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  SBV Indicators
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- S&P 500: Short-Term
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Selling & Buying Volume (SBV) Indicators:
How to Define Long-Term Trend

Analyze Past

  1. Chart selection: Open an SBV chart for the S&P 500 index and select a 3-, 4-, or a 5-year period. The chart has an index pane where you can determine the magnitude of volume surges. The bottom pane is the SBV pane - this is where you will determine whether a surge is buying or selling in nature– as well to establish its duration);
  2. Locate an index reversal point: On the chart, locate the last, major, long-term index reversal point where the index switched trends.
  3. Locate large volume surges at the index reversal point: Do you see any VMA surges with a large magnitude and/or a long duration that are directly associated with the long-term reversal point you found in step 2?
  4. Qualify the volume surge associated with the index reversal (is it buying or selling?): Buying surges appear during a declining market whereas selling surges are generated in a rising market. To determine the nature of a particular volume surge, click on its peak [in the index pane] and check how it correlates with the SBV oscillator (which is located in the bottom of the chart). Decide whether the top of the volume surge lines up with a negative SBV value (green) or a positive SBV value (red). If the SBV value is green, then you have confirmed a buying volume surge; conversely, if you see a corresponding red SBV value, you have identified a selling volume surge.
  5. Locate and qualify the volume surges preceding an index reversal: Now, locate a volume surge immediately preceding the particular volume surge and determine whether it is buying or selling? Again, cross-reference the surge in the index pane with the corresponding SBV indicator.
  6. Locate and qualify the volume surges following an index reversal: Similarly to step 5 – but now moving forward rather than backward on the chart – are there any large volume surges that appear after the index has already made its reversal? Determine whether the volume surge you selected in step 6 (which appeared after the index had reversed course) is buying or selling. Proceed in the same fashion as you did earlier – by looking at both panes on the chart.
  7. Qualify the magnitude and duration of the volume surges that appeared before, during, and after a reversal: Mentally summarize the volume of the same nature defined in steps 3, 5 and 7.

    Compare past with Present
  8. Do you see any large magnitude volume surge following an index reversal that are comparable in magnitude” in duration to the volume surge that was associated with the index reversal point (see step 3)?

    Do you see multiple large magnitude volume surges following an index reversal that are lower then volume surge defined in step 3, however in summary could be comparable?

    If you do not see any large volume surges then the long-term trend more likely continue its movement and there is no need in further analysis. If you see then go to the next step.
  9. Are the large surges defined in the previous step (8) buying or selling? Are they the same or opposite nature to the surges defined in step 3?

    If they are the same nature (for instance surges defined in steps 3 and 8 are buying) then the long-term trend more likely continue its movement and there is no need in further analysis.

    If they are opposite nature (for instance the surges defined in step 3 are buying and surges defined in step 8 are selling) then go to the next step.
  10. Is the accumulation of the volume in these surges larger than the accumulation that had prompted the index reversal? Make a conclusion based on following statements:
    1. If any opposing cumulative volume surges are smaller than the initial volume surges that reversed the prior trend and established the current trend, the market will likely continue along its new trend;
    2. If any opposing cumulative volume surges are roughly equal in size to those that initiated the current trend, the market may level out and enter a supportive / resistive corridor;
    3. If the opposing cumulative volume surges outweigh the volume that caused the initial trend reversal, the market may begin to enter a new opposing trend.

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5/13/2008 - SV1