Mike, Don's signals are explained in the header of his thread at marketswing.com :
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Welcome to Donald Sew's Index Update
EXPLANATION of CLASS SIGNALS:
My short-term system attempts to predict the reversal point prior to any linear confirmation of a reversal. Most systems are linear in that actual price movement is required to confirm a reversal. My short-term system attempts to identify extreme overbought or oversold situation and then gives a time frame as to when the actual short-term top/reversal begins, without the actual price reversing. On many occassions my CLASS SIGNALs may appear to be contrarian since they may ring while the market is still heading in the opposite direction of my signal.
This short-term system is for only short-term moves of 1-5 days. They do not attempt to predict the amount of the price movement, but only the TIME-FRAME of the reversal/top or bottom.
CLASS 1 SELL - extreme overbought with the window until the next days highs
CLASS 2 SELL - a preliminary warning for a CLASS 1 signal, but a reversal could occur immediately
CLASS 1 BUY - extremd oversold with the window until the next days lows
CLASS 2 BUY - a preliminary warning for a CLASS 1 signal, but a reversal could occur immediately
On a statistical basis the minimum move after a CLASS 1 SELL signal is 150 points for the DOW. In only one case over the past 3 years the DOW only reversed 75 points, so I consider 75 as the absolute minimum. The NORMAL MOVE is 200-350 points, and a STRONG MOVE is over 350 points.
NEGATED CLASS 1 SIGNALS - This does not occur often, but when it does - WATCH OUT. I lost my data, but from memory, NEGATED CLASS 1 SIGNAL only occured over the past 3 years, 4 or 5 times for three major indices-DOW/SPX/NAZ- combined. The best example of a negated signal was back in APRIL 1998 when I got a NEGATED CLASS 1 SELL SIGNAL when the the DOW was around 10,100 - thereafter the DOW ran to 11,000+ by MAY. The same type cf response should be expected for a NEGATED CLASS 1 BUY signal, where there should be a strong downside.
AI
