The parallel lines represent a measurement of two Standard Deviations from the mean and are assigned a value of zero and 100 on the chart. The indicator represents the price as it travels above and below the mean (50%) and outside the two standard deviations (zero and 100). Penetration of the upper band represents overbought conditions while penetration of the lower band signifies oversold conditions.

Usage of the CCT Bollinger Band Oscillator to identify "failure swings" and "divergences" can lead to significant reversals.

Indicator provided by Steve Karnish of Cedar Creek Trading.

An obvious bearish signal is when Chaikin Money Flow is less than zero. A reading of less than zero indicates that a security is under selling pressure or experiencing distribution.

A second potentially bearish signal is the length of time that Chaikin Money Flow has remained less than zero. The longer it remains negative, the greater the evidence of sustained selling pressure or distribution. Extended periods below zero can indicate bearish sentiment towards the underlying security and downward pressure on the price is likely.

The third potentially bearish signal is the degree of selling pressure. This can be determined by the oscillator's absolute level. Readings on either side of the zero line or plus or minus 0.10 are usually not considered strong enough to warrant either a bullish or bearish signal. Once the indicator moves below -0.10, the degree selling pressure begins to warrant a bearish signal. Likewise, a move above +0.10 would be significant enough to warrant a bullish signal. Marc Chaikin considers a reading below -0.25 to be indicative of strong selling pressure. Conversely, a reading above +0.25 is considered to be indicative of strong buying pressure.

The Chaikin Money Flow is based upon the assumption that a bullish stock will have a relatively high close price within its daily range and have increasing volume. This condition would be indicative of a strong security. However, if it consistently closed with a relatively low close price within its daily range and high volume, this would be indicative of a weak security.

The Chaikin Oscillator is created by subtracting a 10-period exponential moving average of the Accumulation/Distribution Line from a 3-period exponential moving average of the Accumulation/Distribution Line

The Chaikin Oscillator may be an excellent tool for generating buy and sell signals when its action is compared to price movement. However, because the Chaikin Oscillator is an indicator of an indicator, it is prudent to look for confirmation of a positive or negative divergence, say a moving average crossover, before counting this as a signal.

Two bullish signals that can be generated from the Chaikin Oscillator: positive divergences and bullish centerline crossovers. Two bearish signals that can be generated from the Chaikin Oscillator: a negative divergence and a bearish centerline crossover.

One interpretation of these calculations assumes that market tops are frequently accompanied by increased volatility (as investors get nervous and become indecisive) and latter stages of a market bottom are generally accompanied by decreased volatility. Chaikin has written that an increase in the Volatility Indicator over a relatively short time period indicates that a bottom is near and that a decrease in volatility over a longer time period indicates an approaching top.

To calculate Chaikin Volatility:
First, calculate an exponential moving average (normally 10 days) of the difference between High and Low for each period:

( EMA [H-L] - EMA [H-L 10 days ago] )

---

(EMA [H-L 10 days ago] * 100)

The usual method of interpreting the Chande Momentum Indicator is to look for overbought and oversold conditions. Generally the overbought level is at +50 and the oversold level at -50. These levels are approximate to the 70/30 levels on the Relative Strength Index. Either condition is a strong indicator of a change in the trend of buying/selling.

The CMI is also useful to spot trends, used in a similiar manner as the Vertical Horizontal Filter (VHF). The higher the Chande Momentum Indicator the stronger the trend. Buy when a long period CMI crosses above the short period moving average of the CMI. Sell at the converse.

This indicator was created by Tushar Chande and is described in his book The New Technical Trader.

Much like the Average Directional Movement Index, the CCI can help give a valuable measurement of the overall trendiness of a market. The faster the CCI is accelerating, the more strongly the market is trending. While it is perhaps mathematically possible for the CCI to move upward while the market does not, this is unlikely.

Typically oscillating between +100 and -100, a CCI reading above +100 implies an overbought condition (and a pending price correction) while readings below -100 imply an oversold condition (and a pending rally).

Keep in mind that the CCI can provide important information to a trader even when it is not giving entry signals. If a market stays inside the +/-100 range most of the time, it's demonstrating the absence of a trend, so it might be best to avoid that market or use a countertrend trading strategy.

Despite its name, the CCI can be used effectively on any type of security, not just commodities.

Information provided by Charles LeBeau's Technical Traders Guide to Computer Analysis of the Futures Market.

CSI creator Welles Wilder describes his focus to trading commodities with high CSI values. As these commodities are highly volatile, they have the potential to make the quickest return in the shortest time.

The CSI is based upon the ADXR component of the Directional Movement Indicator. For full calculation details on the Commodity Selection Index, see Wilder's book "New Concepts in Technical Trading Systems."

You can use correlation analysis in two basic ways: to determine the predictive ability of an indicator or to determine the correlation between two securities.

When comparing the correlation between an indicator and a security's price, a high positive coefficient (more then +0.70) tells you that a change in the indicator will usually predict a change in the security's price. A high negative correlation (less than -0.70) tells you that when the indicator changes, the security's price will usually move in the opposite direction. A low (close to or equal to zero) coefficient indicates that the relationship between the security's price and the indicator is not significant.

Correlation analysis is also valuable in gauging the relationship between two securities. Often, one security's price "leads" or predicts the price of another security. For example, the correlation coefficient of gold versus the dollar shows a strong negative relationship, an increase in the dollar usually predicts a decrease in the price of gold.

Volume divergence is evaluated against current price action and plotted as both a trend and a strength indicator. The indicator identifies high probability trading zones and automatically adapts to changes in volatility. The strength indicator is used to confirm the conviction behind the Volumentum Trend.

You can learn more about this indicator at Volumentum.com.

The Cumulative Volume Index and On Balance Volume (OBV) are quite similar in some respects as both were designed to show if volume is flowing into or out of the market. The difference rests in the Cumulative Volume Index using the actual up- and down-volume for the New York Stock Exchange unlike with the OBV which assumes that all volume is up-volume when the stock closes higher and that all volume is down-volume when the stock closes lower as up-volume and down-volume is not available for individual stocks.

One useful method of interpreting the CVI is to look at the overall trends. The CVI will show if there has been more up-volume or down-volume and how long the current volume trend has been in effect.

Also, look for divergences that develop between the CVI and a market index. If the market index is showing a new high while the CVI fails to react in kind, expect the market to correct itself to confirm the underlying story told by the CVI.

Remember, as the CVI always starts at zero, the numeric value of the CVI is of little importance. What is important is the slope and pattern of the CVI.

If a cycle has enough amplitude then the inverse Fisher transform can use its built-in compression to give a good indicator.

You can trade the Cyber Cycle using the crossing of the indicator and the indicator delayed by one bar.

The signals are clear with the Cyber Cycle and inverse Fisher transform, just as if you used an RSI and the inverse Fisher transform.

Further information on Cyber Cycles and inverse Fisher transform can be found in the May 2004 issue of Technical Analysis of Stocks and Commodities

(http://www.traders.com).