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Linda McQuaig
IT'S ALWAYS useful, in a debate, to be able to distort your opponent's argument before you attack it.
"...the CIA considers Iraqi President Saddam Hussein is unlikely to launch an unprovoked attack..."
What CIA doesn't say: Hussein is unlikely to equip anti-western terrorist organizations with funding or weapons of mass destruction.
Painful lessons
Thought I'd add my two-cents to your post.
I think I agree with your first point, but might have a slightly different interpretation. Did you mean 'never follow a single indicator'? If so, I agree. I'm an advocate of timing models - using several indicators to develop a market outlook. My NYSE intermediate model is here:
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID350373
"The trend is your friend". True, but not at market extremes. You'll note that my model includes trend/breadth indicators AND contra-trend indicators. The idea is this: Follow the trend until a critical number of reliable reversal indicators tell you differently.
"Be neither a bull or a bear but a trader and be prepared to go either way". Amen, I totally agree.
"Follow the moving averages...." My advice is this: Develop a model that's ACTIONABLE. I get chuckle whenever I go through the Stockmarket.com public list. I see dozens of pages with trendlines, chart patterns, Elliott waves, oscillators, etc. Most of these pages are history lessons, but don't tell me a damn thing about what I should be doing tommorrow.
Do their indicators mean they're bullish? bearish? a little bearish? a little bullish? Does it mean they're 20% short or 100% long? If indicators aren't quantifiable and ACTIONABLE, don't even waste your time.
Hello Peace,
The buy filter (20 day EMA below the 250 day EMA) sets a special requirement for the CCI. THE CCI MUST FALL BELOW -240 first. The actual buy signal isn't triggered until the CCI rises above -100.
The same principle applies to the sell filter. The basic concept is this - don't trade against the trend unless the market goes to to unusually excessive levels, then wait for momentum to reverse.
Hello Vess, clarifications follow:
Note, however, that if condition D occurs, then the Sell Filter will be in effect. Then, what is the purpose of conditions A and B (i.e., waiting for additional CCI-related conditions to be fulfilled), if condition D tells us to Buy immediately?
Conditions A and B only apply if the 20 day EMA is above the 250 day EMA. Condition D only applies when a sell signal is in effect AND the 20 day is below the 250 day EMA AND condition C isn't met
In other words, just because the 20 day EMA is above the 250 day EMA, it doesn't mean you'd automatically be on a buy signal.
Hope that answers your question. Good to hear from you again, hope your computer is working again.
To Chip: Symbol for Issues Traded?
Wondering if StockCharts.com has thought about including a symbol for "Issues Traded", particularly for the NYSE composite and NASDAQ. Marty Zweig, Ned Davis, Norman Fosback and many others look at breadth data against total Issues Traded (Advances - Declines / Issues Traded, New Highs - New Lows / Issues Traded). I'd like to do the same. Thanks!
Hi hqsmallinvestor
MACD is a good tool for measuring trend direction/strength, but requires a good many rules as well as some subjectivity (recognizing divergent tops/bottoms) to be used as an effective a trading system. Following the traditional buy and sell signals will result in too many trades and numerous whipsaws - It doesn't beat a buy and hold strategy. You might look for an old copy of Appel's book Stock Market Trading Systems (I think that's what it was called) for more insight into how Appel used MACD.
If your really like MACD, I'd suggest using the PPO instead. Because the PPO uses percentages differences instead of price differences, the indicator's current behavior can be more easily compared to it's past behavior.
Good idea to watch both
I drew buy and sell signals using Vess' signal line method and my Bolinger band method - For some reason the annotations aren't showing up My method is a bit more sensitive initiating a few more trades, a bit earlier, but missed some excellent sell signals Vess' method caught (in '02). On the other hand, Vess' method missed key buy signals in '97, '99, '01. It wouldn't hurt to follow both!
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BPIs
Would like to hear more about your interpretation. I use the BPIs as an intermediate term contra-trend indicator, helping to identify reversals. I view the S&P 500 BPI as neutral, and the Nasdaq Comp BPI as slightly bullish (because the bullish signal happened more recently).
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Appel's MACD combos
From http://moneycentral.msn.com/articles/invest/strat/2953.asp
"Appel prefers a faster MACD combination (i.e., a six-day/19-day pairing with a three-day trigger line) to generate "buy" signals, and a slower MACD combination (i.e., a 19-day/39-day pairing with a nine-day trigger line) to generate "sell" signals. This helps him catch the largest possible percentage of any up moves, while avoiding some of the inevitable sell-signal "blips" on the down side."
