it shows that officers are no longer running.37. NEW HIGH-NEW LOW INDEX 197
When officers regain their morale, the whole regiment is likely to rally(Figures 37-2 and 37-3).
Trading Rules
Traders need to pay attention to three aspects of NH-NL, listed here in theorder of their importance: divergences between the peaks and bottoms ofNH-NL and prices, the trend of NH-NL, and the level of NH-NL above orbelow its centerline.
Myr" | Standard & Poor's500
New High-New Low index
1988v c an e
Figure 37-2. New High-New Low Index
The stock market crashed in October 1987, and the number of new lowsexploded, reaching nearly 1300 (A). The stock market bounced ("a deadcat bounce") and fell back to its lows (B). The newspapers were filledwith alarmist articles, wondering whether this was the end of theWestern financial system as we knew it. NH-NL flashed a much moreoptimistic message. It showed that new lows were shrinking-the officerswere refusing to run. The market retested its lows in December (C), andNH-NL traced an even stronger bullish divergence, giving a buy signal. Itwas confirmed when NH-NL crossed into positive territory (D). This wasthe beginning of a 2-year bull market.
 198 STOCK MARKET INDICATORS
Standard & Poor's 500
New High-New Low Index
un U. ug ep
Figure 37-3. | New High-New Low Index
The New High-New Low Index gives its best messages when it divergesfrom prices. This chart shows what happened prior to the 1989 mini-crash and how the recovery began.
The market reached a new peak in August (A), accompanied by anew peak in NH-NL, which indicated that the market was likely to gohigher. The rally in September (B) was accompanied by a bearish diver-gence that gave a sell signal. The market struggled to a new high inOctober (C), but NH-NL made a lower peak, repeating its sell signal.NH-NL turned negative one day prior to the crash, forcefully confirmingits sell signal.
The October low (D) was followed by a reflex rally ("a dead catbounce"), and then prices twice retested their October lows (E, F). Onboth occasions, NH-NL made more shallow bottoms than in October.These bullish divergences gave buy signals, and a new uptrend began.
 
As long as a price peak is confirmed by a new high in NH-NL, the rally islikely to continue, even if it is punctuated by a decline. When low prices areaccompanied by new lows in NH-NL, it means that bears are in control andthe downtrend is likely to continue. Divergences between NH-NL and broad37. NEW HIGH-NEW LOW INDEX 199
market averages provide the best trading signals. A trend that loses its lead-ers is likely to reverse.
1. If NH-NL traces a lower peak while the market rallies to a new high, itcreates a bearish divergence. This shows that bullish leadership isweakening even though the broad market is higher. Bearish diver-gences mark the ends of uptrends. If the last peak in NH-NL is about+100 or less, then a major reversal is probably at hand and it is time toget short. If the latest peak is much higher than +100, then the upsideleadership is strong enough to prevent the market from collapsing.
2. If NH-NL traces a more shallow bottom while the market declines to anew low, it creates a bullish divergence. This shows that bearish lead-ership is shrinking, even though the market is lower. If the latest lowin NH-NL is near —100, it shows that the bearish leadership isexhausted and a major upside reversal is near. If the latest low is muchlower than -100, then bears still have some strength, and the down-trend may pause but not reverse. Keep in mind that bullish diver-gences at stock market bottoms tend to develop faster than bearishdivergences at market tops: Buy fast and sell slowly.
The slope of NH-NL on any given day is defined by the trend of its barsfor the last few days. When the market rallies and NH-NL rises, it confirmsuptrends. When NH-NL declines together with the market, it confirmsdowntrends.
3. Arise in NH-NL shows that it is safe to hold long positions and add tothem. If NH-NL declines while the broad market stays flat or rallies, itis time to take profits on short-term long positions. When NH-NLfalls, it shows that the bearish leadership is strong and it is safe to holdshort positions and even add to them. If the market continues to fallbut NH-NL rises, the downtrend is in question—it is time to covershorts.
4. If NH-NL rises on a flat day, it flashes a bullish message and gives abuy signal. It shows that officers are going over the top while the sol-diers are still crouching in their foxholes. When NH-NL falls on a flatday, it gives a signal to sell short. It shows that officers are desertingwhile the troops are still holding their positions. Soldiers are notstupid — if the officers run, they will not stay and fight.200 STOCK MARKET INDICATORS
The position of NH-NL in relation to its centerline shows whether bulls orbears are in control. When NH-NL is above its centerline, it shows that moremarket leaders are bullish than bearish. Then it is better to trade the stockmarket from the long side. When NH-NL is below its centerline, it showsthat bearish leadership is stronger, and it is better to trade from the short side.NH-NL can stay above its centerline for months at a time in bull markets andbelow its centerline for months at a time in bear markets.
