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The Strength Indexes signal when a counter move in the prevailing market trend is likely to occur.
The Market Edge (www.marketedge.com) 'Market Posture' is a compilation of the readings from three market timing models which forecasts the intermediate term direction of the market as measured by the Dow Jones Industrial Average (DJIA). The main segment of the model is the Cyclical Trend Index (CTI) which has a record dating back to 1974 of correctly forecasting the direction of the DJIA with better than 80% accuracy.
The Market Posture's signals are either Bullish, Bearish or on occasion, Neutral. Unfortunately, the DJIA doesn't move up or down in a straight line. Instead, an up or down move over a period of time is typically accompanied by periods of strength or weakness that go against the current trend. The Market Posture is confined to the Dow Jones Industrial Average. Markets don't always move in tandem. While the DJIA may be in a powerful up trend the NASDAQ or the OEX may be in a consolidation phase. To address these differences, a Strength Index has been developed. The Strength Index is a technical indicator that signals when a counter move to the prevailing Market Posture is likely to occur. The Strength Index should be used in conjunction with the Market Posture when determining entry and exit points into the market. A Strength Index has been developed for the DJIA (DIA), the NASDAQ 100 (QQQ) and the S&P-100 (OEX).
The Strength Index is constructed by dividing the number of stocks which are deemed to be under accumulation (bullish) by the number of stocks in the index. The result is a number that ranges between 0 - 100 and it represents the percentage of stocks in the index that are under accumulation. Strength Index readings over 50 are considered to be positive (bullish) while those under 50 are negative (bearish). It should be noted that there is no correlation between the magnitude of the number and the ensuing move.
The Strength Index is a powerful tool when combined with the Market Posture. When the Market Posture is bullish and the Strength Index is positive, expect favorable price action. A bullish Market Posture coupled with a negative Strength Index warns of a consolidation phase. Conversely, a bearish Market Posture and a negative Strength Index would suggest a period of declining prices while a bearish Market Posture and a positive Strength Index would imply a period of consolidation.
The Strength Indexes are updated weekly and are located in the 'Market Letter' section, under the Market Posture.
Tom Ventresca has been Computrade’s Director of Research
since its inception in 1991. Prior to founding Computrade, Tom spent
12 years in the securities industry holding several positions including
broker, sales manager, bond trader and market technician.
1947: Born-Pittsburgh, Pa.
1965-1969: Pennsylvania State University, BA degree.
1970-1978: Builder
1978-1990: Securities industry. Firms included First Southeastern,
E.G. Francis, First Southeastern, Smith Barney and Oppenheimer.
1990-Present: Computrade Systems, Inc. Co-founder and Director of
Research. Computrade is the developer of Market Edge, a comprehensive,
computerized research web site, which is accessed by individuals,
brokers and institutions throughout the world. As Director of Research,
Tom writes Market Edge’s ‘Market Letter’ and ‘On
The Edge’ plus the Dr. Market Edge series. Both the Market
Letter and On The Edge provide in-depth market analysis based on
three market timing models that he developed. Tom also has recently
finished a new book, ‘Trade Like A Pro’ which is a systematic,
disciplined approach to the stock market. Based on technical analysis,
this book addresses five topics that he believes are critical to
having success in the market. These subjects include market timing,
stock selection, timing entry and exit points, protecting positions
and money management.
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