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Strategies & Market Trends : Strong Industry Groups - Strong Stocks
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To: Sam Raven who started this subject3/1/2002 12:27:29 AM
From: Sam Raven   of 1567
 
I got another request to explain the screened stock ratio, so I thought I'd do it here as well. The screened stock ratio is the best market indicator I've found of the markets health.

It is is a comparison of the number of stocks trading up on the day, above their average daily volume, and above their 50 day moving average to those that are trading down on above average volume and below their 50 day moving average. So, uptrending stocks with volume/downtrending stocks with volume. There are a few other limitations like minimum of 200K average daily volume. But you get a very good assessment of what the whole market actually did, accounting for both price and volume.

To avoid a day or two of counter movement, the each day the ratio is averaged with the previous 7 days. Today, for example, the ratio worked out to +1.89 (still pretty bullish for tomorrow) even though the balance today (Thursday) had 9.1 uptrending stocks with volume, to 9.4 downtrending stocks with volume (a negative ratio on the day). But since we have seen a several consecutive days of a very positive ratio, it will be hard to pull it into the negative. For example the ratio for Feb. 26th was 17.4 uptrending to only 3.4 down trending.

Having said that, the ratio can also be used as an oscillator, and a change in direction is bearish as was seen after the spikes in the ratio the first of January.

Hope this helps several of you. If it is still confusing just drop me a note and I'll try again.

Sam
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