This section contains the most important of our Bull/Bear signal charts with a discussion on how to interpret each of them. These Bull/Bear charts have proven to track price trend changes with a high degree of reliability and form the  basis for many of our trading decisions. (Traditional indicators are at the very bottom)

1. CORPORATE BOND / TREASURY  RELATIVE STRENGTH

This chart is an important intermediate bias indicator and is based on the relative strength of Corporate Bonds to Treasuries. When Corporate Bonds out perform treasuries then a bullish trend in equity prices is normally favored. On the other hand, when Corporate Bonds under perform treasuries then a more bearish trend in equity prices is favored. With QE intervention rampant, even amid rumors of tapering, the stability of treasuries has been affected somewhat altering the effectiveness of this indicator to provide signals for short-term trading. This indicator rarely switches trends or encounters much sideways choppy movement. While not a perfect buy/sell signal this is a very important intermediate bias indicator, especially during traditional market environments.

We consider this indicator bias to be bearish when the 13-day moving average (in green) drops below the 21-day moving average (red) and to be bullish when the 13-day moving average trends above the 21-day moving average:

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2. McCLELLAN BREADTH INDICATORS

The McClellan breadth indicators are extremely valuable Bull/Bear signals, though they often signal a turn in volume breadth well before the broader equity prices actually make that turn (usually a one to two week lag). In fact, the McClellan breadth indicators are so sensitive that they almost always turn in advance of prices turning. Because of this, these breadth indicators may show dramatic swings in breadth for what ends up being a small change in equity prices. Nonetheless, the McClellan breadth indicators catch both short-term and intermediate-term price trends.

We consider this indicator bias to be bearish when the indicator drops through the zero line into bearish territory (red) and to be bullish when it rises from bearish (red) through the zero line into bullish territory (green):

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3. ADVANCE / DECLINE RELATIVE STRENGTH RATIO

The following chart of the advance/decline relative strength ration has proved to be very responsive to equity index price changes. By taking the ratio of the number of index shares advancing on a daily basis against the total number of index shares registered this signal captures the trend change of prices very near short term tops and short term bottom. The caveat with this signal is that when prices mostly move sideways this indicator will create a lot of buy/sell noise.

On the other hand, our best investment advice is to use the McClellan Breadth indicator as a “Heads Up” that prices are about to make a trend reversal and then use this Advance/Decline indicator as a confirmation. Do this and you will be on the right side of the market more often than not.

We consider this indicator bias to be bearish when its 5-day moving average (in green) drops below its 8-day moving average (red) and to be bullish when its 5-day moving average trends above its 8-day moving average:

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4. STOCKS OVER 50-DAY MOVING AVERAGE

By measuring the percentage of stocks that are over their 50-day moving average and charting it on a daily basis you can observe imminent broad market price trend reversals. This indicator often captures price changes in advance of the actual index making a trend change, because as breadth begins to wane in the late stages of a trend you will see the number of stocks over their 50MA confirming the McClellan breadth indicators. As we have mentioned before, if a greater number of stocks are joining the “over 50” crowd, then prices are usually on the rise. If this rate is in decline, then like breadth, prices are usually on the decline as well.

This indicator usually confirms trend changes just after the Advance/Decline signal. Breadth changes first, then prices follow breadth and finally, we see the percentage of stocks over their 50-day moving averages flip as a final confirmation. This indicator is very good at catching (and even making early detection) of trend changes. But when prices move mostly sideways this indicator can also produce a lot of bull/bear trade noise.

We consider this indicator bias to be bearish when its 5-day moving average (in green) drops below its 8-day moving average (red) and its 18-day CCI drops below zero. We consider this indicator bias to be bullish when its 5-day moving average trends above its 8-day moving average and its 18-day CCI moves above zero:

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5. NEW HIGH / NEW LOW RELATIVE STRENGTH

When the total number of New Lows begin to outpace New Highs we often see a change in price trend from bullish advance to bearish decline. This indicator is more of a longer term indicator and generally comes into play to confirm full-on bear markets or bull markets – primarily because it uses a 52-week high / low period. It is important to note that this indicator has no overbought or oversold condition to it – it merely reflects the ratio of new highs to new lows.

But strong bull markets and strong bear markets are easily caught with this indicator measuring the relative strength of New Highs to New Lows. When equity prices move mostly sideways this indicator can give trend change signals that result in going nowhere, much like prices. But when a strong bull or bearish trend emerges, this indicator always catches it. At those times, when you are positioned on the same side as this indicator you are going to make money. In fact, once this indicator has switched you should question positions not on the same side as this indicator.

We consider this indicator bias to be bearish when it drops below its 10-day moving average (in dotted blue)  and to be bullish when it trend above its 10-day moving average (dotted blue):

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OUR TRADITIONAL INDICATORS BELOW ARE UNDER CONSTRUCTION  LOOK FOR A NEW FORMAT SOON.

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