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The JSE Breadth Analysis Report (JBAR) has the 20 most important breadth and market timing indicators that we study and analyse daily to trade with on our personal accounts. Subscribers get JBAR on Sundays (for previous Friday). Don't worry about missing anything in-between as we update and analyse these reports ourselves daily to see if there is anything you need to be alerted about via email. In the email alert we include copies of the relevant charts we are highlighting. Make sure your email allows embedded images otherwise you will be unable to see what we are talking about in the email.

This is one of the longest pages on our website but also the most important. You are advised to study this page before turning information you receive from us into actionable trades. You did not sign up for a "black box" advisory service when you subscribed to us, and this is not our style, so invest the 45 minutes for years worth of gain. If you don't study this you will not understand "PowerStocks Research jargon" and will be confused by the messages, alerts and advisories we post in various emails and alerts, or worse still, incorrectly interpret something and lose money on the market.

1. WHERE TO GET JBAR
JBAR is currently emailed to you as a 3MB zipped file. You cannot open it directly from the email, you must first SAVE the zip file somewhere on your PC, then go there to unzip/extract it and then you can open the .XLSX file in the zip container.

2.HOW TO DOWNLOAD AND OPEN JBAR
JBAR is published as a Microsoft Excel 2010 spreadsheet which is also compatible with Excel 2007. You cannot view it with older versions of Excel such as Excel 2003 as it uses special formatting and charting. By using Excel we cut down on the file size and offer crisp high resolution charts which you can zoom in/out for closer inspection.

IMPORTANT NOTE : If you do not have Excel 2007 then you can view JBAR by downloading Microsoft's free Excel Viewer from their website over HERE. It is 75Mb in size. However, we recommend you upgrade to Excel 2010 as it gives far superior chart resolution and renders drawing of the complex charts far quicker, and as you will soon see, our lives are driven by these charts.

Once you have saved JBAR somewhere on your PC, you can open the .XLS Excel file to view it. You may get a message similar to the one below when opening the file. In this case, just press CONTINUE to proceed with viewing the report.


3. NAVIGATING JBAR
The JBAR report has a lot of charts and embedded images and as a result Excel can take a while to render all the graphics and construct all the charts. You may notice that the sheet will "freeze" when you scroll it but after Excel has cached all the data as you scroll down the sheet, these delays will subside. To assist with viewing performance it is best to ensure you have no other large spreadsheets or documents open when viewing JBAR. You may use the Excel zoom commands to zoom in and out of charts if you want to dive into more granular detail on some complex charts.

TIP : JBAR operates much faster with Excel 2010 than Excel 2007.  

JBAR has THREE sub-sheets as depicted below. You can locate them at the bottom left hand corner of your spreadsheet once it opens. Just click on them to go directly into them.



1. The JBAR sheet summarises important and comprehensive market breadth data for the overall JSE ALSH index and is used for longer term investing decisions and to guage the general health of the overall market.

2. The PRO TIMERS sheet has all our Trading timing signals and risk reduction tools such as SwingTrader, TroughFinder and PeakFinder indicators, as well as our powerful BITS family, SwissClock, STORM-1, STORM5+, Big Dipper and QUANTUM3 timing signals.

3. *NEW* The SECTOR BREADTH sheet has advance/decline and up/down volume stacked column charts depicting market breadth within the ALSH, ALT-X, ALEX, RESI, INDUSTRIALS, FINANCIALS, RETAILERS, FOOD & BEVERAGE, TECHNOLOGY, PROPERTY and CONSTRUCTION & MATERIALS indexes.

4. INTERPRETING THE CHARTS
There is a separate detailed instructional document on how to use and interpret the PRO TIMERS in JBAR which is available here :
The PowerStocks Short-Term Trading Guide. The rest of this page only covers the charts in the JBAR and SECTOR BREADTH sub-sheets.

4.1 JBAR REPORTS
We will now cover the basics on interpreting and trading with JBAR reports. This is just a quick  instructional overview and by no means a comprehensive description of all the uses of each indicator or chart. With experienced use you will be amazed and what other secrets these indicators can reveal and we encourage continued analysis on your own coupled with tips you can pick up from our commentary on the charts in WJP to build up your own confidence and familiarity with various indicators' behaviour. The best advice we can give you is that after reading this section you go and study a few recent editions of WJP to read our analysis and guage how to use the charts.

