms.” Did you profit from the storms of 1973-1974, 1986, 1998, 2000-2002, 2008 and last summer?

Enough fundamentals, our chart today is the daily closes of the Dow Jones Industrials plotted above the daily closes of the Nasdaq Composite spanning that nasty May – August mini-bear. Note the highest recovery peaks that followed the August lows. Now look at to-days close – clearly above their prior highs. Higher highs mean advances. Just for more technical support look at the S&P500, Dow Transports and most of the SPDR sectors – all except SPDR Materials above the prior rally peaks. For more technical evidence take a look at CNR and UNP – both back above the 200 day MA.

A word on divergence:

2011-10-11T22:50:00.000-04:00

A few posts ago I described the sudden and sharp decline in the Dow from the late July price peak through to early August to be a final Elliott “C” down wave. At this time investor temperament changed from bullish to bearish causing investors to stampede out of risky assets and into safe assets. Now after a late August advance and a September swoon, we found most of the major North American stock indices once again sitting at or just below their relative early August lows. The question was; do we hold, or do we fold?

What I look for technically during difficult times like this is divergence.

Divergence is a condition that occurs when two lines on a chart move in opposite directions vertically. A technician will traditionally look for divergence between a stock's direction relative to the direction of a technical study such as an oscillator or the MACD.

Divergence can also be observed when doing inter-market studies such as gold vs. the gold stocks, a large cap index vs. a small cap index or price vs. volume. There are two kinds of divergences: positive and negative which can be also described as a bull or bear setup.

Our chart today is the daily closes of the Dow Jones Industrials plotted above the daily closes of the US 10-yr T-Bonds spanning about 5-months. In this example I am comparing the Dow to investor fear as illustrated by the flight into U.S. Treasuries. Note the recent prices relative to their August lows. Last September 22, the 10-yr yield closed below the August 8 low and Dow Industrials closed above the August 8 low. This price divergence has created a bull setup because while investor fear was greater (lower bond yields) the Dow price was higher. This is bullish divergence.

Saved by the DOW

2011-09-23T15:12:00.000-04:00

First the bad news: The big technical test is for the August 8 lows to hold – see the inter-day DOW chart below. The August 8 low is Dow 10604 and so at 10680 we are at the tipping point. Can we recover from here? See the breadth observation below

Now the good news – so far The Dow internals (breadth) are today in better shape than back in August 8 At quick look at the Dow 30 components and counting how many are above or below their relative August 8 lows As of 2.50 pm September 22, 2011 – I count only 8 (eight) components trading under their relative August 8 lows. The symbols: AA, BAC, CAT, DD, HPQ, JPM, MMM and TRV - Total 8 - All the rest, a total of 22 (twenty two) components are above their respective August 8 lows

On Selling RIM

2011-09-21T17:14:00.001-04:00

A few posts ago I mused that Research In Motion at $23 was almost a joke – unless the market knew something we don’t know - but I don’t think RIM is going bust anytime soon. The technical view of RIM is one of the worst big cap train wrecks I have ever seen. RIM was so bad it had to be good

A few weeks later there was some technical good news on RIM based on a relative perform analysis on RIM vs. AAPL. In August RIM popped from $22 to over $32 then suddenly the torpedo and now right back to $22. Clearly the trade is not working and so I have three choices - sell, hold or add on to the position

Adding on is out because we never add to a losing position unless we planed the original buy in tranches. I won't sell yet just in case we are forming a double bottom. Note the slightly higher money flow lines. I will however sell on a weekly close below the August 8 low of $21.40 - see the daily RIM chart with the stop support line.

