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The first chart depicting my study in the Cumulative Allocated Volume for
the NYSE Composite Index conveys how "allocated" advancing versus declining
volume has been good at confirming the direction of the index itself, with
a notable divergence at the October 8th bottom, suggesting a possible end
to the retracement from the July highs.
The second chart depicting an MACD form of the CAV provides us with an
indicator that is very good at identifying when the movement in a
particular direction is weakening. (1) The July highs were marked by a CAV
MACD divergence. (2) The October lows were marked by another divergence.
(3) And the 1Q 1999 horizontal correction, followed by its very recent
surpassing of the January highs in the NYA (concident with the breaching of
the psychological 10,000 level in the DJIA), is now reflecting still
another key divergence in the CAV MACD. Additional divergences can be seen
at other moments on the chart, but these three serve to show the benefit of
extending the information contained in the CAV into a true indicator.
Joe
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