aj, I agree that you get whipsaws with a 7 DMA, no question about it. That is why I use the 21 DMA along with it. I'm not saying that this single indicator is the holy grail, it is one of many I look at. It just helps to round out the picture.
Neither am I saying that it is always of utmost importance, I was simply pointing out that this indicator is at an extreme right now that has not showed up during the last two years. If you just concentrate on the extreme levels close to 0.9 or above there is no denying that these levels were only reached at what later turned out to be rather lasting lows in the market. On the other side levels below 0.5 or close to that only occured during times when the market was at or close to significant highs like late November/early December 2001, the March top in 2002, the exact August high last year and the one on December 2nd last year. Granted, the "signal" on March 21st this year was not followed by a very pronounced correction and what happens after the current extremely low reading also remains to be seen. But it has been a helpful indicator to follow on the whole, among many others.
Feel free to ignore it.
Culmus
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