|
PureBytes Links
Trading Reference Links
|
Bob, that's an interesting chart. Thanks for posting it,
and explaining the logic behind TEI. I've attached the
chart again, below, for reference.
I think this chart does an excellent job of noting the
current divergence in the market between the big cap
indexes like the S&P and the broader market. If you look
at the previous 3 buy signals in August, September, and
October. note that they occurred within 3 days of a
monthly low being set (and a greater than -5% high-to-low
drop from top-to-bottom, emphasizing the level of oversold).
However, the current "buy" signal has come in a few days
ahead of the S&P setting a new all-time high (up +18%
from its recent lows in Oct.).
That's a noticeable divergence. If you have the data, I
think it would be interesting to see if this sort of thing
(a turn down in new lows, when the S&P is near an
intermediate term high) has happened before.
On Dec 23, 4:24am, ROBERT ROESKE wrote:
> Let's see if we can quantify the dilemma by what is actually
> going on in terms of new highs, new lows, advances,
> declines. When the market is either extremely overbought
> or oversold, the turning points can be measured with
> something called a trend exhaustion index. One can be
> created for the overbought status and another for the
> oversold status and they can be plotted in the same
> subgraph for perspective. The code came from an old TASC
> article. Here is the basic code and as you can see it is
> just an exponential moving average of the ratio of new
> highs to advances or new lows to declines.
>
> TEI = TEI[1] + K*(new highs/Advances - TEI[1])
> where K = 0.18 or a speed of your choice.
>
> Attached is a chart of the TEIs where the red line in
> subgraph 2 is for the new lows and declining issues. As
> you can see it has just given another buy signal. The
> simple fact that selling is gradually abating will permit
> the residual and increased buying to put upward pressure on
> the quality bluechip stocks and we will see a rally of
> gonzo proportions. Thus, there is no dilemma when the
> numbers speak clearly.
X-Zm-Content-Name: TEI.gif
Content-Description: Trend Exhaustion Index
Content-Type: image/gif ; name="TEI.gif"
X-Zm-Decoding-Hint: mimencode -b -u
Attachment Converted: "f:\eudora\attach\TEI1.gif"
|