ADVANCED CONCEPTS IN CHARTING - Section 3 - Chapter 18 Part II - Market Breadth Indicators- Very Short Term Indicators

1. Market Breadth
Indicator
Up & Down Volume
Indicators
CMT LEVEL - I

2. Up/Down Volume Indicator
• Up/Down Volume (UDV) is a technical indicator developed to
measure bullish (volume to price up-side) and bearish (volume to
price down-side) pressure with attempt to predict price trend
reversals.
• UDV (Up/Down Volume) was developed and implemented by our
research team as a substitute of the "Advance/Decline Volume"
indicator used to analyze indexes or any basket of stocks.
• The idea of having the UDV indicator came from our customers
who successfully used Advance/Decline Volume and who
requested from us creating a similar indicator for analysis of stocks
(a single security).

3. Up/Down Volume Indicator
• When analyzing Up/Down Volume, following points should
be kept in mind:
• Advancing Up-Volume (green line moves up) indicates
increasing bullish pressure;
•Declining Up-Volume (green line moves down) indicates
decreasing bullish pressure;
• Advancing Down-Volume (red line moves up) indicates
increasing bearish pressure;

4. Up/Down Volume Indicator
• Declining Down-Volume (red line moves down) indicates
decreasing bearish pressure;
• Up-Volume above Down-Volume (green line moves above
red line) indicates dominance of the Bulls over the Bears;
•Down-Volume above Up-Volume (red line moves above
green line) indicates dominance of the bearish traders over
the bullish traders;
•Crossovers of Up- and Down-Volume (crossovers of green
and red line) indicates critical moments of changes in
sentiment.

5. Up & Down Volume Indicators
The Arms
Index
Ninety Percent
Downside
Days(NPDD)
10 to 1Up day
Volume
9 to 1 Down
Volume Days

6. The Arms Index
• The Arms Index measures the relative volume in advancing stocks versus
declining stocks.
• When a large amount of volume of declining stock occurs, the market is likely
at or close to a bottom.
• Conversely, heavy volume in advancing stocks is usually healthy for the
market. The
• Arms Index is actually a ratio of two ratios, as follows :

7. The Arms Index
•This higher level of the Arms Index would indicate that
although the number of shares advancing is rising, the
market is not strong because there is relatively low
volume to support the price increases.
•Thus, this ratio travels inversely to market prices
(unless plotted inversely), tending to peak at market
bottoms and bottom at market peaks.

8. Ninety Percent Downside Days(NPDD)
• Paul F Desmond presents a reliable method for identifying
major stock market bottoms that uses daily upside and
downside volume as well as daily points gained and points
lost.
• A 90% downside day occurs when on particular day , the
percentage of downside volume exceeds the total upside and
downside volume by 90% and the percentage of downside
point exceeds the total gained points and lost points by 90%.
• A 90% upside day occurs when both the upside volume and
the points gained are 90% of their respective totals.

9. 10 to 1 Up volume Days & 9 to 1 Down Volume Days
• Desmond combines breadth and volume for his panic
Indicator.
• Desmond studies were impressive that often times
to buy in panics
• Roughly six month after a 10 to 1 up volume day ,
the market was 9% higher .
• After 6 month following a 9 to 1 down volume day ,
the market was 6% higher.

10. 10 to 1 Up volume Days & 9 to 1 Down Volume Days

11. Net New Highs & Net
New Lows
CMT LEVEL - I

12. Introduction to Technical Analysis
New Highs
Versus New
Lows
High Low
Logic Index
Hindenburg
Omen

13. New Highs Versus New Lows
• New highs/new lows represents the number of all stocks
making new 52-week highs or lows.
• The result is graphed, and the aggregate number of new highs
and new lows is used as a market timing tool.
• Bullish or bearish divergence can occur in one of two ways.
• At a top, bearish divergence can be signaled if the market
reaches a new peak while the number of new highs is equal to
or less than the previous new highs figure.
• Bullish divergence happens when an index attains a new low, but
there are fewer stocks hitting new lows than when the index
previously valleyed.

14. New Highs Versus New Lows

15. The High Low Logic Index
• The High Low Logic Index was developed by Norman Fosback.
• It is calculated as the lesser of the number of new highs or new
lows divided by the total number of issues traded.
• Daily or weekly NYSE data is typically used in the calculation.
• The concept behind the indicator is that either a large number of
stocks will establish new highs or a large number of stocks will
establish new lows, but normally not both at the same time.
• Since the High Low Logic Index is the lesser of the two ration,
high readings are infrequent.

16. The High Low Logic Index
• When a high indicator
reading does occur, it
signifies that market internals
are inconsistent with many
stocks establishing new highs
at the same time that many
stocks establish new lows.
• When this happens, it is
considers bearish for stock
prices.
• Extreme low indicator
readings reveal a uniform
market. They are considered
bullish for stock prices.