UpVol/DownVol Data
You can access the data on stockcharts.com. Symbols are:
$NYUPV and $NYDNV
System 3 clarifications:
Hi Vesselin, sorry to hear about your computers. Hope I can clear things up.
...you mean "if not invested, Buy when any of the conditons A, B, C or D occur". Correct?
Correct. This system is either 100% long or 100% not invested.
Do you want me to backtest the system over exactly the same time period as you (in order to confirm the trades) - or over the whole lifespan of the $COMPQ?
It would be great if you could test it over the entire lifespan, though I'd be interested if my interpretation of signals matches your results. Note, I used closing prices only.
so I again won't be able to read this forum regularly.
Whenever you get a chance to test it would be fine with me. Thanks for your help.
System 3
I revised the chart slightly from my last posting. The rules haven't changed, I just looked more closely to confirm actual buy and sell signals. Some of the signals are very difficult to see on a chart covering such a long period of time. Here are the rules once again.
FILTERS:
If the $COMPQ 20day EMA is above the $COMPQ 250day EMA, the sell filter is in effect. If the $COMPQ 20day EMA is below the $COMPQ 250day EMA, the buy filter is in effect. (I actually use the 20, 250 PPO)
BUY:
A. If the sell filter is in effect, buy when the CCI rises above -100.
B. If the sell filter is in effect, buy when the CCI rises above 0.
C. If the Buy Filter is in effect, the CCI must first fall below -240 and then rise above -100 to generate a Buy.
D. Buy if the 20day EMA crosses above the 250day EMA.
SELL:
A. If the buy filter is in effect, sell when the CCI falls below +100
B. If the buy filter is in effect, sell when the CCI falls below 0.
C. If the sell filter is in effect, the CCI must first rise above +180 and then fall below +100 to generate a sell.
D. Sell if the 20day EMA crosses below the 250day EMA.
I tested the system by going through the chart signal by signal. Here are the results I came up with
Close Points+/- Gain/Loss
Buy Mar 7, 1990 432.47
Sell Aug 3, 1990 417.46 -15.01 -3.47%
Buy Nov 9, 1990 341.95
Sell Apr 30, 1991 484.72 +142.77 +41.75%
Buy May 1, 1992 578.14
Sell Feb 13, 1993 690.54 +112.40 +19.44%
Buy Apr 28, 1993 658.16
Sell Nov 4, 1993 757.26 +99.10 +15.06%
Buy Apr 2, 1994 743.46
Sell Apr 20, 1994 705.52 -37.94 -5.10%
Buy May 27, 1994 733.14
Sell Dec 9, 1994 719.05 -14.09 -1.92%
Buy Jan 10, 1995 756.52
Sell Sep 26, 1995 1038.05 +281.53 +37.21%
Buy Jan 19, 1996 1007.01
Sell Mar 8, 1996 1063.73 +56.72 +5.67%
Buy Aug 6, 1996 1128.87
Sell Oct 16, 1997 1699.60 +570.73 +50.56%
Buy Jan 2, 1998 1581.50
Sell May 15, 1998 1846.70 +265.20 +16.77%
Buy Sep 22, 1998 1697.80
Sell Feb 17, 1999 2248.90 +551.10 +32.46%
Buy Aug 10, 1999 2490.11
Sell Mar 29, 2000 4644.67 +2154.56 +86.92%
Buy Apr 28, 2000 3860.66
Sell May 25, 2000 3205.35 -655.31 -16.97%
Buy June 2, 2000 3813.38
Sell Oct 4, 2000 3523.10 -290.28 -7.61%
Buy Oct 15, 2001 1696.31
Sell Nov 27, 2001 1935.97 +239.67 +14.13%
SYSTEM GAIN 284.90%
BUY AND HOLD 184.97% (Jan 1, 1990 through Sept 10, 20
Answers to your questions about system 3
"What happens if the Sell Filter is in effect and CCI rises above -100, then (with the Sell Filter still in effect) it rises above 0 (before triggering a Sell signal), and finally the 20-day EMA crosses above the 200-day EMA?"