On all our charts you will see lines and arrows telling you something. Red lines show negative (bearish) divergences which hint at a pending correction. Green lines show rare bullish divergences. Green arrows point to a bullish condition or signal and red arrows point to bearish condition/signal. When arrows have a alphabet character in them they are the first letter of the trough we are currently in. All our troughs are named according to the North Atlantic hurricane naming convention.

CHART SET-0 : The JSE Breadth HeatMap

This shows all the underlying data used for all our charts and indicators in tabular form for the last five rolling trading days. Coloured bars are used to accentuate extent/intensity of declines/advances or gains/losses. Small bars show the number is close to the minimum normally observed with the number and long bars show the number is close to the maximum normally observed with the number. Numbers highlighted in bold represent TroughFinder A, B and C signal threshold triggers and are normally important but infrequent events. As the investor/fund manager becomes into the habit of investing/trading using breadth, this actually becomes a very useful and powerful table. Let's go into each section in more detail.

DATE and ALSH : Shows the days of the week, date and associated ALSH index readings for the last 5 rolling trading days. The ALSH number will be red if it declined from the previous day.

ADVANCE DATA: Shows data of all shares that advanced (moved up in price) on the day in question:
ADVANCES is the number of shares that went up in price on that day.
UP VOL '000 is the sum of volume traded of all the shares that advanced (advance volume)
PTS GAIN is the sum of the ZARc gained per share for each share that advanced on the day
UP VAL '000 is the sum of the (ZARc gained x volume traded) for each share that advanced

DECLINE DATA: Shows data of all shares that declined (retreated in price) on the day in question:
DECLINES is the number of shares that went down in price on that day.
DN VOL '000 is the sum of volume traded of all the shares that declined (decline volume)
PTS LOST is the sum of the ZARc lost per share for each share that declined on the day
DN VAL '000 is the sum of the (ZARc lost x volume traded) for each share that retreated in price.

HOW WE CALCULATE THE ADVANCE/DECLINE DATA:
Note that "UP VAL '000" cannot be computed from "PTS GAIN" and "UP VOL '000" totals, it has to be computed on a per share basis. The same applies to "DN VAL '000". To help you better understand what we are doing here, below is the process we need to conduct to compile these figures:

For each share on the JSE we do the following to compute all the ADVANCE related data:

1. If share advanced in price then add 1 to the ADVANCE tally, else go to step 5.
2. Calculate how many cents the share gained and add to the PTS GAIN tally
3. Add the shares’ volume to the UP VOL tally
4. Take amount from step 2 and multiply it by amount in step 3 and add result to the “UP VAL” tally
5. Move on to the next share

We perform the same process above for computing all the DECLINE related data, except we examine declines, down volume and points lost.

NET VOL '000: Shows the total advance volume minus the total decline volume for the day. Also known as NET ADVANCE VOLUME.

ADVANCE/DECLINE, VOLUME, POINTS AND VAL RATIOS : This section shows the UP-to-DOWN and the reciprocal DOWN-to-UP ratios of all ADVANCE/DECLINE data discussed above. These are very important ratios we have charted going back 12 years in order to calibrate them for reliable thresholds to act as triggers for TroughFinder and SwingTrader. 

A/D is advances for the day divided by declines for the day.
D/A is declines for the day divided by advances for the day.
VOL UP/DN is up-volume divided by down-volume.
VOL DN/UP is down-volume divided by up-volume.
PTS UP/DN is points gained divided by points lost.
PTS DN/UP is points lost divided by points gained.
VAL DN/UP is value gained divided by value lost
VAL DN/UP is value lost divided by value gained.