5. If NH-NL stays negative for several months but then rallies above itscenterline, it signals that a bull move is likely to begin. Then it is timeto look for buying opportunities, using oscillators for precise timing. IfNH-NL stays positive for several months but then falls below its cen-terline, it shows that a bear move is likely to begin. Then it is time tolook for shorting opportunities using oscillators for precise timing.
More on NH-NL
Old analysts used to smooth NH-NL using 10-day and 30-day simple mov-ing averages. When a 10-day MA of NH-NL crossed above a 30-day MA, itgave a buy signal. When a 10-day MA crossed below a 30-day MA, it gave asell signal. Raw NH-NL gives clearer signals, but if you still want to smoothNH-NL, it is better to use exponential moving averages.
The number of new highs and new lows is reported daily by the NewYork Stock Exchange, the American Stock Exchange, the Over-the-CounterExchange, and the London Stock Exchange. Most overseas stockexchanges do not report these numbers, but a computer-equipped analystshould have no difficulty creating NH-NL for any market. Traders who useNH-NL outside of the United States get an edge over competitors who lackthis indicator. You need to obtain one year’s worth of daily data for everystock on the exchange you follow and update that file daily. Program yourcomputer to examine your database each day and flag those stocks that havereached a new high or a new low for the past 52 weeks.
NH-NL does not work in the stock markets dominated by a handful ofstocks. For example, hundreds of stocks are listed on the Milan StockExchange in Italy, but only 2 of them—FIAT and Generale — representnearly 70 percent of total market capitalization. These two giants can over-tide the rest of the market.38. TRADERS’ INDEX AND OTHER STOCK MARKET INDICATORS 201
38. TRADERS’ INDEX AND OTHER STOCKMARKET INDICATORS
The Traders’ Index (TRIN) is a leading stock market indicator. It showswhen major rallies and declines get ready to reverse by measuring the inten-sity of optimism of the dominant market group. Excessive optimism is asso-ciated with market tops and excessive pessimism with bottoms.
TRIN measures the ratio of advancing to declining stocks and compares itto the ratio of advancing to declining volume. This indicator was popularizedby Richard Arms and is included in most quote systems. Any broker with aterminal on his desk can punch a few keys and see the latest TRIN. It is easyto calculate TRIN by hand or by using a computer at the end of each tradingday.
New market developments have changed TRIN over the years: listedstock options, index arbitrage, dividend recapture plays, and so on. The orig-inal interpretation of TRIN had to be adjusted, but TRIN continues to standout as one of the best stock market indicators. It helps in timing stock tradesas well as trades in stock index futures and options.
How to Construct TRIN
You need four pieces of data to calculate the Traders’ Index: the number andvolume of advancing and declining stocks as well as the volume of bothgroups. These figures are released by the New York Stock Exchange andseveral other exchanges throughout each trading session.
Adv Issues Adv Volume
TRIN = —__- / ————_—_-
Decl Issues Decl Volume
TRIN compares the relationship between the ratio of advancing anddeclining stocks and the ratio of advancing and declining volume (see work-sheet, Figure 38-1). If 1000 stocks rally on a volume of 100 million shares,and 1000 stocks decline on a volume of 100 million shares, then TRINequals 1. If 1500 stocks go up on a volume of 150 million shares and 500stocks go down on a volume of 50 million shares, TRIN remains 1.
TRIN falls when the volume of advancing stocks is disproportionatelyhigh, compared to their number. TRIN rises when the volume of decliningstocks is disproportionately high, compared to their number.200 STOCK MARKET INDICATORS
The position of NH-NL in relation to its centerline shows whether bulls orbears are in control. When NH-NL is above its centerline, it shows that moremarket leaders are bullish than bearish. Then it is better to trade the stockmarket from the long side. When NH-NL is below its centerline, it showsthat bearish leadership is stronger, and it is better to trade from the short side.NH-NL can stay above its centerline for months at a time in bull markets andbelow its centerline for months at a time in bear markets.
