Could you please describe in more detail what you mean by "money flow" in your part 3 recommendations and where one can see this. Is this the technical indicator like "Chaikin Money Flow" that one sees on various charting programs? (January 10, 2004)

  The money flow indicator is a measurement of the net positive or negative level of money moving into or out of a stock, calculated using various proprietary methods of measuring the relationships between price and volume. Basically it is a way of determining whether there is, overall, money going into or out of a stock. While the indicator is closely related to institutional buying/selling, it differs because it refers to ALL money moving in and out of stock. Money flow indicators are found on most charting services and software; for the single indicator we use the TC2000 charting program's indicator 'money stream' which is the same thing. Money flow is not a primary, but a secondary, indicator. We use it to confirm or support analysis.

We also calculate money flow beyond using just the charting service measure, looking at many measures of money flow indicators, IBD accumulation tables, block trades and traditional 'money flow' formula calculations. We also look at flows into various types of stock funds and money market funds. With this compilation we generate our view on money flowing into a particular stock.

On the chart, the money flow indicator will track (over a chosen time period) this dynamic, but sometimes it can merely track the price up and down which isn't much of an indicator. It becomes useful, however, when we see either of the following: 1) money flow way up with price still in a base but ready to break out, tending to support our analysis of a solid pattern that presages a breakout; 2) price trying to hold at support but looking weak and money flow falling ahead of it, suggesting a potential move lower. We look for divergences, positive and negative. Positive divergences occur when money flow at the current price is higher than it was at an earlier, higher price. Similarly, negative divergence is when money flow is lower at the current price than it was at an earlier lower price.

If a rise in money flow concurs with other solid indicators, we really like seeing it. As a secondary indicator it can support analysis or let us know we may need to check that analysis again. Money flow can be useful, but we don't base buying or selling decisions on it.


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