The Advance/Decline Line indicator has given a sell signal to close the open trade from the end of October.
Note that the decline line (red line) has closed beneath the bottom Bollinger Band. That is the sell signal.
As you were…
Joined Nov 11, 2007
1,458 Blog Posts
So it begins…?
Nah…This particular indicator isn’t very good for getting short. It is good for short to medium length buy signals. It is just closing down an open trade. It was fun talking to you tonight, Mr. Thaler!
Ominous music playing… glad to know it’s not as good for shorts! I notice Market Dissector™ did call the last push higher correctly – wasn’t sure it was going to be right this time! I like this thing because if anything it gettings me thinking in terms of mean reversion, whereas normally I tend to either catastrophize moves down or unjustifiably extrapolate moves up even when there are overbought conditions present.
Sometimes when the decliners decline significantly, it can be a continuation signal of the upward trend. The chart above shows that it works pretty well sometimes as a continuation signal. I would guess that this is more true when volatility is relatively low.
Still a fair bit of work to do on this indicator in terms of how it works in high or low volatility environments.