5. If NH-NL stays negative for several months but then rallies above itscenterline, it signals that a bull move is likely to begin. Then it is timeto look for buying opportunities, using oscillators for precise timing. IfNH-NL stays positive for several months but then falls below its cen-terline, it shows that a bear move is likely to begin. Then it is time tolook for shorting opportunities using oscillators for precise timing.
More on NH-NL
Old analysts used to smooth NH-NL using 10-day and 30-day simple mov-ing averages. When a 10-day MA of NH-NL crossed above a 30-day MA, itgave a buy signal. When a 10-day MA crossed below a 30-day MA, it gave asell signal. Raw NH-NI gives clearer signals, but if you still want to smoothNH-NL, it is better to use exponential moving averages.
The number of new highs and new lows is reported daily by the NewYork Stock Exchange, the American Stock Exchange, the Over-the-CounterExchange, and the London Stock Exchange. Most overseas stockexchanges do not report these numbers, but a computer-equipped analystshould have no difficulty creating NH-NL for any market. Traders who useNH-NL outside of the United States get an edge over competitors who lackthis indicator. You need to obtain one year’s worth of daily data for everystock on the exchange you follow and update that file daily. Program yourcomputer to examine your database each day and flag those stocks that havereached a new high or a new low for the past 52 weeks.
NH-NL does not work in the stock markets dominated by a handful ofstocks. For example, hundreds of stocks are listed on the Milan StockExchange in Italy, but only 2 of them—FIAT and Generale — representnearly 70 percent of total market capitalization. These two giants can over-ride the rest of the market.38. TRADERS’ INDEX AND OTHER STOCK MARKET INDICATORS 201
38. TRADERS’ INDEX AND OTHER STOCKMARKET INDICATORS
The Traders’ Index (TRIN) is a leading stock market indicator. It showswhen major rallies and declines get ready to reverse by measuring the inten-sity of optimism of the dominant market group. Excessive optimism is asso-ciated with market tops and excessive pessimism with bottoms.
TRIN measures the ratio of advancing to declining stocks and compares itto the ratio of advancing to declining volume. This indicator was popularizedby Richard Arms and is included in most quote systems. Any broker with aterminal on his desk can punch a few keys and see the latest TRIN. It is easyto calculate TRIN by hand or by using a computer at the end of each tradingday.
New market developments have changed TRIN over the years: listedstock options, index arbitrage, dividend recapture plays, and so on. The orig-inal interpretation of TRIN had to be adjusted, but TRIN continues to standout as one of the best stock market indicators. It helps in timing stock tradesas well as trades in stock index futures and options.
How to Construct TRIN
You need four pieces of data to calculate the Traders’ Index: the number andvolume of advancing and declining stocks as well as the volume of bothgroups. These figures are released by the New York Stock Exchange andseveral other exchanges throughout each trading session.
Adv Issues Adv Volume
TRIN = ——_ / ———___--—-
Decl Issues Decl Volume
TRIN compares the relationship between the ratio of advancing anddeclining stocks and the ratio of advancing and declining volume (see work-sheet, Figure 38-1). If 1000 stocks rally on a volume of 100 million shares,and 1000 stocks decline on a volume of 100 million shares, then TRINequals 1. If 1500 stocks go up on a volume of 150 million shares and 500stocks go down on a volume of 50 million shares, TRIN remains 1.
TRIN falls when the volume of advancing stocks is disproportionatelyhigh, compared to their number. TRIN rises when the volume of decliningstocks is disproportionately high, compared to their number.202 STOCK MARKET INDICATORS
S&P 500
 
 
 
11592 BIT8i7i_: 1.08 ;
Figure 38-1. Traders! Index (TRIN) Worksheet
TRIN tracks the ratio of advancing to declining stocks and compares itwith the ratio of advancing to declining volume. It works best when it issmocthed with an exponential moving average, such as a 13-day EMA.
 
The volume of advancing stocks often swells out of proportion to theirnumber during rallies. If the ratio of advancing to declining issues is 2:1, butthe ratio of advancing to declining volume is 4:1, then TRIN equals 0.50 (2/1+ 4/1). A low TRIN shows that bulls are highly optimistic, a rally is beingoverdone, and a top is near.
When the market falls, the volume of declining stocks often swells out ofproportion to their number. If the ratio of advancing to declining issues is1:2, but the ratio of advancing to declining volume is 1:4, then TRIN equals2 (1/2 + 1/4). A high TRIN shows that bears are too optimistic, too muchvolume goes into the declining stocks, a decline is being overdone, and themarket is nearing a bottom.
