50-Day R.S. (50-Day Relative Strength)

Second Opinion calculates the 50-day Relative Strength (R- S) for each of the stocks in the database. Relative Strength ratings of 1.01 or higher are assigned to stocks that have out performed the S&P 500 during the last 50 days. Readings of .99 or less identify those stocks that have under performed the S&P 500. Stocks being considered for Long Positions should possess strong Relative Strength ratings of 1.03 and over, while Short Sale candidates should have ratings of .97 or less.

Resistance Trend Line Values

Resistance trend lines are constructed by connecting the most recent, high points on the stock's chart. A valid Resistance Trend Line should be pointed DOWN. In situations that the trend lines are not pointed in the proper direction, a NA will appear instead of a value. "Second Opinion" constructs three Support and Resistance trend lines for each stock in the database. The reported values represent the trend line's value that is farthest away from the closing price of the stock provided that this number is less than a 20% differential. If the stock is more than 20% away from either the Support or Resistance trend line, the program will report the value of the next closest trend line and so on.

RSV (Relative Strength Value)

Relative Strength Value differs from 50-Day Relative Strength (R-S) in that it is not a measurement of a stock's performance as compared to a market index. Relative Strength Value is the percentage price change of a stock during the preceding twelve months or 250 trading days. The calculation is weighted, with the most recent three months assigned a 40% weight, while the previous nine months receive a 60% weight. All of the stocks in the database are then arranged in order of price change and ranked with a value of 99 to 1. A Relative strength rating of 92 would mean that the stock has outperformed 92% of all other stocks in the database.

Resistance Range

Resistance ranges are constructed by identifying prior areas of congestion on the stock's chart above the current closing price. The fact that a congestion area exists suggests that the last time that the stock approached this area, a sufficient number of sellers emerged and prevented the stock from going any higher. These resistance numbers may vary significantly from the trend line resistance figures due to the way they are constructed. The range numbers are more short-term oriented than trend line numbers.

Revenues

Revenues refer to the income a company receives from a variety of sources. For industrial companies, it refers to net sales and other operating revenues; they include franchise/leased department income for retailers, and royalties for publishers and oil and mining companies, and exclude excise taxes for tobacco, liquor and oil companies.

Risk

Risk is the financial uncertainty that the actual return on an investment will be different from the expected return. Factors of risk that can affect an investment include inflation or deflation, currency exchange rates, liquidity, default by borrower, and interest rate fluctuation. As a measure used in analyzing a particular stock, risk rates the volatility of the stock's price over the past year.

S

Score

Score is a value between -4 and +4 and indicates whether the technical condition of the stock is improving or deteriorating. A score of -4 represents the worst extreme possible before the stock is Downgraded to Avoid while a score of +4 indicates the best level obtainable before the stock is Upgraded to a Long Opinion.

Sell Stop

Depending on the status of the computer's technical Opinion for a particular stock, either a Buy Stop or Sell Stop is calculated for the stock. These stops are generated by locating the most recent cyclical Low or High at the time that the Opinion was originated. Stocks that have a LONG Opinion would have a SELL STOP based on the previous cyclical Low. Stocks with an AVOID Opinion would have a BUY STOP based on the stock's previous cyclical High.

Sentiment Index

Measuring the market's Bullish or Bearish sentiment is important when attempting to determine the market's future direction. Market Edge tracks nine technical indicators that measure excessive speculative or sentiment conditions prevalent in the market.

Short Sale Candidates

Short Sale Candidates are former Momentum stocks whose earnings have stopped growing at an increasingly higher rate. Investing in momentum stocks is risky since when the momentum reverses the stock's price can plummet very rapidly. Momentum stocks are great on the way up but once they disappoint they can become good short sale candidates.

In order to qualify as a Short Sale Candidate the company needs to have the following characteristics:

• The EPS (earnings per share) growth rate for the current quarter is less than the trailing twelve month (TTM) EPS growth rate.
• The TTM EPS growth rate is less than the TTM SPS growth rate.
• The price/earnings growth rate (PEG Ratio) is greater than 1.

The PEG Ratio is calculated by dividing the P/E ratio by the projected earnings growth rate over the next year. If a stock has a P/E of 20 and an estimated growth rate of 15%, the PEG would be 1.33 meaning that the stock is trading at a premium to its growth rate.