Anytime you're out of the market, you act on the first instance of any buy signal(in this case, only signals that pertain when the sell filter in effect). For example, if the sell filter is in effect and the CCI falls to -10, and then rises above "0" - that's a trigger to go long. Another example: If the CCI falls to -110, and then rises above "0", you go long. The "0" buy trigger is now meaningless because you're already long. Obviously, anytime you're out of the market when the sell filter is in effect, the EMA crossover signal is meaningless (The 20 day EMA is already above the 250 day EMA).
BTW, you caught another mistake of mine. The correct EMA is 250-day, not 200-day. Thanks for the catch!
Do you take 3 Long positions, a new one each time?
No. You only take one position, acting on the first signal occurance.
Also, does the filter always use the $COMPQ only - or does it use the underlying security that you're trading?
Use the security you are trading.
"If the Buy Filter is in effect, the CCI must first fall below -240 and then rise above -100 to generate a Buy."
You are correct. Sorry for the way I phrased it.
Thanks again for your patience. Let me know what you think when you get back from your trip. Be safe :)
New Filter, New Rules, New System
I've made a number of changes which should make the performance of the system much better than the other two tested.
First, there's a new filter:
If the $COMPQ 20day EMA is above the $COMPQ 250day EMA, the sell filter is in effect. If the $COMPQ 20day EMA is below the $COMPQ 250day EMA, the buy filter is in effect.
Next, I bumped the CCI to 150
I also improved the rules by changing the trigger levels and including two additional rules:
BUY:
If the sell filter is in effect, buy when the CCI rises above -100.
If the sell filter is in effect, buy when the CCI rises above 0.
If the buy filter is in effect, the CCI must rise above -240 and -100 to generate a buy.
Buy if the 20day EMA crosses above the 200day EMA.
SELL:
If the buy filter is in effect, sell when the CCI falls below +100
If the buy filter is in effect, sell when the CCI falls below 0
If the sell filter is in effect, the CCI must fall below +180 and +100 to generate a sell.
Sell if the 20day EMA crosses below the 200day EMA.
There are no short sells using this system, don't use stops either.
Let me know if you have any questions. I believe the buy and sell signals indicated below accurately reflect the rules and indicator levels.
Tested System
Suppose that today the system is out of the market. You check the AroonOsc. If it is not below -50, things are simple - you Buy if CCI has crossed above -100 and you don't if it hasn't. But what if today AroonOsc is below -50? OK, you check the CCI. If it has not crossed below -200 yet, everything is fine for today - you do nothing.
Correct
But what do you do tomorrow? Do you perform exactly the same checks from the start? Or do you, since the AroonOsc has already fallen below -50, only check the CCI from now on and monitor it until it falls below -200 and then rises above -100?
I think "from now on" is the point of confusion. The answer to your second question is "no". Once the state changes from Aroon below -50 to Aroon above -50, the buy rule changes. The CCI -200 requirement is no longer necessary.
What happens if, while you are waiting for that to happen, AroonOsc moves back above -50? Do you ignore it - or do you then stop monitoring the CCI for falling below -200 first and start again to monitor it for just rising above -100?
You ignore the -200 requirement after the Aroon rises above -50.
I am sorry if I am not expressing myself clearly enough.
No need to apologize :) You are HELPING ME to think through and define the rules. I truly a appreciate it.
In general, it is a good idea to initially develop a system without stops and make sure that it enters trades at the right moment and exits them at reasonable place, too. Only then you could try to improve the performance by placing stop-losses (provided that the system isn't likely to re-enter the trade almost immediately) and trailing stops (to take profits).
Thanks for the advice.
The performance is better than before - but the percentage of winning trades is much lower, too, and the system trades more often. Exact transcript of the trades.
Thanks for the transcript. This is a big help. I'm going to work on improving the concept and will also give WealthBuilder a try. This kind of testing is invaluable.Thanks again for all your help Vess!
Clarified Rules
The word "wait until" confuses me a bit. Suppose that today the system is out of the market and AroonOsc is below -50. Which of the following is the proper way to proceed:
1) Since AroonOsc is less than -50, check whether CCI has crossed above -200. If it has, Buy. Otherwise, do nothing. Perform this check (for both the AroonOsc and CCI) every day.
2) Since Aroon Osc has dropped below -50, start waiting for the CCI to cross above -200. That is, once we enter this state, every day, no matter what the value of the AroonOsc is from now on, check the CCI and Buy as soon as it crosses above -200.
