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Thursday, April 5, 2012

Moneystream indicator

The Telechart software from the Worden Brothers has an interesting proprietary volume based indicator called moneystream.  I find it to be a useful long term indicator.  I am going to show some quarterly charts of the Dow that show the moneystream gave a lot of good information.  Lets start with the crash of 1929 and the great depression era.  In these charts the green line in the top section of the chart is the price of the Dow
index.  The yellow line that tracks fairly close to the green line is a 6 period moving average (MA).  The moneystream indicator is in the middle panel of the chart with the 9 period MA in blue, and a 22 period MA in red.

Going into the top in 29 the moneystream was looking real strong, but look what happened to it during the crash. Was that a major warning sign of what was to come?  Check out the next chart.

The rally into the 6 quarter MA (yellow line top panel) in the middle of 1930 was actually about a 50% rise from the crash low.  However, it barely made the moneystream indicator move up.  The crash of 29 was but a blip compared to what happened after. The next chart shows the aftermath of the over 80% decline of the Dow from 1929-32.

As you can see there was a very big rally off the final low in 1932.  The moneystream picked up some, but notice the action from 1933-37.  There was a big strong move up in moneystream in 1933 to begin with.  However, during the rest of the rally into 37, the moneystream was not near as strong.  The 37 peak in moneystream was barely above the 33 peak. The Dow went down after 37 for years as WW2 became the driving force.  The moneystream indicator crossed above and below its 22 MA multiple times, but never could stay there.  Things start to get interesting in the late 40s.  That will be the subject for next time.


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.