17. Hindenburg Omen
• Hindenburg Omen is a pattern in the market Breadth data to predict
market crashes.
• The Hindenburg Omen rules are based on the analysis of the number of
stocks making new 52-week Highs and Lows.
• Hindenburg Omen rule (also known as Hindenburg Omen indicator) was
introduced in late 1930th as a criteria that allows predicting the
possibility of a stock market crashes.
• Hindenburg Omen indicator tracks the number of New Highs and New
Lows - the number of stocks listed in an index and which made new 52-
week lows or 52-week highs.
• Hindenburg Omen principles to predict stock market crashes, recessions
and long-term down-trends.

18. Hindenburg Omen
• In a result of the research the Hindenburg Omen criteria has been
improved and now it includes several rules:
• The daily number of New Highs and New Lows on the NYSE should
be above 2.8%
• NYSE composite index should be greater than it was 50-day ago. It
could be equivalent to as 50-day ROC of the NYSE index should be
positive.
• McClellan Oscillator (19,39) should be negative.
• The number of New Highs cannot be twice bigger than the number
of New Lows
• To confirm the high odds of coming strong decline (recession)
Hindenburg Omen should be triggered several times within a month

19. Breadth and New High& New Low
• Breadth and New High& New Low tend to be a indicator
of trend and divergence analysis is useful in determining
when a known trend may be reversing , short term
reading of breadth and new high low date are often
contrary indicators
• For Example when the daily A/D Ratio is 2/1 or 3/1 on
the downside . It provide an excellent buying opportunity
for the short term.

20. Hindenburg Omen

21. Module - 34
Moving Average
Indicators
CMT LEVEL - I

22. Moving Average Indicators
Coppock Curve
No of Stock Above
their 30 Weeks
Moving Averages
The 80/60 Rule

23. Coppock Curve
• The Coppock Curve is a long-term price momentum indicator
used primarily to recognize major bottoms in the stock
market.
• It is calculated as a 10-month weighted moving average of
the sum of the 14-month rate of change and the 11-month
rate of change for the index; it is also known as the "Coppock
Guide.“
• The Coppock Curve was originally implemented as a long-
term buy or sell indicator for major indices such as the S&P
500 and the Wilshire 5000. This allowed indices to spot large
trends and adjust allocations accordingly.

24. Coppock Curve
• The curve is considered an oscillating trendline that bounces
higher and lower than zero and is the summation of two
rates of change: an 11-period change and a 14-period
change.
•The curve looks at the rate-of-change calculations over an
11-month and 14-month period and then applies a 10-month
weighted moving average to derive a signal line indicator.
•Investors can then look at the Coppock Curve and its
resulting signal line indicator to make investment decisions in
the medium to long term.

25. Coppock Curve

26. No of Stock Above their 30 Weeks Moving Averages
• One Indicator of overbought and oversold markets is the
number of stocks above or below 30 weeks Moving Averages.
• IT is a contrary indicator , when the percentage of stocks
above their 30 weeks moving average reaches above 70% , the
market is inevitably overbought and ready for correction
• Conversely , when the percentage of stocks below their 30
weeks moving average decline below 30% , the market is at
bottom and ready for reversal.
• It developed another rules for action between 30% and 70%
levels that follow intermediate trend turns.

27. The 80/60 Rules
• One interesting variation in the use of 30 weeks above or
below is the 80/60 rule.
• This rule states that when the percentage of stocks
above 30 weeks average has been greater that 80% and
then declines below 60% , the percentage will decline to
or close to 30% .
• A serious decline will likely to follow such a signal .
• Ned Davis research suggest that of the 20 instance since
1968 , 17 resulted in a general market decline.

28. Very Short Term
Indicators
CMT LEVEL - I

29. Breadth and New High& New Low
• Trading with the long term trend is the best method of
maximizing profits.
• For Example , if market is above 200 days moving
average is presumed that in longer term uptrend,
whenever the averages break to new 10 days lows is an
excellent time to go long . Oppositely , When market are
below 200 days moving averages and rallies take price
above their 10 days highs , you have best opportunities to
sell short.
•Same way New High& New Low can be used as a contrary
signal within major trend.

30. Net Ticks
• Ticks represent actual trades. IF the stock trades at its
previous price , a zero tick is produced.
• By using the number of upticks versus downticks, the
day trader has an indicator of market action across the
board. It is similar to A/D ratio or difference except
more sensitive intraday data.
• Tick data is used as a contrary indicator because it
measures short term bursts of enthusiasm or fear.

31. Net Ticks
•Extreme readings may indicate a longer term change in
trend
•When it is oversold , traders will buy into the short term
fear and when it is overbought , they will sell into the
temporary enthusiasm
• Closing ticks can also be used similar to daily breadth
statistics.
• Closing ticks represents the trading action just at the close
of trading and show whether traders are anxious or
ambivalent.
• A 10 SMA of net ticks shows oscillations in line with
moving averages.