For example, if A/D = 4:1 then advances exceeded declines 4-to-1 or 4 shares advanced for every 1 share that declined. This means advances represented 4/(4+1)*100 = 80% of all moves on the JSE. Just take a ratio and divide it by the ratio plus 1 and multiply by 100. Similarly a VOL DN/UP ratio of 9 represents a classic Lowry's 90% Down Volume Day, which we know from our Lowry's Research notes are important markers during a major correction that are used in conjunction with 90% Up Volume days to reliably predict major trough turning points. Lowry's Research are also fond of using the POINTS ratios in combination with the VOLUME ratios to improve accuracy of their calls.

THRESHOLDS : All 8 of these ratios have been calibrated over 12 years of daily JSE readings to provide us with the important markers we need for TroughFinder, PeakFinder and SwingTrader. Advances, volume, points and value are all very different breadth data and have their own unique thresholds that are triggered during extreme situations on the JSE. The coloured intensity bars within the cells containing the ratios show how the ratio compares in relation to the minimum and maximum extremes observed over 12 years with this ratio. Whenever a ratio is highlighted in BOLD it means an important threshold has been exceeded and should be viewed as an important signal.

MORE ON VALUE RATIOS : This section shows the UP-to-DOWN and the reciprocal DOWN-to-UP ratios of the proprietary volume-weighted points gained/lost metric invented by PowerStocks Labs and Profile Data (www.profile.co.za). On small markets like the JSE, large volume trades in small cap shares and even penny-stocks can skew the volume data to incorrectly reflect a bullish or bearish day. For example more recently PINPOINT traded with a down-volume of 70,000,000 shares on a day when total volume traded was only 150,000,000 shares. This skewed the volume ratios to depict a bearish day when indeed if you removed this single trade in a penny stock it was actually quite a bullish (up) day. This could result in a late/early signal for one of our indicators relying on UP/DN volume. By multiplying the volume traded for each share by the ZARc gained or lost per share we get a more accurate weighted figure of what transpired on the JSE for the day. In the example for PINPOINT the PTS-LOST was only 2c per share so its "Value" shedded for the day was 2c x 70,000,000 = R1,400,000 which was actually insignificant versus the total "Value" traded on the whole JSE. We will be launching a ground-breaking new indicator based on this methodology very soon. It is to be called the "PowerStocks/Profile Data Breadth Indicator" or PPBI.



We have shown the HEATMAP again so you don't have to scroll back to the top to refer to it. We now cover the bottom section of the HEATMAP which provides interesting SHARE DRILL-DOWN INFORMATION related to all the ADVANCE/DECLINE data on the LAST DAY shown in the bottom of the top section (Tuesday 2009/11/10 in the above example)

TOP VAL LEADERS : This shows the TOP-5 shares that "gained" or "lost" the most on a volume-weighted price gain/loss basis (volume traded of the share x by ZARc gained/lost by the share) and shown in ZAR. The name of the share is shown together with the "value" it gained/lost and its price change for the day (%CH). The %VAL at the bottom shows what percentage of TOTAL "Value" gained/lost on the JSE is represented by these top-5 shares. If this value is high it shows these shares dominated this aspect of the JSE for the day. In the example above you can see that the top-5 value losers represented 74% of all "value" lost on the JSE. We could conclude that even though 119 shares declined in price the "value lost" was not that widespread and therefore nothing to be concerned about.

VOLUME LEADERS : This shows the TOP-5 shares that generated the most up-volume and down-volume respectively. Once again each share is shown with its price change for the day (%CH). Again, the %UP Vol and %DN Vol at the bottom shows what percentage of TOTAL JSE volume-up or volume-down is represented by these top-5 shares. If this value is high it shows these shares dominated this aspect of the JSE for the day. If you have a heavy DN-VOL day but you see the top-5 dominated down-volume you could conclude the sell-off was not that widespread and probably nothing to be concerned about. If however you have a heavy down-volume day and the top-5 represent less than 30% of total down-volume you should be concerned as down-volume was widely spread among all the JSE shares and even the big-hitters were only a small part of the action.

TOP PRICE GAINERS/LOSERS: This merely shows the six JSE shares that gained or lost the most in their share prices in percentage terms. Small-caps seem to dominate and we are considering filtering this list to include a minimum market-cap and share entry price to avoid penny stocks. 

