Semi-log vs. Linear scale charting:

Why do you always use a semi-log scale in your charts? This is a question I always get during a teaching session. Usually the students are industry pros who surprisingly are not clear on the choice between a linear or semi-log (percent) scale.

The old rule among technical analysts used to be if the data doubles use a semi-log scale but now many will use a 50% price range before the switch from linear to semi-log. I always use a semi-log - see the Air Canada chart example.

On the lower linear scale it appears the advance at B is greater than the advance at A which is not true. The above semi log clearly displays the A & B advances to be about equal in price change. Also never draw trend lines on a linear scale. This is a common error even among CMT’s that should know better.

Non confirmation of the NYSE advance / decline line:

Just to review a clip from the Getting Technical market letter - Interim Update December 4, 2013 GT1417 – page 2 – “A Probable Short Trading Correction”

“The Advance / Decline Line (AD line) is one of the most widely used indicators to measure the breadth of a stock market advance or decline. The AD line tracks the net difference between advancing and declining issues. It is usually compared to a market average where divergence from that average would be an early indication of a possible trend reversal.

Clearly that observation was 20 days ago – and now here we are with the S&P500 at all time highs and the NYSE A/D line (see chart) still not confirming the recent advance. This is a sign of thinning leadership.  Reducing into the current bullish stampede may be prudent.

Selling into strength

Yesterday’s big rally on the Dow to 16167.97 - UP 292.71 points or 1.84% was a new record high. The Dow is also up 146.95% from its Bear low of 6547.05 hit 3/9/2009. The S&P500 also closed at a new all-time high – but the NYSE advance / decline line did not confirm the current bullish stampede. I will display a chart – next post.

Here at GT we are selling our CDN Multi-National selections of April 26, 2012 that has returned about 63% to date. A clip from a Getting Technical letter Interim Update December 18, 2013 GT1419 TSX Comp 13335 DJII 16168 – “Cyclic peaks in many Stock sectors suggest we sell into the current period of seasonal strength.”

And:

“Canadian Multi-Nationals - We take advantage of the current bullish stampede into equities. It has been a great 20-month run but with all components at long and intermediate term cyclic peaks - we liquidate all positions - only laggard Bombardier could be retained. The final returns will be based at the close of December 24, 2013