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Tutorial Step #1 . . . Determine Market Direction . . . Stage 4 Market for NYSE . . . Stage 4 Market for NASDAQ . . .

FYI . . . We have ceased publishing . . . The January 28, 2007 tutorial you see in these pages is our final . . . Thanks for your patronage -- It has been fun . . . May all your trades be profitable -- Sincerely, RWG

Tutorial Date: Sunday, Jan 28, 2007 - Final Edition!!!
Valid until Market Close: Friday, Feb 2, 2007

Tutorial Step #1 - Lesson Plan:

Philosophy:

The trend is our friend. Avoid swimming against the tide. If we have a handle on the Direction of a Market and we invest in stocks characteristic of that Direction, we improve our odds of profitability.

Objective:

Reduce Market Risk. Helps you "go with the flow".

Key Indicators:

Market Configurations (a 15 week Moving Average of weekly Advances minus Declines, in combination with a 5 week, 15 week and 40 week Moving Average of the weekly close of the applicable Market Index).

 

Editorial Notes: As you read through this Step, it will help you to know:

"This Past Friday" means Friday, Jan 26, 2007

"Friday Before Last" means Friday, Jan 19, 2007

Process:

a) Update Market data history

We update our historic data file of weekly Advances minus Declines and the weekly close of the Index for two major Markets (the NYSE and the NASDAQ).

b) Calculate the Moving Averages

For each Market, we calculate the Moving Averages as of This Past Friday.

A 15 week Moving Average of Advances minus Declines, and

A 5 week, 15 week, and 40 week Moving Average for the Index.

c) Assemble the Market Configurations

For each Market, we compare the Moving Averages for This Past Friday with those of Friday Before Last to determine the direction of each of the Moving Averages. We also determine the rank order of the 5 week, 15 week, and 40 week Moving Averages of the Index as of This Past Friday. The result is what we call "This Week’s Market Configuration."

d) Determine the Market Stage

For each Market, we match This Week’s Market Configuration against the Market Configuration Tables. The table which contains the matching configuration identifies the Market Stage.

This Week's Determinations:

Note that we do separate evaluations for the NYSE Market and the NASDAQ Market. Since each Market is comprised of different types of companies, the configuration and Stage readings will frequently differ between Markets. 

NYSE:
	For the week ended This Past Friday:
		# of Advancing Issues					+	1,700
		# of Declining Issues					-	1,806
		Thus, Advances minus Declines					=	( 106 )
	NYSE Composite Index Close for This Past Friday						=	9,154.10
	Moving Averages at Market Close Friday Before Last:
					Value*
		NYSE AD15wk			748
		NYSE 5wk			9,109	* Calculated from our historic data files. See the FAQs for calculation method.
		NYSE 15wk			8,945
		NYSE 40wk			8,519
	Moving Averages at Market Close This Past Friday (i.e., This Week's Market Configuration)
					Value*	Rank	Direction (in relation to Friday Before Last)
		NYSE AD15wk			641		DOWN
		NYSE 5wk			9,128	1	UP
		NYSE 15wk			8,979	2	UP
		NYSE 40wk			8,536	3	UP
	Therefore, looking up this week's Market Configuration in the Market Configuration Tables, we conclude this week's NYSE Direction to be a: Stage 4 - Uncertain Market Please make a note of the NYSE Market Stage. It will be useful later in the Tutorial.

 

NASDAQ:
	For the week ended This Past Friday:
		# of Advancing Issues					+	1,537
		# of Declining Issues					-	1,676
		Thus, Advances minus Declines					=	( 139 )
	NASDAQ Combined Composite Index Close for This Past Friday						=	2,435.49
	Moving Averages at Market Close Friday Before Last:
					Value*
		NASDAQ AD15wk			174
		NASDAQ 5wk			2,441	* Calculated from our historic data files. See the FAQs for details.
		NASDAQ 15wk			2,413
		NASDAQ 40wk			2,268
	Moving Averages at Market Close This Past Friday (i.e., This Week's Market Configuration)
					Value*	Rank	Direction (in relation to Friday Before Last)
		NASDAQ AD15wk			68		DOWN
		NASDAQ 5wk			2,448	1	UP
		NASDAQ 15wk			2,418	2	UP
		NASDAQ 40wk			2,270	3	UP
	Therefore, looking up this week's Market Configuration in the Market Configuration Tables, we conclude this week's NASDAQ Direction to be a: Stage 4 - Uncertain Market Please make a note of the NASDAQ Market Stage. It will be useful later in the Tutorial.

Applicability:

Market Stage is a way of articulating Market Direction. When we begin to look at the recent and expected behavior of individual stocks, Market Stage helps to guide our interpretation (in Tutorial Steps #2 and #3) by directing us to the appropriate Stock Configuration Tables. We will use these Market Stage readings until each Market next closes for the week on Feb 2, 2007.

Additional Help with this Step:

FAQs about Step #1

Books about Step #1

• The Art of Low Risk Investing: Learn more about Market Configurations
  

• Secrets of Profiting in Bull and Bear Markets: Learn more about the markets' cyclical patterns

Tools to assist with Step #1

UniverseManager automates the process of determining Market Stages

Next Step of the Tutorial:

Step #2 - Observe the Exit Signals