CHART SET-1 : McClellan Oscillator and Summation Index

This shows the McClellan Oscillator (MCOS) and the Summation Index (MCSI). The Summation index for the day is the previous days value plus today's MCOS reading. If MCOS is on zero, then the MCSI remains unchanged (moves sideways). If MCOS is -1 then the MCSI moves down by 1 from the previous day. There is a dedicated HOW-TO page on the McClellan indicators you may want to review which has much more detail on its use and interpretation, over HERE.  Below is a quick summary.

MCOS (left chart) is the 19-day EMA subtract the 38 day EMA of the daily NET ADVANCES (# of shares that went up in price less # of shares that declined in price). It is a very short term and rapid oscillator and if it is above zero it generally depicts money moving into the JSE (sellers are in control). If it is in negative territory then money is flowing out the JSE (buyers are in control). If MCOS bounces along zero line fluctuating between positive and negative territory the market is undecided and buyers and sellers are struggling for control (such as is occurring at the right of both charts above). A trend gets established when the MCOS forms complex structures above or below the zero line (8 or more readings). You can apply trend line analysis to the MCOS to predict trends and reversals. If you look at the chart you can see the sellers are gradually taking control over the last 20 days shown.  You will see a thick green horizontal line at the -4 level on this chart (not shown above.) When MCOS dips below -4 this is a historically very oversold condition with high probability you are close to a trough reversal. When MCOS rises to form mountain like structures, these are called breadth-thrusts and propel the market higher.

MCSI shows longer term market trends. When it is pointing up, demand is outstripping supply. When it is flat then buyers and sellers are struggling for control. When it is pointing down, supply exceeds demand (selling pressure is rising) MCSI is very good at signalling entry trades from deeply oversold conditions (when it is less than -100). When MCSI turns up for the first time from deeply oversold conditions you can be sure we have reached a turning point as this signal has very few false turns. Similarly it is an excellent indicator of market peaks (deeply overbought) When it turns down from any point by more than 50 points it is generally time to exit your trades. You can apply simple trend-lining to MCSI - from the chart we can see that it is posting higher highs and higher lows - the sign of a healthy bull run. According to international research, very few bad things happen to the market when MCSI is above zero. When MCSI is posting lower highs and lower lowers its a sign of bad things to come. You do not want to be in the JSE when MCSI is below zero and pointing down! The example above shows a negative divergence between the JSE and MCSI hinting at a large correction, which duly commenced on 15th January 2010. The red arrow shows MCSI dropping below the Pring line which is a SELL signal for people that follow this timing strategy.

SWISSCLOCK INDICATOR On top of the MCSI chart you will see an indicator such as shown below:

MCSI HI shows the last 90-day high posted by MCSI. NOW shows the current MCSI reading. DELTA represents the difference between the NOW reading and the MCSI HI reading. When this gets to -50 (as shown by the DELTA red bar filling the whole cell displaying the number) then we have a DEFCON-1 signal which means SWISSCLOCK is issuing a SELL. The rightmost cell shows the DEFCON condition where DEFCON-1 is high alert (BEARISH) and DEFCON-5 is very safe (BULLISH)

CHART SET-2 : Advance/Decline Ratio charts

These are PowerStocks research proprietary format you won't see in any literature. Left chart is advances data (# shares that rose in price to those that declined) and right is decline data (# of shares that fell in price versus those that rose in price). The bar charts show the ratios of advances to declines and vice versa. Right chart is reciprocal of left chart (a A/D ratio of 2:1 is the same as a D/A ratio of 0.5:1) The bottom of each chart shows with vertical bars the daily ratios measured together with a 5-day moving average.

ADVANCES : For the left chart, any green bar punching through the shaded green zone (1.8 and above) is a TroughFinder B-signal ( a bullish marker) and these are shown with  arrows together with the letter of the trough it belongs to. So the last one you see on the left chart is for Trough Mindy. This is a hint that trough Mindy may have reversed (bottomed). Large signals are green arrows (normally when Lowry's events are involved with the trough.) otherwise they are grey. The taller the vertical columns the bigger the signal.

