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by Mike Carr, CMT
The Value Line Index is understudied but one of the broadest measures of the stock market. Right now, it seems to be breaking out of a rectangle.
Position: N/A
Mike Carr, CMT
Mike Carr, CMT, is a member of the Market Technicians Association, and editor of the MTA's newsletter, Technically Speaking. He is also the author of "Smarter Investing in Any Economy: The Definitive Guide to Relative Strength Investing," and "Conquering the Divide: How to Use Economic Indicators to Catch Stock Market Trends."
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STRATEGIES
A Rectangle In The Broad Market
07/24/09 02:27:18 PMby Mike Carr, CMT
The Value Line Index is understudied but one of the broadest measures of the stock market. Right now, it seems to be breaking out of a rectangle.
Position: N/A
| Rectangles are useful price patterns that can signify a reversal or a continuation. After the market's rapid rise from the March lows, a consolidation pattern was the best-case scenario for the market bulls. Looking at Figure 1, we can see that a rectangle has contained the price action for almost two months in the Value Line Geometric Index ($XVG). |
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| FIGURE 1: $XVG: DAILY. Prices are at the upper boundary of the rectangle and the RSI points to an upside breakout. |
| Graphic provided by: Trade Navigator. |
| |
| While not as commonly used as other indexes as the Standard & Poor's 500 or Dow Jones Industrial Average (DJIA), $XVG is monitored by many traders. It is intended to offer a rough approximation of how the average stock in the Value Line universe is performing and offers exposure across market capitalizations. It is usually thought of as more representative of a typical investor's portfolio. |
| The middle frame in Figure 1 shows the relative strength index (RSI) after applying a moving average convergence/divergence (MACD)-style calculation. This is a technique pioneered by Andrew Cardwell, who has done a great deal of innovative work with the RSI. We see that it is currently indicating upward momentum in the indicator, a good sign that higher prices are ahead. |
| We can also see the RSI in the bottom part of the chart is bullish. Cardwell advocates putting moving averages on the RSI. In this case, we see that the nine-day moving average is just crossing above the 45-day moving average, another sign that the market should move higher. |
| Overall, this is supportive of higher prices for the broad market. |
Mike Carr, CMT, is a member of the Market Technicians Association, and editor of the MTA's newsletter, Technically Speaking. He is also the author of "Smarter Investing in Any Economy: The Definitive Guide to Relative Strength Investing," and "Conquering the Divide: How to Use Economic Indicators to Catch Stock Market Trends."
| Website: | www.moneynews.com/blogs/MichaelCarr/id-73 |
| E-mail address: | marketstrategist@gmail.com |
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Date: 07/28/09Rank: 4Comment:
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