The August 8 Lows are Still Holding

2011-09-06T15:25:00.001-04:00

The TSX Composite is still trading above support at the 11900 to 12000 level - see the weekly chart below. - Currently the simple 10-week moving average is too far below the simple 40-week moving average where these extreme deviations usually signal an over-sold condition or a pending reversal. Also the very slow stochastic has printed a trough at the over-sold 20 per cent level. The August 8 low is 11618 and should hold so don’t be a seller here

The Dow Industrials are still trading above support at the 10700 to 10900 level - see weekly chart below - Currently the 10 week MA has been below the 40 week moving average for 6-weeks and is setting up an over-sold condition or a pending reversal. We last saw this condition during the 2010 June – July correction. The very slow stochastic has printed a trough at the over-sold 20 per cent level. The August 8 low is 10589 and should hold so don’t be a seller here

Glad I Bought RIM

2011-08-26T14:41:00.001-04:00

A few posts ago I mused that Research In Motion at $23 was almost a joke – unless the market knows something we don’t know - but I don’t think RIM is going bust anytime soon. The technical view of RIM is one of the worst big cap train wrecks I have ever seen. The weekly displayed the MACD falling with no divergence in sight, the 10-week price channel has been falling for 19-weeks, the 10-week ROC has been negative for 20 weeks and the per cent divergence (CP#) from the 30-week MA is at a historical record of negative 50 per cent. RIM was so bad it has to be good

Now a few weeks later I see some technical good news on RIM based on a relative perform analysis on RIM vs. AAPL. The break down in RIM began last March 2011 when RIM slipped below $65 and began to under perform its rival Apple Inc. Note the series of under perform numbers through to early August. Now we can see the early up turn in RIM vs. AAPL and so I will stay with the position until the relative turns against me. Keep in mind that what is good for RIM is also good for the iShares Info Tech exchange traded fund (TSX-XIT)

Elliott Wave Basic Tenents

2011-08-14T18:16:00.002-04:00

The nasty selling panic that began three weeks ago has confused the fundamental and technical analysts. The fundamental guys fear a recession along with declining earnings and those risky European banks. The technical guys study the MACD, the RSI, stochastics and moving averages. The only thing that works is Elliott Wave because when the count is applied to long term charts we can see where we were and where we are going.

Our first chart is the basic 8-wave count of a full bull and bear Elliott Wave count. Note the bull phase – impulse wave to (1) which is followed by a counter trend corrective wave down to (2). We then get an impulse wave to (3) which is followed by a counter trend corrective wave down to (4). We then get the final advance to (5) which is then followed by an A-B-C or three wave correction or bear phase.

Some basic tenents are the corrective (2) will never violate the low of impulse wave (1). Impulse wave (3) is never the shortest wave and the low of corrective wave (4) will never enter the space of impulse wave (1). The theory of alternation holds that if corrective wave (2) is short and simple than corrective wave (4) will be long and complicated. So there you have it as set out in our simple diagram

Now I am illustrating an Elliott Wave count on the Dow Industrials using weekly data to set out the 2009 to date 1-2-3-4-5 bull advance count and the subsequent A-B-C correction or bear phase. Note the last C wave corrective wave has been a sudden and sharp decline accompanied by fear, confusion and panic which is typical of a C wave bottom. If this is a bottom then we start into a new Elliott Wave 1-2-3-4-5 wave advance that should run through 2013. Keep in mind that a new impulse was (1) is always thought to be a bear market rally

I Bought RIM Today

2011-08-04T21:56:00.000-04:00

The current liquidation of equities is a global event which I will address on the weekend but today’s broad collapse has to deliver some opportunity. Now Research In Motion at $23 is almost a joke – unless the market knows something we don’t know - but I don’t think RIM is going bust anytime soon.

The technical view of RIM is one of the worst big cap train wrecks I have ever seen. The weekly displays the MACD falling with no divergence in sight, the 10-week price channel has been falling for 19-weeks, the 10-week ROC has been negative for 20 weeks and the per cent divergence (CP#) from the 30-week MA is at a historical record of negative 50 per cent. RIM is so bad it has to be good

Listen to the markets

2011-07-22T15:50:00.000-04:00

Forget all that noise centering on the euro-zone debt problems and the possibility of

U.S.

lawmakers failing to reach a debt ceiling deal by August 2, 2011.

Take a look at some of the biggest $ gainers today - Calfrac Well Services Ltd. (CFW) up $1.36 (+3.7%), Precision Drilling Corporation (PD) up $1.11 (+7.2%), Trican Well Service Ltd. (TCW) up $0.97 (+3.9%) and Total Energy Services Inc. (TOT) up $0.90 (+5.9%). Take a look at the recent new 52-week highs and you find the same names.

