Detecting market tops and bottoms

[Tom K]

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.