I believe your second interpretation is what I had in mind. If the Aroon is below -50, the CCI must cross above -200 AND -100 to generate a buy signal. The rule dictates that the CCI must be below -200 (at some point) when the Aroon is in the -50 state. If a signal isn't triggered, and the Aroon moves above -50, the CCI only needs to cross above -100.
BUY RULES
If the Aroon is below -50, BUY when the CCI crosses above -200 AND -100
If the Aroon is above -50, BUY when the CCI crosses above -100
SELL RULES
If the Aroon is above +50, SELL when the CCI crosses below +200 AND +100
If the Aroon is below +50, SELL when the CCI crosses below +100
Sell long positions on any Sell short rule.
Place stops 5% below any buy.
SHORT RULES (green arrows)
Short if the CCI crosses from above to below +100 as
long as the Aroon Oscillator is below "0".
That's good - but what are the Cover rules? Does the system cover when a Buy signal occurs?
Yes.
If the Aroon is below 0, SHORT when the CCI crosses below -100
Cover shorts on any subsequent buy rule.
Place stops 5% above Short Sales.
This doesn't seem to be the case, according to your chart - the system has stayed Short from September 2000 to September 2001, yet there have been several Buy signals in-between.
Here's my takeaway from the chart: The CCI fell below -200 at the start of October and rose above -200 BEFORE the Aroon Oscillator went south of -50 in late October. (This is damn hard to tell from a 1000 pixel chart, I'm probably wrong). So to my thinking, the CCI would need to dip again below -200 before any cross above -100 would qualify as a buy signal. When the Aroon is at or below -50, it's telling me this is a bad-ass down trend - DON'T BUY unless the CCI tells you the sell-off is out of gas.
Note from late October '00 through early September '01, the Aroon was below -50 but the CCI never fell below -200 (or so it appears). There was a short period between early September '01 and late September'01 when the Aroon peeked up above -50. From late September '01 to early December '01, the Aroon was again below -50, BUT this time, the CCI was clearly below -200. This set up a ballsy buy signal in early October followed by a sell short signal in late December.
The real damage was done from March through May of 2002. I counted 3 disasterous buy signals during that period. Had the Aroon moved below -50 during that period, it would have eliminated two. I shall begin looking for a bear market filter.
Backtesting shows that the system performs quite well in bull markets (backtested since the 80s) - but is disastrous in bear markets. It had series of losing trades since May 2000 and another one in September 1998 - another bad time for the bulls.
I agree. The system would have been whipsawed using 10% stops. Do more agressive stops (5%) make sense? The subsequent buy signals in Oct '98 and May '00 look good.
Humor me Vess, can you run the test one more time using the rules I described above? I'm not practiced in writing scripts.
Thanks for your patience!
Clarification coming soon...
I'll be away for a couple hours but I'll clarify
your questions tonight. I agree, my wording is
a bit confusing. I believe this system is much better
than the Stochastic system you tested previously.
BTW, thanks for testing it.
Please note the rules modifications in my last post.
Aroon filter system: RULES UPDATE...
in bold
BUY RULES
If the CCI crosses from below to above -100 as
long as the Aroon Oscillator isn't at -50 or below.
If the Aroon Oscillator is at or below -50, you must
wait until the CCI crosses below -200 and rises
above -100.
SELL RULES
If the CCI crosses from above to below +100 as
long as the Aroon Oscillator isn't at +50 or above.
If the Aroon Oscillator is at or above +50, you must
wait until the CCI crosses above +200 and falls
below +100.
SHORT RULES (green arrows)
Short if the CCI crosses above +100 and falls below
+100 as long as the Aroon Oscillator is below "0".
Updated chart shows improved sell signals:
Here's another way to use the Aroon filter system.
I used the CCI instead of stochastics for this test.
Instead of filtering out signals, I use the Aroon
as a way of raising or lowering requirements to
generate signals. Here are the buy, sell, and
short rules:
BUY RULES
If the CCI crosses from below to above -100 as
long as the Aroon Oscillator isn't at -50 or below.
If the Aroon Oscillator is at or below -50, you must
wait until the CCI crosses from below to above -200.
SELL RULES
If the CCI crosses from above to below +100 as
long as the Aroon Oscillator isn't at +50 or above.
If the Aroon Oscillator is at or above +50, you must
wait until the CCI crosses from above to below +200.