TRIN can change sharply from day to day. TRIN gives better signalswhen it is smoothed with a moving average. You can use a 13-day exponen-38. TRADERS’ INDEX AND OTHER STOCK MARKET INDICATORS 203
tial moving average of daily TRIN (see Section 25). It filters out the noise ofdaily swings and shows the true trend of this indicator. For the rest of thischapter, the term TRIN is used as shorthand for 13-day EMA of daily TRIN.
Plot TRIN on an inverted vertical scale. Low numbers on the top identifymarket peaks, and high numbers at the bottom identify market lows. Twohorizontal reference lines mark overbought and oversold levels. When TRINrises above its upper reference line, it shows that the stock market is over-bought and nearing a top. When TRIN falls below its lower reference line, itshows that the market is oversold and nearing a bottom.
The level of reference lines depends on whether the stocks are in a bull orbear market or a neutral trading range. The overbought line is usually placedat 0.65 or 0.70 in bull markets, 0.70 or 0.75 in bear markets. The oversoldline is placed at 0.90 or 0.95 in bull markets, 1.00 or 1.10 in bear markets.These levels may shift by the time you read this book —use them as a start-ing point for your own research.
The best way to draw reference lines is to examine a chart of an indexsuch as the S&P 500 for the past six months, along with TRIN. Mark allimportant tops and bottoms of the S&P 500 and draw two reference linesthat cut across the corresponding tops and bottoms of TRIN. When TRINenters those extreme areas again, you will know that the market has entereda reversal zone. Adjust oversold and overbought lines every three months.
Crowd Psychology
The stock market is a manic-depressive beast—it swings from expansivemania to fearful depression. The mood of a manic-depressive patient goesthrough cycles. When he reaches the bottom of depression, his mood startsto improve. When he rises to the height of mania, he starts to slow down.Traders can use TRIN to diagnose manic and depressive episodes in thestock market and bet on their reversals (see Figure 38-2).
Crowds are emotional and short-term oriented. Trends often go fartherthan you expect because crowds act out their feelings and run instead of act-ing rationally. Trends reverse when masses of traders get tired of running.TRIN shows when they become exhausted.
If bulls become greedy during a rally, they buy so many shares thatadvancing volume swells out of proportion with the number of advancingstocks. When TRIN rises above its upper reference line it shows that massoptimism has risen to a level associated with tops.204 STOCK MARKET INDICATORS
Standard & Poor's 500
IdOverso Traders’ Index
il ug epFigure 38-2. Traders' Index (TRIN)
When the volume of rising stocks rises out of proportion to their number,it reflects bullish enthusiasm, and TRIN becomes overbought. It rises andthen flashes a sell signal when it leaves its overbought zone. When thevolume of declining stocks becomes too large relative to their number,TRIN becomes oversold. It gives a buy signal when it leaves its oversoldzone.
TRIN gives its best buy and sell signals when it diverges from the pat-tern of the S&P 500 index. The market rose higher in October than inSeptember, but TRIN reached a lower top, giving a strong sell signal.After the October fall, the market retested its bottom in November, but amuch higher bottom in TRIN showed that bears were out of breath. Thisbullish divergence gave a strong buy signal. At the right edge of thechart, the market is strong but TRIN is nowhere near overbought-holdlongs.
 
If bears dump shares during a decline, then downside volume swells outof proportion with the number of declining stocks. When TRIN falls belowits lower reference line, it shows that bearishness is being overdone and anupside reversal is near.38. TRADERS’ INDEX AND OTHER STOCK MARKET INDICATORS 205
Changes of TRIN are similar to what happens during rush hours at a sub-urban commuter train station. In the morning, the departure platform getsovercrowded, while at night there is a crowd at the arriving platform. Thebiggest crowd identifies the peak of the trend—either into the city or backhome. You can identify traffic reversals by measuring the number of com-muters crowding a platform. That is what TRIN does in the stock market.
TRIN identifies rush hours in uptrends and downtrends. It flags bullishextremes at stock market tops and bearish extremes at market bottoms. TRINidentifies mood swings of the stock market crowd. Professionals use thisinformation because they tend to trade against deviations and for a return tonormalcy.
