Update– As of Thursday’s close, the indicator crossed.
I have it on good faith that on October 1st, one of my favorite system deginger/traders is publishing a review of this indicator. As soon as it gets posted, I’ll link to it here. One thing he has found is that the short signal has not always worked well. It’s success is more of a recent development…Keep that in mind.
2nd Update– As of Friday’s close, the indicator was still crossed. The signal is therefore confirmed. I put on a small short in order to make it real and track the performance.
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I introduced this indicator here: Simple, Long-Term Indicator Near to Giving Short Signal.
Just over a month later, the indicator is nearing a cross. See below…
The blue and red lines (252 day ROC and 5 day ROC, respectively) are very near to crossing.
If the cross occurs, I’ll put up a post and may provide further analysis/tweaks to the indicator.
Blue and red didn’t even touch during massive August/September sell-off…explain.
These woodshitters come up with some kind of idiotic indicators everyday that make no sense to anyone including themselves. What do you want him to explain? The indicator doesn’t cross even when shit hits the fan. Any good?
All, the 252 ROC is a long term trend indicator. It takes a long downtrend to turn it towards zero. It is measuring the change of the SPY over the last 252 trading days. A couple months worth of action is equal to about 15% of the data used. Hence, it does not typically have a profound effect.
Once the SPY has firmly rolled over and then we get a spike up (measured by ROC5) the indicator will cross.
To be sure, you don’t want to be holding a long term short of the market if it hasn’t truly rolled over. ROC252 measures this.
Yeah right. You couldn’t do shit about short term, now you are promising LONG term. Why? Because you won’t be here for that LONG.
Beating, perhaps you’d care to explain your comment below (be sure to read my responses).
http://ibankcoin.com/woodshedderblog/2011/08/28/simple-long-term-indicator-near-to-giving-short-signal/#comment-46281
I don’t particularly think it is worth my time to engage in someone who either a). can’t read, b). doesn’t know what inflation is c). just wants to attack me for some unknown reason.
If you don’t like my work, feel free not to read it. If I have made a mistake somewhere, feel free to bring it to my attention. If you are unable or unwilling to do either of those things, then kindly STFU.
I think it’s more of a long term thing; like, you wouldn’t want a long term indicator to tell you to short a bull market correction but if blue and red touch that’s cause to think you are in a bear market.
Thx Wood. Sorry to keep pestering you about this indicator but I was hooked by your first ROC post and unwound my remaining longs since then. Hat tip to you sir.
I’d expect explanation is the rapidity of the initial decline as opposed the the more gradual roll-overse observed during past secular transitions. For all the gloom, it is surprising to me we aren’t lower on the year though.
Exactly.
So, in the spirit of “seeing the whole field”, maybe a vertical of the SnP, DAX, FTSE, NIKKEI is in order, or something like that.
Sounds good…
I was actually wondering about this earlier. Thanks for taking time to come back to this indicator.
Wood — maybe it’s my monitor, but I can’t see the red line, only the blue one.
There is a GREEN line, however?
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Jake, look at the bottom/lowest pane. It is there. Except now they have just barely crossed (not reflected in the chart above).
Ach! (slaps forehead)
I was looking at the main chart, duh.
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good stuff woodshedder.those two lines are doing some serious “kissing”. looking at numbers this morning,that thing does the cross today.tipping point.
Drummer, they were crossed as of Thursday’s close. The formula would have a short sell, if, at today’s close, they are still crossed. I believe as long as SPY doesn’t close down more than a 1% or so, they should still be crossed at the close.
There are now so many bears and so many recession predictions that I am not contrary – I am believing that it is a self fulfilling prophecy.
Thanks again for the update Wood.
Hey Woody, what program do you use to backtest?
Hi Raver,
I use Amibroker for the actual testing. The charts sometimes are generated by Amibroker. Sometimes I export from Amibroker to excel for other charting stuff.
Stuff about market math and numbers, and formulas… my pleeb mind can’t wrap my head around it, but figured I’d try yours to see if you gain anything from it.
http://www.bjmath.com/bjmath/thorp/ch7.pdf
Good stuff. Don’t have time right now to get into explaining it. Basically it lets you determine optimum bet size up to the theoretical maximum without crossing the line to where risk of ruin is very large.
we must be at or precariously close to that shorting signal now?…
Yes, the signal was triggered at Friday’s close. Look at the 2nd update at the top of the post 😉