Category Archives: Technical Analysis

“Dow is Overbought” Is More Bullish Than Bearish

The Dow Jones Industrial Average has been in overbought territory since the first trading day of this month and for a total of 10 days, according to a popular technical analysis indicator. But usually overbought conditions occur along uptrends.

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S&P 500/VIX Correlation And The Perils Of Visual Charting

Another indicator of market tops surfaced yesterday: When the 10-day correlation between the S&P 500 and VIX is positive, then this indicates a price top. The problem is that this does not work in practice unless one is just a … Continue reading

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Ignore Any Island Reversal Noise

The island reversal chart pattern should be totally ignored by investors but it is also an unreliable signal for short-term traders unless combined with other indicators. I include examples from a recent formation in NVDA and an older one in … Continue reading

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An Example Of How Technical Analysis Has Misled Traders

Technical analysis has been a major cause of trader failures along with account undercapitalization. Here we show briefly how untested technical analysis claims about overbought/overbought conditions have misled traders into unprofitable trading.

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The Failed “Market Is Technically Overbought” Narrative

The S&P 500 is overbought in the last three days according to a popular indicator. Shorting a technically overbought S&P 500 has been a losing strategy in the last 57 years as shown in this article. Yet, the “market is … Continue reading

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Overbought Conditions In Uptrends Usually Signal Strength

I have no idea who came up with the notion of overbought/oversold conditions. Market makers have probably appreciated the gifts from unskilled technical traders who thought these levels could be easily traded. There is worse than that: some even think … Continue reading

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