|
PureBytes Links
Trading Reference Links
|
Net Up Volume as a Percentage of Total NYSE Volume
Chart http://24.0.100.173/charts/S261.gif uses volume to determine if the
market is overbought, and thus in danger of a sell-off, or oversold, and
thus ripe for a rally.
The chart's top clip shows the Standard and Poor's 500 stock index while the
bottom clip features net up volume as a percentage of total New York Stock
Exchange volume. We start the calculation by subtracting the volume for
stocks which closed lower on the day from the volume for stocks which closed
up for the day. This yields the net up volume figure, which is then
smoothed with a 12-day moving average. Next, the total volume for the New
York Stock Exchange is likewise smoothed with a 12-day moving average, and
the ratio of the smoothed net up volume to the smoothed total volume is
determined.
When net up volume as a percentage of total volume exceeds the upper bracket
of 16.3, the demand for stocks is excessive and likely to be followed by a
period of declining demand. Since we like to go with the flow until it
reaches an extreme and then reverses, a sell signal is delayed until the
ratio declines back below the upper bracket, at which point the indicator
switches into the safety of commercial paper.
Likewise, when the ratio of net up volume to total volume falls below the
lower bracket of -12.8, the market is under excessive downside pressure and
is likely to experience a pickup in demand as soon as the sellers exhaust
themselves. A buy signal is generated when, after dropping into the
oversold territory, the indicator rises back above the lower bracket.
As shown by the results in the chart's upper left hand corner, it pays to
get into the market when conditions are oversold and to get out of the
market when conditions are overbought.
I am practicing for an online newspaper about Trading I may be writing for,
since I have continually been turned down by the big Omega advertising
magazines. Just think what they have been keeping from you. ; - )
Just the Facts,
MB and dog
|
