Wednesday, November 30, 2011

Apologies, but I can start out with a chart I like, showing what I watch

When I bumped into LQD it was using it as a second part in a two part Liquidity Measure

 
  and over time, I found it useful to track money representative of that which comes in and out of the  money, oft on a cyclical basis.  So its LQD, and here is the link to its Yahoo Profile  LQD . IT tracks the price of Investment Grade bonds in an I-Shares configuration.  So I use it a lot as a base measurement.   To help me track the flow of money into and out of LQD, I use the measure known as Chaiken Money Flow, whose definition can be found here  -> CMF here on the Stock Charts.Com site.    The third item I use building this chart, is Mr.Nasty©, or $NASI which for lack of a better description is the 39 DMA of the cumulative advances and declines of the NASDAQ  market.  It is often described as being composed somewhat different but that it is the  39 DMA of advances minus declines ( breadth ) is the short answer.
 
  On the chart below, we have the SLOPE(20 periods) of  CMF of LQD plotted with the actual LQD price as Invisible , so you can develop a sense for how fast or slow the inflow of funds is coming into or ebbing from LQD via the CMF.
I have to give credit to an assistant of mine, simply observing that the CMF was like the blood pressure of a stock, so therefore, the SLOPE is kinda like the Green Line on the screen of the oscilloscope that beeps when you flatline.
 
Since $$ are the precursor of volume, and volume tends to drive price, these measures while directly linked to market moves, have variable lead times.  To track  how these inflows or outflows impact the more general market, I use Mr.Nasty©  as a background check, lead time considered to see if we have direction right.  Thus as  you see I have also used the SLOPE(BLUE) for MR.NASTY© ( RED dashed half-tone line), with the BLACK line of the LQD CMF SLOPE showing us how fast or slow the money was coming into or out of  LQD.
 
       Bascially these guys are in formation, going down but entering a space where they slow down previous to changes or reversals.   The phrase I remember and work with is "Neutrality Pre-Sages Change" and so I look for places where neutrality is manifesting and reversals can begin to appear.
So this is the kind of "SIMPLE" Chart that I like that conveys a lot of information, and the interpretation is pretty straight up -> When the money flows back into the market, LQD goes up and the rest of the market will likely go up as well. Here is where I look for changes if and as they occur. 
 
   So, combined with a bunch of other charts, this is how I am developing the feeling I want to position for this market, both Gold and Silver Miners as well as others, before it actually goes up. I get to be early at times but I am ok with that.............

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