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In a message dated 98-08-11 04:24:22 EDT, you write:
<< Bottom line is that all these accumulation/distribution indicators (except
for perhaps Lazlo Birnyni's Money Flow) are basically just "fun with
numbers."
regards,
Rick >>
I think I reached a similar general conclusion today through a different
route.
I am not familiar with Lazlo Birnyni's indicator, however, I have been using
the "Money Flow Index" found in Metastock as a confirmatory indicator.
Roughly speaking, it is a volume weighted version of the Relative Strength
Index.
I have been short of Borg-Warner Automotive (BWA) for the last couple of weeks
and I am a little bit ahead. BWA was up today on volume that was much heavier
than average. I looked at the intraday chart on Excite.com and found that
most of the volume came from a handful of very large trades that caused the
price to move down. The trades that caused the price to move up were very
much smaller and represented a much smaller fraction of the day's trading
volume.
Now to the fun with numbers. According to the Money Flow Index, BWA was
accumulated today, however, examination of the intraday chart showed
distribution very clearly. Over the long term, and who knows how long, these
kinds of errors probably average out. This situation, however, illustrates a
limitation of the Money Flow Index and the need to take it with a grain of
salt.
Dan
Pocatello, ID USA
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