AD LINE : The black line on the left chart plots the daily  NET ADVANCES (daily advances less daily declines.) otherwise known as the AD-LINE. If you recall from the previous section the MCOS is derived from the difference between 19 and 38 day moving averages of this line. The AD line is one of the oldest and most reliable breadth indicators in the investing industry. This line must follow the ALSH. When it doesn't we have DIVERGENCE which is normally very rare and can be bullish (AD LINE going up but ALSH going down) or BEARISH (AD Line posting lower lows and lower highs while the JSE keeps posting higher highs and higher lows). You can see a bearish divergence shown by the red line warning us a correction was looming. When you see bearish AD divergence for a few weeks or month there is a serious correction looming as it shows fewer and fewer shares are contributing to the markets continued rise (market weakness). Read more about the AD-LINE here.

AD Ratios with 5-day MA's : A red moving average of the AD ratio is tracked at the bottom of the left chart. When the 5-day MA reaches 2 you have a very powerful and sustained thrust on the market and this can be considered a very bullish event, sometimes spawning new bull markets. AD ratios of 2 can also be considered bullish for short term traders. Two orange horizontal threshold lines are drawn at the bottom. When the 5-day MA of the AD ratio is above the top line we have a bullish condition and when it is below the bottom line we normally are at a trough bottom.

DECLINES : All the Decline/Advance ratio data is shown on the right chart. Decline/Advance ratios above 3 are  rare events (especially in a rising market) but are actually BULLISH events! When these exceed a certain threshold and frequency, then TroughFinder wakes up and starts taking notice as it smells opportunity. You can see from the above chart that DA ratios above 2 generally coincide with minor localised troughs. In a major correction though you read these in a completely different manner. TroughFinder is not going to get excited with a DA ratio of 3 when the markets' falling through the floor - it will start getting excited when the DA ratios start hitting 9 and more in  a major correction.  To raise a point toward the A-signal, TroughFinder insists the 5-day EMA of the DA ratio (little green line at bottom) is at least 1.6  to indicate some kind of sustained sell-off. If ever the 5-day MA of the DA gets to 2 then TroughFinder gets excited in a rising market as this marks high probability we are witnessing a trough reversal. In a falling (crashing) market it gets excited when this gets to 3 or more.

When you see tall red bars on the right followed by tall green bars on the left a few days later you can be sure TroughFinder is triggering some kind of B-signals. Short term traders sometimes trade on these situations even if TroughFinder has not triggered alerts (TroughFinder takes a lot to fire a signal as it likes to maintain its integrity as being accurate!)

NET VOLUME LINE : The black line on the right chart plots the daily  NET ADVANCING VOLUME (daily advancing volume less daily declining volume.) Its use is identical to the AD-LINE in terms of it must follow the ALSH in direction and divergences hint at pending corrections/crashes. Bullish and bearish signals accompany instances when this line crosses its 60-day moving average (dotted line).

CHART SET-3 : UP-Volume and Down-Volume Ratio charts

Left chart is UP-Volume data (volume traded of shares that rose in price versus those that declined in price) and right is DOWN-Volume data (volume traded of shares that fell versus those that rose in price.) The bar charts show the ratios of up volume to down volume and vice versa. Right chart is reciprocal of left chart (a UP/DN ratio of 2:1 is the same as a DN/UP ratio of 0.5:1) Each chart shows the ALSH index and the daily UP/DN or DN/UP ratio (depending on chart) and a 5-day moving average of these. It also shows when the volume events of the day contributed to a TroughFinder A-signal (arrows on right chart) and B-signal (left chart).

You can see from the T-FINDER line that TroughFinder only becomes interested when these ratios start exceeding 4-to-1. The LOWRY LINE is the threshold we discussed in so much detail in our seminal "90% Days JSE Lowries Events" research note for detecting the bottom of major corrections. When these ratios exceed the Lowry's line you can be sure  TroughFinder is very occupied with its job at hand. In a rising market, TroughFinder has to be careful about getting too excited about these events to maintain its accuracy, so it requires the 5-day MA of the DN/UP ratio to be above 2 to trigger a strong A-signal or the MA of the UP/DN ratio to be at least 2 before generating a strong B-signal to avoid generating too many signals or generating signals prematurely.

