By kind permission of Elder.com, the website of the recognized trader, Alexander Elder, I reproduce for you, literally, its recent article "Books and Trades #256: A Spike Lesson... Education... A new book special" of April 24th, about the accurate signal that gives the New High- New Low Index (NH-NL) indicator in the powerful market recovery since late December 2018, post which I publish here. Not popular in trading platforms, at www.indexindicators.com you can find this indicator for the SP500 or other indexes. Just select the stock index, and in Breadth indicator the NH-NL option.
Also here, in stockcharts.com, you could check this indicator in a weekly chart.
Now the SP500 SPX is all-time highs again and, in Elder' words, the question now "is whether the upmove will continue more or less uninterrupted or whether there’ll be a retest of the initial low like we saw in 2016. Some gravity is seen returning to the markets".
Good Trading!
@BravoTrader
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Dear Trader,
The letter I had sent to you right after Christmas, was headlined “A major buy signal on stand-by.” The Spike signal triggered two days later and produced a record-setting rally.
Spike signals are very rare – they occur only a few times in a decade. They are extremely powerful, but most traders fail to take full advantage of them. I hope that the following recap will help you be better prepared when this signal occurs again.
A Spike is the strongest signal in technical analysis (which is why SpikeTrade group is named after it). It occurs when weekly New High – New Low Index (NH-NL) drops below minus 4,000 and then rises above that level. Do not confuse it with a Spike Bounce signal which comes from a daily chart in the monthly look-back window. That lesser signal occurs many times a year (3 times so far in 2019) and delivers more modest rallies.
Let’s review three charts, showing the latest Spike signals, and then draw a lesson from them…
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In 2009: an explosive 35% rally in 14 weeks, followed by a great deal more after a reaction to less than one ATR below value. In 2011: not shown because that Spike signal occurred intraweek. Still, it was followed by a great lasting rally. |
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| In 2016: an impressive 10% rally that lasted 20 weeks, followed by a lot more after two reactions to one ATR below value. |
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Dr. Alexander Elder & staff