3D Rendered Abstract Background of one hundred dollar bill with stock market chart
Tim Ord takes the temperature of the stock market and checks its blood pressure. As a technical analyst, he studies the details of price charts, volume levels and related indicators to judge how healthy things are.
His Twitter feed is one of the places where he offers observations and insights — that’s the spot I’ve followed his work for a few years now. He also publishes The Ord Oracle which contains more in-depth analysis to subscribers.
Tim consented to an interview about chart-reading and here it is:
John Navin: What were you doing when you first discovered technical analysis? Stock broker? Commodities analyst? Professor of economics?
Tim Ord: I was a stock broker with the Dean Witter brokerage firm — that was in 1977. Back then fundamentals was the only right way to go according to them and technically analysis was more or less “witchcraft”.
While at Dean Witter, I came across Stan Weinstein’s “Secrets for Profiting in Bull and Bear Market” and along with his market letter. Back then there was very little information on technical analysis (no internet).
I graduated as a math teacher from the University of Nebraska in 1973 and numbers made more since to me than fundamentals. Reading and re-reading Stan Weinstein’s material totally fascinated me and I was convinced that was the only way to go for stocks selection and timing the market.
Navin: What are the most important elements of price chart analysis?
Ord: Indicators that work best for me are the one that produce exhaustion reading. If market is testing support and there is exhaustion present, then support is more likely to hold and vice versa for resistance.
Navin: You do a lot of work with put/call ratios — could you describe why this is important?
Ord: Put/call ratio readings are a way to read what the public sentiment is. The public in general is usually are on the wrong side of the market when it comes to extremes.
They are the ones that buy the most puts at panic lows and the ones that buy the most calls at euphoric highs. When put/call ratios reach extreme levels then market usually near a reversal.
Navin: You’ve written that holiday periods often involve reversals. Could you elaborate?
Ord: I noticed over the years when the market approaches a holiday, some traders take off early to enjoy the holiday. With fewer traders making trades, volume tends to drop.
Volume is the energy for the market. Therefore, when volume drops during a rally into a holiday than that holiday can market a high because market doesn’t have energy (volume) to push higher.
Likewise, when volume drops during a decline into a holiday that holiday can mark a low because market doesn’t have energy (volume) to push lower.
Navin: You use the McClellan Oscillator as an indicator. How is it derived and why is it important?
Ord: Sherman and Marian McClellan developed this indicator back in 1969, the oscillator is computed using the Exponential Moving Average (EMA) of the daily difference of advancing issues from declining issues over 39 trading day and 19 trading day periods.
I use this indicator to help me keep in the trend of the market. In general when the McClellan Oscillator is above “0” the trend for the market is considered up and when below “0” the trend is considered down.
Navin: You refer to Bollinger Bands in your work. Can you describe the difference between expanding and contracting BB’s as it might affect price?
Ord: A contracting Bollinger band reflects the narrowness of the distance be between the high and low of the stock or index. General this narrowness of price range in a stock or index happens in a trading range. The narrower between the high and lows of the stock or index the more contracted the Bollinger bands become.
Bollinger Bands for the S&P 500 weekly price chart, 12 9 19.
Once the stock or index breaks out of the trading range then the Bollinger bands will expand. Ideally a trader would look for narrowness in the Bollinger Band knowing that an impulse wave will be starting soon but the Bollinger band does not give the directions which way the stock or index will move, just that a large move is coming. A trader will have to look at other indictors to determine what direction the breakout will occur.
Navin: You use an indicator that looks at the volatility of volatility. Can you tell us about this. What information do you glean from this?
Ord: The VIX of the VIX (VVIX) measures the change of the volatility of the VIX index. VVIX measures how fast the SPX volatility changes.
$VVIX $VIX ratio weekly, 12 9 19.
I use the VVIX/VIX ratio to find divergences in the SPX market. When this ratio moves a distance above or below its 10 period moving average, than the SPX has gone too far to fast and a short term reversal is likely.
Navin: You live in Lincoln, Nebraska just down the road from one of the greats of fundamental analysis. If you ran into Warren Buffet at the supermarket, what would you tell him? Or ask him?
Ord: To meet the man on top of the food chain (for technical analysis) would be a big thrill. He has proven that he has most of the right answer for picking stock and market direction. I most likely would say how much I admire his work and wouldn’t waste his time asking for any advice.
I do not hold positions in these investments. No recommendations are made one way or the other. If you’re an investor, you’d want to look much deeper into each of these situations. You can lose money trading or investing in stocks and other instruments. Always do your own independent research, due diligence and seek professional advice from a licensed investment advisor.