These thresholds are as we have tested and calibrated over 12 years of JSE data.
When you see tall red bars on the right followed by tall green bars on the left within 20 days you can be sure TroughFinder is triggering some kind of BUY signals. Short term traders sometimes trade on these situations even if TroughFinder has not triggered alerts (TroughFinder takes a lot to fire a signal as it likes to maintain its integrity as being accurate!) Volume breadth is a very important indicator on the JSE and we advise you study "UP/DN Volume and Lowry's 90% days" if you would like to enhance your skills on interpreting these charts for profitable trading.

CHART SET-4 : Breadth 100% Stacked Column Charts

The charts represent Volume and Advance/Decline breadth as discussed in the previous two sections but displays the respective ratios as percentages of total instead.

VOLUME : The left chart is Volume Breadth and the green bars show what % of total volume was UP-Volume and the red bars show what % of total volume was down volume. For example, the last day on the right shows advancing volume was 87% of all volume and declining volume was only 13% of all volume. When the red bars punch below the yellow horizontal line at 20% it means down-volume is over 80% of all volume (a Lowry's 80% down-day). Conversely this means up-volume was less than 20% of all volume. When the red bars punch below the white line at the bottom at 10% it means down-volume was 90% of all volume (a Lowry's 90% down day.) When the green bars punch through the 80% and 90% lines at the top these are Lowry's 80% and 90% up-days respectively. Lowry's up-days within 20 days of Lowry's down days are very good trough-bottom markers and strong BUY signals. So look for tall red bars depicting strong selling followed by tall green bars depicting strong buying. That is your trough! 90% up-days after 90% down days is your strongest signal, followed by 90% up-days after 80% down days, and then 80% up days after 90% down days. 80% up-days following 80% down days are the weakest signals but work good in trending bull markets. When the 80% and 90% thresholds are breached, TroughFinder triggers A-signals and B signals.

ADVANCES : The right chart works identically to the left chart except we are looking at advance/decline data as opposed to up/down volume data. The difference is that you will very rarely see the Lowry's 80% and 90% thresholds being exceeded and will work more with the yellow dotted line which shows when advances are 65% of all moves (top line) or when declines are more than 65% of all moves (bottom dotted line) When the 65% threshold is breached, TroughFinder triggers A and B signals.

CHART SET-5 a+b : Buying Demand and Selling Pressure

We define the DEMAND trend by the trend in up-volume and SUPPLY trend by the trend in down-volume. For Buying Demand we track the daily UP-Volume (volume of advancing shares on left chart). In a rising market we need to see rising demand to sustain it. A rising market with falling demand hints at a weakening market that is about to encounter a reversal. An incredibly effective method to track the base demand (minimum demand) trend is to plot a 5-day (1 week) exponential moving average (EMA) of the daily demand and then connect the troughs of this average together to find the base trend (see the white line on chart on left). The market goes up in growth spurts and this allows us to remove the effects of the powerful spurts to measure base (minimum) demand trend. Divergence in base demand points to market reversals. This becomes incredibly powerful when combined with the Lowry's 90% and 80% days theory, to confirm your reversals. Backtests done by us confirm that buying and selling the market using this trendline to be highly effective in generating profitable trades and minimising your risk.

For Selling Pressure (Supply) we perform the same exercise with daily down-volume data.  In a rising market we like to see a modestly rising or flat or even declining selling pressure. This is best as a confirmation tool and it is not as effective to time the market with this trendline as it is with the demand trendline.

When there is steep rises in UP-Volume or steep rises in Down-Volume then TroughFinder starts taking notes and comparing to what is happening with Advances and Volume ratios in sections 3 and 4 above. We might have a 5:1 Advance/Decline ratio event but if its off small volume then TroughFinder will not attribute as much interest to that event as opposed to if it was generated off the back of large volume. There is one more thing TroughFinder does when it sees large volume before making a decision - it checks that this volume is not attributed to one or two large cap trades.

We catalogued the trends in volume derived demand and supply over the last couple of crashes at another seminal research note of ours titled
"Buying Demand and Selling Pressure" and you are encouraged to read this to better hone your skills and interpreting these charts.

