Pull the trigger with confidence.

When analyzing trading volume, one should understand that it works differently in ETFs than it does in individual stocks.  Volume studies can be important in individual stocks, to help confirm the validity of an apparent breakout for example.  Volume is also important to help validate a head and shoulders structure. 

But in the big ETFs like QQQ or SPY, volume works in a different way.  Very simply, those ETFs’ volume tends to move inversely with prices.  Falling prices serve to get traders... Read More

I like getting answers ahead of time, and I really like chart pattern leading indications like the one in this week’s chart which can give us useful answers about what lies ahead.  The movements in crude oil prices tend to show up again about 3 weeks later in the movements of bond yields, with the dance steps getting repeated.

Sometimes the Treasury Yield Index (TYX) does its own artistic interpretation of those dance steps.  And sometimes it goes completely off script for a while, but then... Read More

Gold prices shot higher starting on June 14, once the dollar price of gold cleared the Feb. 20, 2019 high at 1343.70.  That brought out the momentum chasing buyers, or at least it brought out those who think in dollars. 

But a breakout to a higher high had already taken place if you look at the spot price of gold as measured in the Chinese yuan.  It moved above its equivalent high on June 3, almost 2 weeks before the dollar price’s breakout. 

Traders and investors in the USA are used to... Read More

The Treasury Bond blowoff which is currently underway is dragging along the high-grade corporate bonds due to the coattails effect.  That is leading to really strong numbers for the Advance-Decline statistics for these corporate bonds, which has driven up the Ratio-Adjusted Summation Index (RASI) for these bonds to a really high level. 

When it comes to the stock market, a really high RASI for the NYSE is great news.  It says that strong upward initiation of an uptrend has taken place, and... Read More

When small cap stocks are outperforming on a relative basis, that is usually a bullish sign for the overall stock market.  And small cap underperformance is usually a bad sign.  This principle works because small cap stocks tend to be more sensitive to liquidity conditions, either good or bad.  So when there is enough money around to lift the small caps, that means there is enough money to lift everything. 

This week’s lead chart shows a very simple indicator, the relative strength ratio... Read More

The month of May 2019 gave us a scary-feeling selloff, as tariff worries gripped investors’ hearts.  But it also showed that liquidity is not really in trouble, and now we have an affirmative sign that the bulls are back in charge. 

High yield bonds, sometimes known as “junk bonds”, trade more like stocks than like Treasury bonds.  And they have proven to be ultra-sensitive to liquidity conditions, either positive or negative.  They turn out to be really useful canaries in the stock... Read More

Years ago, market analyst Norm Fosback came up with his 21-day Absolute Breadth Ratio, which looks at the absolute value of the daily Advance-Decline (A-D) difference, and normalizes it by dividing by the sum of Advances plus Declines (A+D).  He also then smoothed those daily numbers with a 21-day simple moving average.  Bigger daily breadth readings, regardless of which direction they are going, are a sign of chaos associated with important price bottoms.  Quietness is a feature of price... Read More