Trading Rules
TRIN is plotted on an inverted scale. High numbers mark the bottoms andlow numbers signal market tops. TRIN hovers between 0.75 to 0.85 in neu-tral markets. It is less than 1.0 because the volume of advancing stocks nor-mally exceeds the volume of declining stocks. People are normally morebullish than bearish.
TRIN cannot be used mechanically —the same readings mean differentthings under different market conditions. Overbought and oversold readingsare lower during bear markets and higher during buil markets. For example,TRIN of 0.60 marks great bullish strength at an early stage of a bull market. Ittells you to look for every opportunity to add to long positions. The same read-ing of 0.60 during a rally in a bear market marks a major shorting opportunity.This is why it pays to adjust overbought and oversold lines every three months.
1. Buy when TRIN leaves its oversold zone. When it crosses above itslower reference line, it shows that bears have run out of steam. Buyingat this time is like betting on a traffic reversal after the rush hour.
2. Sell when TRIN leaves its overbought zone. When TRIN sinks belowits upper reference line, it shows that bulls are running out of breath.Selling short at this time is safer than trying to pick the exact top.
3. TRIN works best when combined with the New High-New LowIndex (see Section 37). If TRIN becomes oversold while NH-NLreaches a new low, it shows that bearish leadership is strong and thedowntrend is likely to continue. If TRIN becomes oversold but NH-206 STOCK MARKET INDICATORS
NL traces a bullish divergence, it marks an important low. The com-bined signals of TRIN and NH-NL give traders confidence to buy alarger position. .
4. If TRIN becomes overbought but NH-NL rises to a new high, it showsthat the upside leadership is strong and the uptrend is likely to con-tinue. If TRIN becomes overbought while NH-NL traces a bearishdivergence, it often marks an important stock market top. Then youcan short a larger position.
TRIN gives its strongest buy and sell signals when it diverges from prices..
5. When the stock market rises to a new high but TRIN traces a lowerpeak than it did during its previous rally, it shows that bulls are losingpower. When bulls cannot purchase as many shares as before, theuptrend is in trouble. A bearish divergence between TRIN and thestock market gives a strong sell signal.
6. When the stock market falls to a new low but TRIN flattens out at amore shallow level than during its previous decline, it shows that bearshave fewer stocks to sell. When bears start losing power, the market isready to rally. A bullish divergence between TRIN and the stock mar-ket gives a strong buy signal.
More on TRIN
The New York Stock Exchange releases information on advancing anddeclining stocks and their volume throughout each trading session. IntradayTRIN can be used by day-traders.
TRIN can be applied to any stock exchange that reports the numbers ofadvancing and declining stocks and their volume. When that data becomesavailable for overseas exchanges, the first traders to use it will have a com-petitive advantage.
Advance/Decline
The Advance/Decline line (A/D line) measures mass participation in ralliesand declines. If New Highs and New Lows are the officers, and the Dow38. TRADERS’ INDEX AND OTHER STOCK MARKET INDICATORS 207
Jones Industrials are the generals, then the A/D line shows whether or notthe soldiers are following their leaders. A rally or decline is more likely topersist when the A/D line rises to a new high or falls to a new low in gearwith the Dow.
To calculate A/D for each day, subtract the number of declining stocksfrom the number of advancing stocks and ignore unchanged stocks. Theresult is positive or negative, depending on whether more stocks advanced ordeclined. For example, if 1900 stocks were traded, 900 advanced, 700declined, and 300 were unchanged, then Advance/Decline equals +200 (900— 700). Each day’s Advance/Decline figures are added to the previous day’stotal, creating a cumulative A/D line.
Traders should keep an eye on new peaks and valleys in the A/D linebecause its absolute level depends mostly on its starting date. Broadly basedrallies and declines have greater staying power. If a new high in the stockmarket is accompanied by a new high in the A/D line, it shows that the rallyhas broad support and is likely to continue. If the stock market reaches a newpeak but the A/D line reaches a lower peak than during the previous rally, itshows that fewer stocks are participating, and the rally may be near its end.When the market falls to a new low but the A/D line traces a more shallowbottom than during the previous decline, it shows that the decline is narrow-ing down and the bear move is nearing an end. These signals tend to precedereversals by weeks if not months.