CHART SET-5 c+d : Net Advancing Volume and Total Volume stacked

NET VOLUME is defined as daily Up-Volume (volume of shares that rose in price) minus daily Down Volume (volume of shares that fell in price). Markets are mostly going up when this value is positive and vice versa. When this value is low (i.e. minus 150 million shares) and suddenly shoots to zero and above we have what is called a NET VOLUME DEMAND REVERSAL which is a bullish event (in an upward trending market only) and TroughFinder sits up. If this occurs not too long after a recent peak occurred, then TroughFinder raises a C-signal. These reversals and when they coincided with recent TroughFinder signals are shown by arrows. The white line tracks the 5-day moving average of the green daily bars. Generally the market is "bullish" when this line is above zero and "bearish" when it is below zero.

TOTAL VOLUME STACKED The chart on the right shows up and down volume stacked on top of each other to also represent total changed volume. Generally this averages 200 million shares per day as shown with the green horizontal line. This chart is a good reflection of total volume being traded as unchanged volume is normally only 10% of all volume. For the last day depicted on the extreme right of the chart, the up-volume as % of total volume is shown, and similarly with down volume (12.9% in above example.)

CHART SET-6 : BULLISH % BREADTH INDEX AND ABSOLUTE BREADTH INDEX

This shows, through the vertical red bars, the percentage of all-ordinary shares (excluding debt, warrants, ETF's etc.) trading above their 50-day moving average. Good buying opportunity is represented by red bars at or below 30 and general overbought conditions are represented by values above 60. We run a shortish medium-term timing signal on this chart called the BPI Timing Model. Look for divergences such as the BPI not posting higher highs with the JSE (as is shown on the right of the above chart) representing a market running out of steam.  

The right chart is a powerful Absolute Breadth Indicator we have adapted into a multi-purpose chart and calibrated over 12 years of JSE data. It has to rate as one of our favourites. Look for the beige indicator hitting the yellow line to warn of increased probability of the market reaching a top (such as shown by the red arrow). Look for the indicator hitting the orange line during major crashes/corrections to signal a bottom reversal. Look for the vertical brown bars going over 40 to show high probabilities of a minor trough being reached. Look for green bars near zero to warn of a minor peak being reached.


CHART SET-7 : MCCLELLAN MULTI-INDICES

These are for some of our large fund managers but individuals may find them useful too. In addition to the standard McClellan Oscillator and Summation Index pair we track for Advance/Decline data, we also track Oscillator and Summation pairs for Up/Down Volume and our proprietary "VALUE" metrics of (points gained x up-volume) and (points lost x down volume.) Generally, money leaving the market is depicted by their summation indices trending down and vice versa. The Volume and Value versions of these indicators are much more volatile than the standard advance/decline version. The green VALUE version is a good representation of the market mood through measurement of real cash entering or leaving the market.) High confidence oversold thresholds are in the right chart which have historically been very accurate and marking troughs "approximate" bottoms. When the green summation index goes below zero you can be assured lots of cash is draining from the market and we are in a bear trend. We are compiling more detailed research papers on the use of these indices.

4.2 SECTOR BREADTH CHARTS
A Breadth 100% stacked column chart for both advances and volume appear for each of the 11 major sub-categories (indices) of the JSE. All the shares on the ALT-X exchange appear in their own sector and thus the remaining sectors exclude ALT-X shares (i.e. they are JSE main-board only.)

This is an exceptionally powerful tool that allows the investor to see which sectors in the JSE are currently outperforming or under-performing others and/or the ALSH index from a daily price and breadth perspective as well as get insight into what's really happening within a sector. For each of the sectors/indices covered a 100% stacked column chart set appears such as that shown below for the FINANCIALS sector which includes all Financial Services shares as well as Banks on the JSE main board.



There are 20 shares in the FINANCIALS index, including the 5 major banks. The chart on the left shows up-volume (green) and down-volume (red) for these shares represented as a percentage of total volume traded for shares in the index/sector that moved in price. You can see on the 9th March over 90% of all volume was down-volume (a Lowry's 90% down-volume day for the FINANCIALS) which naturally coincided with the FINANCIALS index (shown in purple on the left) falling. The very next day, there was an almost 100% up-volume day! Just as we do with breadth for the ALSH index, we may interpret this as a very bullish event and possibly a signal to climb into financials.

