Daily Murmur 07/03/2011

by Gary Glover

The green line is the Average True Range (10 days) and shows us when volatility is high or low.  A spike in volatility, larger daily ranges will be accompanied by the green line moving higher and when the ranges tighten up and are smaller in nature it moves lower.

A nice bullish upward trend is usually common with lower average true range as you get a consistent climb without too many wild moves and a bearish move is usually consistent with a larger move in the average true range as volatility increases and move wild moves are prevalent. 
Warning signs after a strong uptrend is an increase in volatilty as a topping process is the first step before a decline.  This spike in volatility can be a topping process similar to the beginning of  decline like in April 2010 or possibly a consolidation phase similar to November 2010.  Either way, a rapid move upwards of the Average True Range is the first warning bell your likely to receive. 

6 out of the last 9 trading days have seen almost 100 point daily swings with 3 of them over 170 points, so this could be a warning bell right here.  If we see this Average True Range continue to accelerate like it did back in April last year we would view this as very dangerous.


Gary Glover is an Authorised Representative (Rep No. 259215) of Novus Capital Limited ("Novus"). Novus is a holder of Australian Financial Services Licence No 238 168. Novus, its directors, officers, associates and employees each declare that they, from time to time, may hold interests in financial products and/or earn brokerage, commission, fees or other benefits from financial products mentioned in this e-mail or attached documents. Unless specifically stated within this page or an attached document, any information communicated by this e-mail constitutes unsolicited general financial product advice which has been compiled without regard to any investor's individual objectives, financial situation or needs. It is not specific advice for any particular investor. Before making any decision about the information provided, you need to consider the appropriateness of this information having regard to your individual objectives, financial situation and needs and consult your adviser. Any indicative information and assumptions used here are summarised and also may change without notice to you, particularly if based on past performance or relate to a future matter.

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