A Daily Swing Trade

The major indexes are all trading below the resistance of their respective long-term moving averages. The market participants were not overly impressed with President Bush's $140 billion economic stimulus package and it will continue to be interesting to see if this plan will help give the economy the jump-start it needs to shrug off the weakness...

The Accumulation/Distribution Line was developed by Marc Chaikin to assess the cumulative flow of money into and out of a security. He decided to focus on the price action for a given period (day, week, month) and derived a formula to calculate a value based on the location of the close, relative to the range for the period. This is the "Close Location Value" or CLV. The CLV ranges from plus one to minus one with the center point at zero.

The signals for the Accumulation/Distribution Line are fairly straightforward and involve divergence or confirmation. A bullish signal is given when the Accumulation/Distribution Line forms a positive divergence. Be wary of weak positive divergences that fail to make higher reaction highs. A two-week positive divergence should be suspect. However, a multi-month positive divergence deserves serious attention...