The chart on the right shows advances (green) and declines (red) as a percentage of all shares in the index that moved in price. This time we superimpose the ALSH index on the chart, so you can compare the purple FINANCIALS index to the blue ALSH index to guage relative strength.

We have kept the 80% and 90% threshold lines in these charts as they depict important thresholds just as we use for the ALSH index. Naturally these charts represent sets of far fewer shares than the whole JSE index, so penetration of these thresholds is likely to happen far more quickly than those we have been witnessing on the overall JSE index. For this reason, until we have conducted further research into thresholds to use for various indices, we suggest you use the white 90% line as a more high confidence signal.

For each index, we also show a stacked volume chart, so you can compare the breadth ratios depicted in the previous 100% stacked VOL chart to overall volume traded as well as observe important trends in absolute volume. Obviously if you see a 90% Lowry's up-volume day but it came from low overall volume, you will pay less attention than if it came off unusually high volume. Two examples are shown below for the FINANCIALS and INDUSTRIAL sectors respectively:



These are a classic demonstration of the enormous power of sub-sector breadth. On 26th February 2010 there was nothing special showing up for breadth on the ALSH index. However from the 100% stacked volume chart we saw that the Financial index had a 90% up-volume day. We would then have glanced across to the stacked volume chart shown on the left above and seen this was off unusually high volume in excess of 60 million shares! This would have been a clear BUY signal for us to climb into financials, and as you can see in the above chart, after this event it was only one way for the financials after this - up.

Similarly for industrials- on 23rd February 2010 we had a Lowry's 90% down volume day, followed on the 24th with an 80% down volume day. These were off small volumes, as can be seen in the chart on the right above, a sign that the last of the sellers of industrial shares were being flushed from the system. Then the next day, on the 25th we had a Lowry's 90% up-volume day off abnormal volume as the smart buyers and funds flocked into the market. A classic panic followed by rush-buying reversal signal. Again, it was all up from there.

The two above examples show how Financials and Industrials led the JSE in a huge 10-day surge from 23rd February to, as of this writing, 10th March and still going strong. During this time, the RETAIL sector also gave signals. And all this time, the resources and various other counters were merely ambling along. But by examining breadth for the entire ALSH index only, we would have not seen anything unusual and would have missed the trend!

As another exciting example, as of 10 March 2010, the CONSTRUCTION & MATERIALS sector has experienced a massive 22% sell-off compared to the ALSH which has rallied hard. Using sub-sector breadth we will be able to detect when this specific sector has troughed and when it is safe to climb back into cheap construction shares!

There is absolutely no reason we cannot develop robust breadth timing models such as that we use on the ALSH index, for these various sub-sectors. We will also compile and publish McClellan charts for various important sectors. We can use the TroughFinder concepts right out-the-box on these sectors  by looking for 80% and 90% down days followed shortly by 80% or 90% up-days. We have scheduled research time to build STORM, BITS, BIG-DIPPER and QUANTUM models for various important large-cap indices such as RESOURCES, FINANCIALS and INDUSTRIALS. The concepts we deploy are identical, its just the thresholds and sensitivities we will use for various triggers that needs to be properly calibrated over a 12 year history.

Can you imagine the power of sub-sector breadth which will now alert you to a trough-reversal for a JSE sub-sector during a correction, before the JSE itself has troughed! Certain sectors will always lead out a trough and with sub-sector breadth you will be able to identify them and pile into shares before the overall market turns up.

For more details of charts from the TRADING TIMERS sheet, go to "The PowerStocks Trading Guide".

RELATED TOPICS ---> | How to interpret TroughFinder Signal Charts | Go to Main HOW-TO page |
                                |
The McClellan Indicators | UP/DN Volume and Lowrys events |
                                |
Demand and Selling Pressure | Advance and Decline Indicators |
                                | The Disparity Indexes |
The PowerStocks Trading Guide |
 
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