Info!! Looking At Technical Indicators From The Bottom Up

Typically, if nosotros desire to role a technical indicator to justice the forcefulness or weakness of a given marketplace index, nosotros volition only apply that indicator to the cost serial for that index.  Suppose, however, nosotros took a unlike approach, from the bottom up, rather than the overstep down.  Suppose nosotros applied the indicator to every unmarried stock inside the index together with gauged forcefulness together with weakness via the breadth of private purchase together with sell signals.

Above are iii charts that accept a bottom upwards sentiment of the recent market.  (Data obtained via the fantabulous Stock Charts site).  The overstep nautical chart volition endure familiar to readers; it's the residuum of NYSE stocks trading to a higher identify their upper Bollinger Bands vs. below their lower Bands.  The middle nautical chart utilizes the Parabolic Stop together with Reverse (SAR) indicator developed yesteryear Welles Wilder together with takes the disclose of NYSE stocks at the unopen each 24-hour interval giving purchase vs. sell signals.  The bottom nautical chart shows the disclose of purchase vs. sell signals for each NYSE stock for the Commodity Channel Index (CCI). 

Note that at that spot is a identify unit of measurement resemblance amidst the charts, but differences also.  Each indicator operates amongst unlike parameters on unlike fourth dimension frames.  The links inwards the paragraph to a higher identify explicate how each indicator is constructed together with how purchase together with sell signals are derived.  I mean value of each of the indicators equally a prism through which nosotros tin hand notice run into the breadth of forcefulness together with weakness across the entire market.  No 1 prism provides a perfect indicate all the time, but when you lot run into mutual patterns amidst the prisms, it's mostly worthy of attention.

As a rule, nosotros run into peaks inwards the numbers of stocks giving purchase signals ahead of cyclical peaks inwards the wide marketplace (SPY) together with nosotros run into peaks inwards the numbers of shares giving sell signals ahead of cyclical troughs.  You tin hand notice run into how the indicators peaked--but stayed positive--prior to the recent September marketplace overstep together with how they conduct maintain troughed ahead of yesterday's rally inwards stocks together with conduct maintain straightaway turned positive.

We conduct maintain many ideas close whether markets *should* merchandise higher or lower, but bottom-up measures similar this demo whether they are truly strengthening or weakening.  I volition characteristic regular updates of the indicators for those interested inwards next the signals.

Further Reading:  Breadth Volatility together with Market Cycles
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