HOW TO USE THE DAILY INDICATORS
Knowing the proper use of my daily indicators should help you to benefit from my analysis section. I will give the title, plus a brief summary of each, and also the proper application and how I use each indicator in my own market timing, and how you should interpret them. If you are a seasoned trader/analyst you probably already know most of these. I am publishing these for the benefit of the traders who are still in the learning process.
DAILY AND WEEKLY MACD
I have found that the MACD histogram and bar charts are one of the most effective tools for the trader, more than any other indicator other than stochastics for determining market strength/weakness. When both daily and weekly MACD bars are moving up, the trend is strong and any declines should be bought. Since my analysis focuses mostly on cycles, we use this as a confirming indicator. For example, after the cycle low made in October I wanted to see a confirmation of a low by weekly MACD turning higher. This happened right on schedule. Since I knew that cycles should move the market higher into late November, and decline in the daily MACD should point to a buying opportunity. When both are pointing in the same direction the trend is usually a strong one. When the Nov. 23 top occured, weekly MACD then turned flat, which for me was a confirmation that the cycle high was close and at least in the process of being made. Day-traders might use these indicators this way: If we are in a period of cycle weakness, and that is confirmed by weekly MACD turning down, then wait until the daily MAC turns up for a few days, then turns back down. This turn down should signal to the day-trader that he should be looking to be on the sell side of intraday rallies. The advance/decline line should also be monitored during this time. If it is faltering, this is a double confirmation.
This is a calculation that I do on a daily basis that is purely my own invention. I calculate it by hand every day after the close. Generally, this indicator is for day-traders only. A reading below .30 implies the market is oversold on an intraday basis, a reading above .70 tells us the market is overbought intraday. Also, bear in mind that this reading has nothing do do with the status of the market on a daily or weekly basis in being oversold. The market can be oversold intraday, but on a daily basis be overbought and vice-versa. It is purely a very short-term indicator that should help to pinpoint the next day's direction. When the indicator is at .23, as it was on Friday Dec 11, we should look to be buying a low made first the next day for a rally attempt (which happened Friday). We would look to buy at or near the projected low (Friday 1165) or at an important support level such as the previous day's low, etc. Friday, Dec. 11th the market found support right at the projected low. If the low is made very early and FIRST, we would look to hold out for a run towards the projected high. When daily MACD is pointing down, USUALLY the daily projected high will fall short, you have to use your other technicals to alert you on the proper time to close out a position.
THE CALL/PUT $$ RATIO
The option dollar ratio is a daily calculation on the OEX index to determine where the money is going into on a daily basis. This indicator is primarily a CONFIRMING indicator, never a stand-alone one. When used in conjunction with the other indicators it is an important tool in telling us the current overbought/oversold level of the market. When this indicator is 2/1 in favor of calls traders are to bullish, the market should should correct and go lower. A 2/1 put reading says too many bears and a rally is in order. When a daily stochastic reaches overbought level and the call $$ are 2/1 over puts, 90% of the time it's a good sell. And vice versa on the buy side. I believe a trading system could be based on these two indicators alone.
THE DAILY PROJECTED RANGES
The daily projected rane is probably THE most important indicator I have for day-traders. When used in conjunction with the overbought/oversold indicator it becomes a powerful tool that should point you in the right direction over 70% of the time. Just a small edge can make all the difference in the world, and this is it.