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LOOK REPORT #30 Background: Quick Look Reports performs the forensics of the dominant trend in an Index, Equity or Commodity. This report looks at the preliminary results of an experimental buy/sell indicator (i.e., not the standard RSI/MACD) which was developed by a close associate of mine over five years ago. He has tested hundreds of trading systems in the past 20+ years and this has been the most practical and works on trending datasets. It has been successfully back-tested/traded in the past five years using the Russell 2000 as a US proxy. I am currently conducting research on the trading tool and applying it to the closing daily prices of a number of datasets (which will be expanded in the future) using daily updated datasets from Mr. Nick Laird (see www.goldmarketdata.com. This approach has nothing to do with market cycles. It is a simple (but elegant) mechanical trading tool to use as an additional guide (possibly with cycles, RSi,MACD,etc) to stop large losses and find solid turning points. In Table I, we present a summary of our initial findings as a start (results can change daily). It is not yet proposed as a trading tool, but let’s see what the future research may hold as some of its parameters are optimized to each particular dataset (ongoing process). Table 1 presents the initial results of a mechanical trading system which has a very simple buy/sell conditional (keep it simple). It does not predict absolute tops and bottoms but the idea is to catch 80% of the major trend while avoiding the major corrections. An item (such as Nat Gas) with both a Buy and a Neutral Rating means in this case it is probably coming off a seasonal bottom (but not yet a solid daily Buy indicator from the mechanical trading system). These results cannot and should never be applied to “day trading” which would require 5 to 15 minute real-time data and you would need a real-time feed graphics code such as TradeStation. Bottom Line: Long term cycles may govern the overall long term behavior of markets but it is possible (at least in trending markets) to let the market tell you where it is going by adopting some type of mechanical trading system with a set of “conditionals or rules” which will determine entry/exit points (and many interesting ones are noted in FSU Archives by various authors). The results of such a mechanical trading system will be added to our arsenal (cycles, mechanical trading, neural nets, as well as rumors and innuendos). The current mechanical system has been extensively back-tested on certain (but limited datasets) and is a work in progress as regards Forex, Metals, Rates and Energy. TABLE 1. DATA ITEMS OCT 13 2006
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INFORMATION DISCLAIMER: The author is not a registered stockbroker nor a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity, index or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, the author recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments. |
