Tuesday, October 31, 2006
Technical Indicators
Negative Volume Index
Norman Fosback first detailed the Negative Volume Index in his
1976 book, Stock Market Logic. Used in conjunction with the Positive Volume
Index, it's an attempt to identify bull markets. These indicators are
predicated on the assumption that smart money dominates trading on quiet days
while less uninformed investors dominate trading on active days.
Fosback points out the odds of a bull market are 95 out of 100 when the NVI
rises above its one-year moving average. The odds of a bull market are roughly
50/50 when the NVI is below its one-year average. Following this logic, the NVI
is most useful as a bull market indicator.
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Trading Education
Tutorial
Trendlines
Determining
Market Reversals and Continuations
Trendlines are perhaps the oldest tools known to chartists. Trendlines form
across peaks and valleys called pivot points - relative highs and lows in a
chart. As more points form along a line, it becomes more
"established". This means that, when the line is broken, it will
likely follow through with a strong move in the new direction.
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NASDAQ Chart of the Day
CPWR
has formed a large triangle that could be on the verge of a breakout. Watch 8.10
and 7.40 for a solid breakout from this range, as such a move could spark big
movement in the direction of the break.
Daily Trading Signals
NYSE Chart of the Day
VLO
has formed a clear pennant consolidation at the lows, which is highly bearish.
However, a break in either direction from this well-developed pattern could spark
big movement. Watch 55.00 up and 51.00 down.
Daily Trading Signals
Daily Market Commentary
Updated Monday, 10/30 for Tuesday's market.
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Key DOW Levels for 10/31
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UP
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Above 12,125
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DN
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Below 12,050
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Winding Up...
- Dow sells off from highs to begin session, ends day with steep
decline. The index closed the day with a negligible 4 point loss, but is now
winding up within a clear triangle pattern that could spark movement tomorrow.
- The NASDAQ and S&P each recouped the day's early losses and are now
winding up within clear technical patterns. Watch for a breakout for the next
key move.
Summary
The Dow closed the day flat in terms of points, but could be gearing up for a
big move out of the clear triangle pattern. Watch this pattern for the next key
directional move.
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