Slope (Money Flow Index Slope)

The Money Flow Index Slope identifies the direction in which the MFI is pointed. Although the raw MFI value is a valuable Overbought/Oversold indicator, it is the direction or Slope of the indicator that forewarns of a change of trend in a stock's price.

Slope (Up/Down Volume Ratio Slope)

The Up/Down Volume Ratio Slope identifies the direction in which the Up/Down Volume Ratio is pointed. Although the raw U/D Volume Ratio is a valuable indicator, it is the direction or Slope of this indicator that forewarns of a change of trend in a stock's price.

STO Slow %K & Fast %K (Stochastic)

Developed by Dr. George Lane, Stochastic indicators are designed to identify Overbought and Oversold conditions. The Stochastic Oscillator compares where a security's price closed relative to its trading range over x-time periods. "Second Opinion" computes both the Slow %K Stochastic Oscillator and Fast %K. Values range from 0 to 100. Readings over 80 signal Overbought conditions (short term negative) while readings below 20 are regarded as an Oversold situation (short term positive). Both Fast %K and Slow %K are calculated over a five-day period. Slow %K is smoothed with a three-day simple moving average. Stochastics are best used to time entry and exit points.

Stops

Depending on the status of the computer's technical Opinion for a particular stock, either a Buy Stop or Sell Stop is calculated for the stock. These stops are generated by locating the most recent cyclical low or high at the time that the Opinion was originated. Stocks with an Avoid Opinion would have a Buy Stop based on the stock's previous cyclical high.

Strength Index

The Market Edge 'Market Posture' is a compilation of the readings from three market timing models which forecasts the intermediate term direction of the market as measured by the Dow Jones Industrial Average (DJIA). The main segment of the model is the Cyclical Trend Index (CTI) which has a record dating back to 1974 of correctly forecasting the direction of the DJIA with better than 80% accuracy.

The Market Posture's signals are either Bullish, Bearish or on occasion, Neutral. Unfortunately, the DJIA doesn't move up or down in a straight line. Instead, an up or down move over a period of time is typically accompanied by periods of strength or weakness that go against the current trend. The Market Posture is confined to the Dow Jones Industrial Average. Markets don't always move in tandem. While the DJIA may be in a powerful up trend the NASDAQ or the OEX may be in a consolidation phase. To address these differences, a Strength Index has been developed. The Strength Index is a technical indicator that signals when a counter move to the prevailing Market Posture is likely to occur. The Strength Index should be used in conjunction with the Market Posture when determining entry and exit points into the market. A Strength Index has been developed for the DJIA (DIA), the NASDAQ 100 (QQQQ) and the S&P-100 (OEX).

The Strength Index is constructed by dividing the number of stocks that are being accumulated (bullish) by the total number of stocks in the index. The result is a number that ranges between 0 - 100 and it represents the percentage of stocks in the index that are under accumulation. Strength Index readings over 50 are considered to be positive (bullish) while those under 50 are negative (bearish). It should be noted that there is no correlation between the magnitude of the number and the ensuing move.

The Strength Index is a powerful tool when combined with the Market Posture. When the Market Posture is bullish and the Strength Index is positive, expect favorable price action. A bullish Market Posture coupled with a negative Strength Index warns of a consolidation phase. Conversely, a bearish Market Posture and a negative Strength Index would suggest a period of declining prices while a bearish Market Posture and a positive Strength Index would imply a period of consolidation.

The Strength Index's are updated weekly and are located in the 'Market Letter' section, under the Market Posture.

Support Range

Support ranges are constructed by identifying prior areas of congestion on the stock's chart below the current closing price. The fact that a congestion area exists suggests that the last time that the stock approached this area, a sufficient number of buyers emerged and prevented the stock from going any lower. These support numbers may vary significantly from the trend line support figures due to the way they are constructed. The range numbers are more short-term oriented than trend line numbers.

Support Trend Line Values

Support trend lines are constructed by connecting the most recent, significant lows on the stock's chart. To have a valid Support Trend Line, the slope of the line should be pointed UP. In situations that the trend lines are not pointed in the proper direction, a NA will appear instead of a value. "Second Opinion" constructs three Support and Resistance trend lines for each stock in the database. The reported values represent the trend line's value that is farthest away from the closing price of the stock provided that this number is less than a 20% differential. If the stock is more than 20% away from either the Support or Resistance trend line, the program will report the value of the next closest trend line and so on.

Symbol

Ticker symbol for the security