Q: I'm comparing the daily chart and weekly chart for CMA. How can the daily chart show a positive Acc/Dist line, while the weekly chart shows negative? I am puzzled -- is this an anomaly or am I missing something?

A: The Accumulation/Distribution Line and Chaikin Money Flow (CMF) are based on the level of the close relative to the high-low range. The further the close is above the midpoint of the high-low range, the more positive the impact on the indicators. The further the close is below the midpoint, the more negative the impact.

The level of the close relative to the high-low range might be strong for 3 of 5 days, making the cumulative 5-day impact (using daily charts) on the Accumulation Distribution Line and CMF positive. However, if the weekly close was below the midpoint of the weekly high/low range, the weekly chart would show a negative impact on both CMF and the Accumulation Distribution Line. Furthermore, Marc Chaikin, its developer, recommended using these indicators on daily charts instead of weekly. The CMA example shows how weekly data can skew the Accumulation Distribution Line.

(Current Chart for CMA)

One more thing: Because the Accumulation/Distribution Line and Chaikin Money Flow do not consider the change from close to close (be it day to day or week to week), a security could actually advance (or decline) and still have negative (or positive) money flows.

Cheers,
Arthur Hill

Q: Ken, January 17 you used a 2600 close as the benchmark for a NDX breakout, down from January 13's 2675-2700. I see a significant resistance at 2700, using 50-day moving average and P&F. As you know, waiting for a day (or even an hour) on the NDX can be the difference between wealth and waste. What caused you to drop your benchmark?

A: Because of the downward slope of the resistance line that I am using, the level become markedly lower each day. However, I never use an 'exact line' of resistance, rather a resistance/congestive 'area' I mentioned in my update on ChartStrategy.com that the NDX has 2550-2650 resistance. Certainly there is resistance as you mention at the 50 day MA. What I suggest to most users of my service is that they use a three day rule as well, looking for three closes above the resistance zone before reversing positions.

Regards,
Ken Mitchell