SHORT RULES (green arrows)
Short if the CCI crosses from above to below +100 as
long as the Aroon Oscillator is below "0".
You'll note a couple funky things:
1) Sell signals in strong up trends tend to be
early, but not all together bad.
2) This system failed to generate a buy signal in
'99, missing the entire rally that lead to the Q1
2000 peak.
3) Check out the last buy signal. The system went
totally haywire. Obviously, stops would have kept
loses from going out of control.
4) The CCI is a bit erratic. It's difficult to see exactly
when it crosses above and below overbought and oversold
levels. I suppose there's a way to smooth it.
Answers about the "system"
1) Does the system go only long (i.e., Buy/Sell) or does it go short too? If the latter, what are the conditions for taking a short position - or is the system always in the market, alternating between long and short positions?
It's meant to go long and short, BUT (and it's a BIG BUT), I haven't yet developed rules for selling or covering shorts. Also, this "system" hasn't been fully developed yet. First of all, the 200 day Aroon doesn't do a very good job of screening out Stochastic sell (short) signals at the on-set of bull market rallys. I am thinking of adding an additional screen, possibly using a breadth thrust indicator as an warning against taking short positions when sell short signals occur soon after an explosive move. Second, I'm not quite sure buy signals (go long) need to be screened at all. Given the typical nature of price movements, sell offs tend to occur very quickly. Rallys off oversold lows are tradable (although dangerous without agressive stops).
"You sell when %K crosses below %D if the oscillator is overbought (or near overbought) AND the Aroon Oscillator isn't above +50."
You are correct. Sorry about my typo (brain fart).
RE: Distinguishing trending from range-bound markets.
Thanks for the great tips Vess.I'd like to hear your thoughts on this observation: The relationship between moving averages seem to indicate whether a range-bound market is in play. For example, when the PPO 50, 250 is between +3 and -3, there's a pretty good chance you're in a range bound market. A breakout above +4 or below -4 usually signifies the market is trending strong.
"I had missed your excellent message somehow. Interesting system."
Thanks for your interest. I wouldn't call it a system (yet), just the first stab at a concept. The buy and sell signals are actually long and short entry points, not "buy and sell" signals necessary to qualify it as a trading system. At a bare minimum, you would want to use stops as a trading rule.
"You buy when %K crosses above %D if the oscillator is oversold (or near oversold) AND the Aroon Oscillator isn't below -50.
What exactly do you consider "oversold (or near oversold)" and "overbought (or near overbought)" levels?
25 for oversold and 75 for overbought. The concept is actually more important than the indicators or levels at this point. I'm not even sure if Stochastics and the Aroon Oscillator are the right indicators.
Also, any particular reasons why you have used the NYSE Composite to illustrate your system - instead of some more popular index, like the SPX, the COMPX or the DJIA?
No particular reason.
$NYHL / Issues Traded
Along a same lines as the previous discussion, I'd like to chart the NYSE New Highs minus New Lows / Issues Traded. Is there an easy way to do this? I can't find a symbol for "NYSE Issues Traded".
gottfried, I agree with you. I keep a long term timing model composed of Tape, Monetary and Sentiment/Valuation indicators. Of the 29 indicators I track, only one is based on polls/surveys.
gottfried - The AAII poll still looks like it could be a useful indicator if it were constructed differently. I'd be curious to see the ratio of the index to it's 30, 40, or 50 week smoothing. It would probably generate more intermediate signals, but be more stable over time. Thoughts?
AAII bullish/bearish poll:
Another online source:
http://tal.marketgauge.com/dvmgpro/charts/CAAIISR.HTM
Opinion polls
Thanks for the link gottfried - wondering if VTO needed permission to do this. I also wonder if Chip would consider polling, publishing and tracking investor opinion of StockCharts members on a weekly basis? The results would be interesting and who knows, it might eventually become a good PR tool for him.
Thanks Cush!
Thank worked. Never noticed "cumulative" there before.
Cumulative Advance-Decline Line
How do you create a Sharp Chart of the $NYAD CUMULATIVE? Thought this would be easy but I haven't figured it out yet!
Using oscillators to spot tops and bottoms
Hello all. First I want to apologize for the wide format of this page - there's a big image below and the text auto-flows to the width of the image.
I've been exploring momentum oscillators to help identify intermediate peaks and troughs on the NYSE Index, thought some of you could provide feedback on my exploits.
