HOW I USE DECISIONPOINT FOR THOROUGH MARKET ANALYSIS

Throughout the last several weeks I've dedicated this section of the newsletter to a discussion of how I combine various information sources to create a comprehensive swing trading system. Although there are many excellent financial websites, I've found that no single site meets my complete needs. Thus, for streaming real-time quotes I rely on Interactivebrokers, yet for streaming real-time charts I employ Livecharts. To spot opportunities in a consistent group of stocks and analyze them with multiple indicators, I use Stockcharts.

The fourth and final pillar of my system is www.Decisionpoint.com. I use this site for two main purposes: as a source of overall market indicators and to analyze various stock market sectors. The site is also encyclopedic in the number of charts it contains. One warning before you visit this website--if you like to study charts, then avoid Decisionpoint. The site contains literally thousands of up-to-date charts of virtually every financial instrument imaginable. Land on the site and you may get lost. In fact, you are liable to forget about both lunch and dinner as you immerse yourself in the thousands of graphs Decisionpoint contains.

One of the most important judgments for me to make as a swing trader is whether the market is overbought or oversold. Short a deeply oversold market or go long a very overbought market and you are likely to get your fingers burned. The overbought and oversold state of the market can in part be judged through price indicators such as stochastics and CCI when applied to a major average such as the S&P 500. One problem with these indicators, however, is that in strong trending periods they tend to get and stay oversold or overbought for long periods of time.

To filter my interpretation of stochastics or CCI, I find it important to consult what I call the "overall market indicators." If you are a regular Swing Trader reader, then I'm sure you are already familiar with most of these indicators, as I discuss them in almost every issue. They include the McClellan Oscillator, Arms Index (Trin), Volatility Index and Put/Call Ratio. At key technical junctures I also find it important to analyze new highs and lows, stocks above their 200-day moving average and market sentiment indicators such as the Investor's Intelligence figures.

Decisionpoint has the most complete collection of these indicators that I have been able to find on the web. If you want to drill down into any one indicator, then Decisionpoint is more than happy to cooperate. On the Arms Index page, for example, the site offers a graph of the raw Arms Index numbers as well as the 4, 10, 21 and 55-day exponential moving average figures. A careful examination of each of these moving averages gives the technician a different perspective and helps to prevent superficial judgments.

Decisionpoint allows you to perform Arms Index analysis on the Nasdaq Composite and the Wilshire 5000 as well. All you need to do is click at the top of the NYSE Arms chart and you can analyze Arms on these indices. If you want to place the current number in historical context, then you can do that too. Historical data on the Arms Index, for example, is available dating back to 1970!

A second important feature of Decisionpoint is that it gives the technician the ability to easily track sector rotation (defined as the flow of money from one sub-index of the stock market to another as traders move from group to group). The site contains approximately 35 sector indices, such as the Airline Index, Banking Index and Telecommunications Index. Decisionpoint also offers an additional 120 Dow Jones Sector Indices. These allow the swing trader to immediately see what is currently hot and what is not. The sectors are organized by a proprietary Decisionpoint indicator called Price Momentum Oscillator (PMO)--a relative strength tool. In reviewing sectors, traders can easily scan for those that are either underperforming or outperforming the overall market.

On a recent review of the sector indices I noted that Health Care Providers ($RXH) have remained extremely weak despite the rally that started on August 6th. The sector has underperformed the market since that time. Weak stocks in this sector, I reasoned, would be vulnerable when the market again turns down and would make good shorting opportunities. To find out which stocks these were, I opened the sector chart book for $RXH.

Decisionpoint organizes all stocks in an individual sector by "chart books." These chart books contain small "snapshots" of charts that load approximately 20 to one computer page. Since the charts are arranged by relative strength, all I needed to do was go to the bottom of the page to find the weakest stocks in a weak sector. In that particular case they were LifePoint Hospitals (LPNT) and Omnicare (OCR). To study the companies further I double clicked on the chart and a new window opened. Both companies had recent large gaps down on very strong volume and have entered into stage IV declines. However, they were beginning to rally weakly as the market moved higher. I concluded that both stocks should not yet be shorted, but seemed vulnerable when the market again weakened. I put them in Stockcharts so I could consistently track them.

Another great feature of Decisionpoint is its encyclopedic list of charts. The site has assembled chart books for all stocks in the Dow and S&P large, small and mid-cap indices. That represents a vast universe of about 1500 stocks. Are you curious as to which stock in the S&P 500 has the highest relative strength over the last six months? It's Goodyear Tire (GT). Wonder about the lowest? It's Ciena (CIEN). Want to find a chart of the silver bullion, the U.S. Dollar Index, Crude Oil, or the Milan Stock Exchange? You will find them all at Decisionpoint and many, many more.

There are literally thousands of charts updated daily on Decisionpoint, making the site an invaluable took for determining what is happening in the market. Decisionpoint costs $19.95 a month, and I find this to be a very worthwhile investment. My usual disclaimer applies: StreetAuthority.com does not have a relationship with Decisionpoint and I have received no financial benefit from Decisionpoint for this review.

Good trading!

Dr. Melvin Pasternak
Editor
The StreetAuthority Swing Trader