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Zweig Breadth Thrust Signal

weekly Chart In Focus

Technicians have a lot of versions of a “breadth thrust” signal, and the basic idea is that the Advance-Decline numbers suddenly go from not so good to REALLY good in a short amount of time.  The late Martin Zweig was one of the first to examine this phenomenon, and he came up with specific criteria for what is now known by technicians as a Zweig Breadth Thrust (ZBT) signal.    

Zweig quantified this idea by first calculating a ratio of the number of advances divided by the sum of advances... Read More

Spending Our Grandchildren’s Money

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The presidential debate schedules have been announced, with a total of 6 Democratic debates scheduled between October 2015 and March 2016 on CNN, CBS, ABC, NBC, Univision, and PBS (but not on Fox, what a surprise!).  The Republicans have 9 more debates scheduled, on top of the two already aired. 

None of the networks has called me yet to ask what questions I would pose.  But if I were given the chance, I would like to ask all of the candidates a few questions about what I view as the most... Read More

Bund Spread Gives Permission for Bear Market

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In an April 2014 Chart In Focus article, I noted how the yield spread between 10-year German government bonds and the equivalent U.S. government bonds was saying that the bull market could not yet be over.  The logic was that while the yield spread was still rising, the uptrend for stock prices was still underway. 

German government bonds are known in the industry as “Bunds”, a contraction of the prefix “bundes” which is German for “federal”.  At the major stock market tops in 2000 and... Read More

Misplaced Optimism on Housing

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Recent data from the American Institute of Architects (AIA) shows that there is some gathering optimism about the future prospects for the housing and construction areas of the U.S. economy.  The AIA’s Architecture Billing Index data consist of 2 main series, one on actual billings sent to customers for actual architectural work, and the other known as the Inquiries Index.  That latter one is shown in the chart above, and is derived from member firms’ responses on the subject of customers... Read More

VIX Above All of Its Futures Contracts

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The August 2015 minicrash caused the spot VIX Index to move up above the price level of all of its futures contracts, which currently extend out to May 2016.  That is another way of saying that the options traders whose actions determine the level of the VIX are more nervous than the VIX futures traders believe is appropriate. 

During a protracted uptrend, it can be a wonderful sign of a short term bottom to see such a development.  It says that fear has reached an extreme, and that bottom... Read More

DJIA’s Proportional Price Oscillator

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When my parents, Sherman and Marian McClellan, first came up with the math for the McClellan Oscillator in 1969, they were applying it to the daily difference between Advances and Declines (A-D).  But they also soon applied the same math to data for closing prices, what we now call a McClellan Price Oscillator.  It examines the difference between the 10% Trend and 5% Trend (19-day and 39-day EMAs) of closing prices.  In that sense, it is very similar to Gerald Appel’s MACD (Moving Average... Read More

Correctly Defining “Bear Market”

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I am starting a personal crusade to expunge the notion of “10% is a correction and 20% is a bear market” from our collective lexicon.  It is among the most meaningless, useless, and untrue statements out there.

The reason I dislike it so much is that it offers no insights about what a trader or investor should do.  If you find the market down some percentage, and conclude that, okay, it is a “correction”, then so what?  What does one do next?

Every 20% decline goes first through 10%.  So... Read More