All of you are probably familiar with the problems associated with using banded oscillators to identify overbought and oversold extremes. To beat a dead horse, oscillators don't work very well in trending markets where momentum is sustained over a long period of time - they tend to generate many invalid signals. Most technicians look for divergences or other indicators to filter out invalid signals.
I'm not a big fan of using divergences as a filter for three reasons:
1)Spotting divergences requires subjectivity and interpretation. For example, how close or far apart do peaks need to be? What exactly qualifies as a peak vs. a minor blip? What degree of slope is needed to truly qualify as a divergence? What is the exact rule that triggers the signal?
2)False divergences occur, especially in strongly trending markets.
3)Excellent trading opportunities are missed when the market fails to form a double-top or double-bottom - when no divergence occurs.
I began exploring filtering techniques based on a very basic concept - don't trade against a strong trend. Although I knew this approach would result in a few missed opportunities, my goal was to improve the overall percentage of excellent entry/exit points.
This study consisted of two indicators:
1. A Full Stochastic with %K at (60,12) and %D at (12). I didn't dork with the parameters at all - no curve fitting, data torturing, etc. Just wanted parameters that fit an intermediate term market cycle.
2. The Aroon Oscillator, set at 200 days. Again, I didn't fiddle with the parameters at all. All I wanted was a stable indicator that could identify the direction and strength of long-term trends. The Aroon Oscillator would be used as my trend strength filter.
The buy/sell rules I established for this test were pretty simple:
You buy when %K crosses above %D if the oscillator is oversold (or near oversold) AND the Aroon Oscillator isn't below -50.
You sell when %K crosses above %D if the oscillator is overbought (or near overbought) AND the Aroon Oscillator above +50.
I've included an annotated chart below. Please excuse the large chart, but I wanted to test the $NYA data set between Jan 1, 1990 through August 2002. A larger chart was needed for clarity.
Key:
Black arrows = Valid signals that resulted in excellent entry or exit points (17).
Blue arrows = Valid signals that resulted in less than ideal entry or exit points (11)
Green arrows = Invalid signals that would have resulted in an excellent entry or exit point (8).
Red Boxes = Stochastic signals filtered out by the Aroon Oscillator. I counted (39) invalid signals, the vast majority would have been less than ideal intermediate entry/exit points.
Things to note:
1.Most of the ill-timed sell signals (blue arrows) were a result of the Aroon Oscillator failing to identify strong up-trends early enough. Note the signals generated in late '90, early '95, and early '99. This leads me to consider using a faster Aroon Oscillator in subsequent studies.
2.There were four excellent sell signals (green arrows) missed at end of strong up-trends. There were also two instances where good, but invalid sell signals occurred in the midst of strong up-trends (mid '96 and early '98). In almost every case, these signals occurred after strong negative divergences. Peaks were spaced 3 to 6 months apart. This made me re-think my above stated opinion on divergences, except for the fact that I noticed seven other sell signals based on what could have been interpreted as negative divergences. These signals would have resulted in less than ideal results (Aug '91, Oct '94, July '95, Apr '96, Oct '97, Mar or Jun '99, Aug '00).
3. For the entire period, there were only two double-bottom positive divergences. Note there were also seven instances where bottoms were formed on single downward spike by the Stochastic Oscillator.
I would welcome any thoughts on this subject.
Thanks Chip. I suppose...
there isn't a way to use the PPO with simple moving averages?
I'm exploring a strategy that employs long term moving averages during trending markets, and switches to a shorter term swing system during flat markets. One filter I wanted to explore is using the percentage difference in long term moving averages to indicate periods of "trendless" markets.
Note the $NYA during 1994, and also the period between late 1999 and mid 2002. Both periods were a horrible time to be using long term moving average strategies, but seem to be ideal for employing swing systems. In both periods, the 150 day ma and the 250 ma converged and tracked in very close proximity to each other.
Thoughts anyone?
Percentage Price Oscillator problem
I'm looking for help on this. As I understand it, the PPO plots the percentage difference between two moving averages. If the shorter term MA is below the longer term MA, the PPO should be below "0" as well, correct? This doesn't seem to be the case.
I'm trying to identify periods when the $NYA 150 day MA is within 1.5% of the 250 day MA. Using the PPO seemed to be the logical choice, but I noticed that during several instances MA cross-overs didn't correspond with crosses of the PPO "0" line.
Any ideas?