Most Active Stocks
The Most Active Stocks indicator (MAS) is an advance/decline line of the15 most active stocks on the New York Stock Exchange. They are listeddaily in many newspapers. Several large capitalization stocks, such as IBM,frequently appear on this list. Other stocks make the list only when theycatch the public’s eye due to an extremely positive or negative piece ofnews. MAS is a big money indicator — it shows whether big money is bullishor bearish.
MAS for each day equals the number of the most active stocks thatadvanced minus the number of the most active stocks that declined. Forexample, if 9 of the most active stocks went up, 4 fell, and 2 wereunchanged, then MAS for that day is 5 (9 — 4). Each day’s MAS is added tothe previous day’s total, creating a cumulative MAS line.
When MAS moves in the same direction as the broad stock market, it208 STOCK MARKET INDICATORS
shows that big money supports the trend and it is likely to continue. Whenthe market goes one way and MAS goes the other way, it shows that bigmoney is betting on a reversal. When the trend of MAS diverges from theprice trend, the market is especially likely to reverse.
Other Stock Market Indicators
Only a few stock market indicators have withstood the test of time. The NewHigh—-New Low Index and TRIN are probably the best stock market indica-tors, followed by Advance/Decline and Most Active Stocks.
Old stock market books are full of fascinating indicators, but you have tobe very careful using them today. Changes in the market over the years havekilled many indicators.
Indicators based on volume of low-priced stocks lost their usefulnesswhen the average volume of the U.S. stock market soared tenfold and theDow rose sixfold. The Member Short Sale Ratio and the Specialist ShortSale Ratio stopped working after options became popular. Member and spe-cialist short sales are now tied up in the intermarket arbitrage. Odd-lotstatistics lost value when conservative odd-lotters bought mutual funds. TheOdd-lot Short Sale Ratio stopped working when gamblers discovered puts.VilPsychological Indicators
 
39. CONSENSUS INDICATORS
Many private traders keep their market opinions to themselves, but financialjournalists and market letter writers spew them forth like open fire hydrants.Some writers are very bright, but both groups as a whole have poor tradingrecords.
Financial journalists and letter writers overstay important trends and missmajor turning points. When these groups become bullish or bearish, it paysto trade against them. The behavior of groups is more primitive than individ-ual behavior.
Consensus indicators, also known as contrary opinion indicators, are notas exact as trend-following indicators or oscillators. They simply draw yourattention to the fact that a trend is ready to reverse. When you get that mes-sage, use technical indicators for more precise timing.
As long as the market crowd remains in conflict, the trend can continue.When the crowd reaches a strong consensus, the trend is ready to reverse.When the crowd becomes highly bullish, it pays to get ready to sell. Whenthe crowd becomes strongly bearish, it pays to get ready to buy.
The foundations of the contrary opinion theory were laid by CharlesMackay, a Scottish barrister. He described in his book, ExtraordinaryPopular Delusions and the Madness of Crowds, crowd behavior during theDutch Tulip Mania and the South Seas Bubble in England. Humphrey B.Neill applied the theory of contrary opinion to stocks and other financial210 PSYCHOLOGICAL INDICATORS
markets. He explained in his book, The Art of Contrary Thinking, why themajority must be wrong at the market’s major turning points. Prices areestablished by crowds, and by the time the majority turns bullish, there arenot enough new buyers left to support a bull market.
Abraham W. Cohen, a New York lawyer, came up with the idea of pollingmarket advisors and using their responses as a proxy for the entire body oftraders. Cohen was a skeptical man who spent many years on Wall Street andsaw that the advisors as a group performed no better than the market crowd.In 1963, he established a service called Investors Intelligence for trackingmarket letter writers. When the majority of them became bearish, Cohenidentified a buying opportunity. Selling opportunities were marked by strongbullishness among letter writers. James H. Sibbet applied this theory to com-modities. In 1964, he set up an advisory service called Market Vane. Hestudied the opinions of advisors and also weighed them in proportion to thenumbers of their subscribers.
Tracking Advisory Opinion
Some letter writers are very smart, but taken as a group they are no betterthan average traders. They become very bullish at major tops and very bear-ish at major bottoms. Their consensus is similar to that of the trading crowd.
Most letter writers follow trends because they are afraid to appear foolishand lose subscribers by missing a major move. The longer a trend continues,the louder letter writers bay at it. The advisors are most bullish at markettops and most bearish at market bottoms. When most letter writers becomestrongly bullish or bearish, it is a good idea to trade against them.
Several rating services track the percentage of bulls and bears amongadvisors. The main rating services are