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PART 3b
Let's take a look at a couple of other charts that
show the picture a bit more clearly.
This chart shows NASDAQ (blue line) and the daily close in
relation to the total range for the day from low to high. If
this line is moving up, it means the Index is closing -on
average- above the mid-range, for this to happen the index
would have to open LOWER and close HIGHER. If it is trending
down, it means that the Index -on average- is closing below the
mid-range, for this to happen the index would have to open
HIGHER and close LOWER. Those of you who are watching CNBC -for
the latest fraud pushed on to the small investor- you will
recall that "experts" thru-out July and early
August were pointing to the fact that the market was opening
"weak" and closing "strong" as a positive
sign! Well, that is true if the market is advancing! However,
that was not the case! The market was declining. So what was
happening? This is what was happening: NASDAQ Market
Makers, were
opening stocks lower, and then pushing them up thru-out the day
in order to sell SHORT! We can only sell short on the up-tick.
So, if you need to sell short, the stock must be moving
up, so, what do you do? You open it lower, and you move it up.
As the stock moves up, investors take as a sign of strength, so
they start buying, and you sell to them short. Why were
these people selling short? Did they know the WTC was coming? Of
course not. What they did know, was that prices were going lower
no matter what, because the economy was getting worse. (by
the way, the same holds true for NYSE stocks a s well, we just
did not have time to reformat and post the chart)
 
This chart, is a tool that we use for very short-term
trading. It is very reliable in pointing out
"extremes." Reading below -0.4, and above 0.4 are
extremes. Below -0.4 the market is extremely oversold, and above
0.4 is extremely overbought, on a very short term basis. Right
now, the SP500 is near the 0.4 level. Which means, on a very
short-term basis (within 1-3 days) the current rally will be
exhausted. That is what you would expect in the first
attempt to build a bottom.
PART
4
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