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What is the Delacour Index

The Delacour Index is an aggregate of 9 popular technical indicators. The indicators used are the 6 and 13 period exponential moving averages. The 30 period simple moving average and its relationship with the 13 period exponential moving average. The 7 period Wilder Relative Strength Index and the 13 period exponential moving average of the 7 period Wilder RSI. The 50 day On Balance Volume and the 13 period exponential moving average of the 50 day OBV. And lastly, The 14 day William's Percentage R. Each indicator is treated equally. Each indicator registers a bullish, neutral or bearish score and the total score for any particular issue is it's DI. A DI is created for each of the three time frames followed (daily, weekly and monthly). The DI cumulative index is created by adding each time frame scores equally which creates an overall technical reading for an issue.

As an oscillator the DIC is expressed in percentage terms. The index moves from 0 to 100 and back again as an issue moves through its own bullish & bearish cycles.

Every investing day a cumulative technical score is calculated for all of the issues in our universe (see Watchlist). This score is expressed as a percentage called, The Delacour Index Cumulative or DIC for short. A reading above 50% suggests the general technical picture for an issue is bullish while a reading below suggests a bearish picture. In this example, the DIC is 48.48 (or below 50% and therefore bearish) and is accompanied with a red background.

For short term trending signals, the 13 period exponential moving average is calculated for the DIC and is expressed as the DICe. If the short term moving average is greater than the DIC it implies a bearish short term technical reading. Conversely, a DICe lower than the DIC implies a bullish short term technical reading. A day when the DIC crosses the DICe a short term signal is generated. In this example, the DIC has crossed above the DICe and is now greater than the DICe. The DICe column is shaded green to represent the bullish reading and a signal of '2' (or buy signal) is registered.

For medium term trending signals, the 30 period simple moving average is calculated for the DIC and is expressed as the DICs. If the DICs is greater than the DICe it implies a bearish medium term technical trend. Conversely, if the DICs is lower than the DICe it implies a bullish medium term technical trend. A day when the DICe crosses the DICs a medium term signal is generated. In this example, the DICe is less than the DICs which suggests a medium term bearish technical trend. The DICs column is shaded red to represent the bearish reading. there was no cross of the DICe and DICs so the signal of '1' (or no signal) is reported.

How to use the DI (five ways)

1. General technical health of the market. The ratio of stocks that have registered buy vs. sell signals in both the short and medium term give investors a hidden clue as to the underlying strength or weakness of the broader market. This ratio is then converted into a Bullish/Bearish percentage. Use this reading to gauge an entire sector's relative performance. Since it oscillates between 0 and 100, excessive readings may suggest potential tops and/or bottoms.

2. General technical health of an issue. Since the DI is a cumulative reading of a stock's technical picture over several time frames, a reading above 50% is considered bullish while a reading below is bearish. Overbought and oversold conditions often arise when this index moves toward either the upper or lower extremes.

3. Short term trending signals. The short term trending signal line is the 13 period exponential moving average of the DI. Short term trend reversals often occur when the signal line crosses the DI (DI cross above signal line: bullish / DI cross below signal line: bearish).

4. Medium term trending signals. The medium term trending signal line is the relationship between the 13 period exponential moving average of the DI and the 30 period simple moving average of the DI. An issue is considered to be trending higher when the 13 EMA has crossed above the 30 SMA and an issue is considered to be trending lower if the opposite is the case.

5. DI Buy and Sell signals are issued when both a short term signal (13EMA) and a medium term signal (30SMA) are generated on the same day.

How do you use the Delacour Index in your trading day

Every investing day The Rational Investor (parent site of The Delacour Index) updates the DI database automatically and email alerts are sent to members all over the world. On registration you may choose which DI reports you would like to receive. Here is an example to two types of reports generated.

Market Breadth

The Bullish percentage of Short and Medium term DI buy signals to DI sell signals is calculated every trading day and displayed in graphic format for easy interpretation.

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In this example we can see that the market is generally bearish in the medium term (most bullish percentages are below 0%) but more bearish in the short term. We can also take from this report a general bullish tone in one sector of the market in particular (IDU - Dow Utilities) in the short term. A 'Trader' might interpret this report as a short term bullish opportunity within the Dow Utilities while an 'Investor' might interpret this report bearishly but with a mind to Canadian issues (XIU - S&P/TSX 60).

DI Signals

This is the real 'meat-and-potateos' of the site and is broken into three components.
1. Along the top is a brief summary of four popular market barometers (SPY, TLT, GLD, XLE) as well as a summary of recent DI buy and sell signals (and their respective performance).
2. On the right hand side is a relative strength summary of each sector covered. It details the strongest and weakest 5 stocks in each sector based on their cumulative DI scores.
3. Along the left hand side is both a listing of the most recent DI signals and a running summary of current open positions. Open positions are expressed in both real dollars and percentage return and are closed only when a short term counter-trend signal is issued. A DI sell signal will remain short until a short term buy signal

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(DI crosses above 13EMA of DI) is issued. Similarly, A DI buy signal will remain long until a short term sell signal (DI crosses below 13EMA of DI) is issued.

Members receive these email reports or visit the site to see the same reports in a little more detail (as well as a running performance summary of the entire universe on DIScreen Page).

For those new to investing and trading, it is important to remember that no trading utility is 100% accurate. With this in mind it is VERY IMPORTANT that you use a money management discipline when considering a trade. Having said that, traders or investors can use the reports to initiate new positions, alter your current holdings based on sector performance or as a barometer reading of the breadth of the market from a strictly technical perspective.

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This web site has been produced by Brian Beamish for Brian Beamish, a news-letter writer. The information contained in this website is drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does Brian assume any responsibility or liability. This information is current as of the date appearing on specific reports within this site and Brian Beamish assumes no obligation to update the information or advise on further developments relating to these securities. This information is not to be construed as an offer to sell or the solicitation of an offer to buy securities and is intended for distribution only in those jurisdictions where permited. The reproduction, copying, sale, resale, re-distribution, dissemination or unauthorized use, by any means whatsoever, of content (whether in whole or in part) from the Web Site to any third-party without the prior written permission of Brian Beamish is strictly prohibited. The Web Site contains links to other web sites or web pages that are not under the control of Brian Beamish and therefore cannot be responsible for the content, policies, or any other aspect of such web sites or web pages.
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