Trend-Following Indicator Back-Tests

Have a look at my research on trend-following indicators in which I systematically analyzed 10 ways to ride the trend in US stocks. The back-testing was done with Wealth-Lab Pro(R) for Fidelity Investments. The stocks considered were the S&P500 components. The 10 indicators tested were:

  • Average Directional Movement Index (ADX)
  • Commodity Channel Index (CCI)
  • Channel Break-Outs (NH/NL)
  • Moving Averages (MA)
  • Moving Average Crossover (MAXO)
  • Moving Average Convergence Divergence (MACD)
  • Momentum (Mo)
  • Rate of Change (RoC)
  • Linear Regression
  • Chaiken Money Flow (CMF)

Check it out – the data may surprise you!
https://www.fidelity.com/learning-center/technical-analysis/how-to-befriend-the-trend

How Stock Market Buying Opportunities Look

This MoneyShow interview highlights several things to look for to identify an excellent buying opportunity in the stock market. I recorded it in August and I think the message still holds.  Short summary as of this writing is that some of the signs were present in Oct 2011 but the market still has high valuations.

To get a current update of the state of the market, join divergence-alerts.com or attend my free presentation at the Traders Expo Las Vegas on Nov 18, 2011.

Back Testing Oscillators for Swing Trading

I back-tested oscillators for swing trading to research an article for Fidelity. The results suggest simpler is better. Right now we’re in a market that’s lower than 6 months ago, higher than 10-days ago, and moving downwards. Backtesting confirms this is likely the top of the current trading range. Read the full article back-testing oscillators here:
https://www.fidelity.com/learning-center/technical-analysis/swing-trading-indicators

TradeStation Webinar and Update

Several people asked for the archive for my recent TradeStation webinar. You can find it here:
https://www.tradestation.com/education/events/on-demand-webcasts/spotlight-on

Of course we have a new set of MACD Divergences now. To stay current, you can sign up for the full list of MACD divergences and MACD Histogram divergences daily on US stocks, ETFs and futures at divergence-alerts.com

Or to sample the scan output, check out the MACD Divergences on NASDAQ stocks posted on Wednesday and Friday by entering your name and email below. That adds you to an email list that gets notified of new divergences twice a week, plus a few promotional offers.

Watching the QQQs

Watching the QQQ gave important clues to the market this summer.  Negative MACD Divergences on the weekly chart (top) of the QQQ showed up just before the big drop in August.   As I write, QQQ is running into overhead resistance from the old up trend line drawn on the weekly chart (top).  On the daily chart (bottom), QQQ reached up to touch the 50-day MA and fell back.  If the NASDAQ leaders retreat, I would expect the market to follow.

QQQ on Sept 1, 2011 - Weekly and Daily Charts
TradeStation Screenshot of QQQ on 09/01/2011

The small cap Russell index, shown below in charts of the e-mini TF, has not even performed as well as the NASDAQ.   You can see from the weekly chart below (top panel) the past negative divergences.  In early August TF failed to achieve new highs and MACD confirmed the weakness – a fuzzy negative divergence.  On the rebound, it is not even close to the past uptrend line.  On the daily chart (bottom), notice TF’s current inability to reach its 50-day MA like QQQ.

TF Weekly and Daily Charts as of Sept 1, 2011
TradeStation Screenshot of TF on 09/01/2011

In summary, I think there could be further to go on the downside before the market gets ready for election year.

Upcoming Educational Presentations

TradeStation Strategy Network, Sept 6 at 4pm EST, Join me for a live online presentation on the latest in MACD Divergence technology. Click here to register for TradeStation Webinar

Trading Options for ProfitS (TOPS) Group Meeting, Sunnyvale CA, Sept 10 at 1pm PST. If you’re in town, feel free to attend this meeting for an extended talk on technical and fundamental indicators to get insight into the movements of the broad market.  Email RSVP to ovug (at) helpone.com

Traders Expo Las Vegas, Nov 18 2011 8am PST on MACD Divergences and 5:30pm PST on Weekend Market Status
Treat yourself to a trip to Vegas to sharpen your trading skills! Click here to register for Traders Expo

Trends and Reversals in Trading

Back in Feb 2011 at the Traders Expo New York, I recorded this interview about Trends and Reversals.  Since that time, I’ve researched several additional ways to check out the strength of the trend, otherwise known as market internals.    I’ll be talking about them in depth in a presentation at the Traders Expo Dallas on June 18, 2011 called Weekend Market Status.

One of the topics is yield spreads between corporate and treasury issues.   This can have an impact for stock traders and investors, not just the bond market.   Yesterday, the yield spreads headed off in an ominous direction for the stock market.