Now I am a bellwether guy in that I look for the behaviour of the sector leaders before acting on the sector as a group. When I see the oilfield services stocks on the move I have confidence the broader energy stocks – the oil & gas producers and the integrated big guys will follow. Now I know gold is the hot sector right now – but don’t overlook the energy sector. Our weekly chart displays some of the leaders – all just getting underway so there is still time to do some homework on the sector

Technical Non-Event

2011-07-12T13:05:00.000-04:00

This is a clip from yesterday’s Globe Report on Business, “North American stocks suffered their deepest losses in more than a month Monday, as investors fled from risk amid deepening worries about the spread of European debt contagion, the U.S.'s own debt problems and the looming corporate earnings season.”

The S&P/TSX composite index closed down 191.95 points, or 1.4 per cent, the Dow Jones industrial average lost 151.44 points or 1.2 per cent and the Nasdaq composite index slumped 57.19 points or 2 per cent. It was a gloomy day.

The markets were been hoping the Greek crisis could be limited to Greece and a few other smaller Euro area nations such as Ireland and Portugal. But the sudden rise in concern about

Italy

raises the spectre of a much broader and harder-hitting debt crisis.

Pile on the uncertainty is the continuing impasses in Washington over the U.S. debt ceiling and the result is the fear of risky assets.

Now the problem technically is there is no problem. Our chart today is the Dow Industrials (daily) plotted above the Dow Transports (daily) along with the industry standard 50 and 200 day simple moving averages. Note in each plot the shorter 50 DMA is above the longer 200 DMA. Note also the price of the industrials and the transports is still above the 50 DMA. The nasty two day sell-off is a technical non-event so ignore those perma-bears who wish to scare you out of equities

Cyclic Commonality

2011-06-30T13:16:00.000-04:00

There are five cycle principles - Summation – Commonality – Variation – Nominality and Proportionality. Commonality is rare, much like a lunar eclipse. The condition is setup when the cycles of the major stock sectors bunch together following periods of congestion or non-correlated splaying. In other words when the peaks and troughs of cyclic rhythms and the relative magnitudes are similar when over-laid in graphic form - we have a significant buy or sell opportunity

The innovators of this graphic placement of the intermediate cycles were the great Ian Notley and Don Stark back in the early (1982) Dominion Securities Trend & Cycle days.

Our weekly chart is displaying a pending rare cycle commonality trough in the top five weighted TSX sectors – financial, energy, materials, industrials and energy. The summation of these troughs and peaks precedes a major move – this is only the second time in the last 5-years we have had a pending significant trough – this is a setup for a pending powerful advance through the summer months - possibly the most significant advance opportunity of 2011!

NYSE A/D Line & Positive Divergence

2011-06-19T19:39:00.000-04:00

A Google search on NYSE Advance Decline Line will serve up many offerings and so I selected http://stockcharts.com/school/doku.php?id=chart_school and this is a clip

“The Advance Decline Line (AD Line) is a breadth indicator based on Net Advances, which is the number of advancing stocks less the number of declining stocks. Net Advances is positive when advances exceed declines and negative when declines exceed advances. The AD Line is a cumulative measure of Net Advances. It rises when Net Advances is positive and falls when Net Advances is negative. Typically, the advance-decline statistics come from the NYSE or Nasdaq on a daily basis. Chartists can plot the AD Line for the index and compare it to the performance of the actual index. The AD Line should confirm an advance or a decline with similar movements. Bullish or bearish divergences in the AD Line signal a change in participation that could foreshadow a reversal.”

Note the key word here DIVERGENCES. A divergence occurs when two lines on a chart move in opposite directions vertically. The lines can be two indices (the DOW and the Russell2000) or, an index and a technical study such as a stochastic or for our purpose the NYSE advance/decline line. A positive divergence occurs when the indicator moves higher while the stock is declining. A negative divergence occurs when the indicator moves lower while the stock is rising.

Our Current NYSE A/D line is displaying positive divergence due to the higher low relative to the prior March low. In other words the current low of the S&P500 is not confirmed by the bullish higher low of the A/D line.