Special Risk Capital Management LLC

The Climb Continues, On (very) Low Volume August 29, 2014

Since I’ve got a lot of end of the month newsletter writing to do this weekend, this will be short.  But that’s OK since really not much has changed since last Friday.  Looking at the chart below, the climb up continues, again with narrow range bars and very low volume.  Not exactly a confidence builder, but Up is Up.  Narrow ranges typically show balance, that is supply and demand about equal.  Low volume sort of goes along with that especially in this type of price structure.

I wouldn’t be surprised to see a minor correction next week, but nothing major is indicated, at least not yet.   (A lot depends on Russia too.)

I’m going to introduce a new indicator that I’ve been working on.  It’s on the chart above and labeled as “Sentiment” (blue line).  What is “Sentiment” anyway.  My definition is simple; it’s an indicator of non-price or volume activity in the broad market.  There are MANY sentiment indicators, but the indicator that I’ve developed makes use of 4 of them together: 1) Up/Down Volume, 2) the McClellan Oscillator (advances/declines), 3) New Highs / New Lows and 4) the VIX (put/call options ratio).  You can look these up on the internet if you’re interested in more detail.  I feel that these are some of the strongest indicators and I’ve put them into a single composite indicator to show when the majority are “Bullish” or “Bearish”.  I’ve tuned the data to be fairly responsive to possible changes in market sentiment.  NO INDCATOR IS PERFECT (but you know that).

So click on the graphic above to enlarge it to see the Sentiment indicator better.  I combine this indicator along with a Price indicator (not shown) to help me decide when the market is weak or strong.  That helps with deciding if it’s OK to Enter, Exit or Hedge my positions.  It’s a helpful indicator that uses data that is not available on the traditional price chart, and attempts to detect what may be happening behind the actual price movement.  Sometimes it leads a price move, sometimes not.  I hope you find it interesting.  If so, let me know.

Cheers and have a good week; the ‘A’ Team is back from vacations.  🙂      ……………  Tom  ………………