Short term correction signals?

Jim gave a indicator for a bull correction in a bear market using $nahl: check crossovers of the 13d
EMA above the 42d EMA, when the 13d EMA is negative. A 9 day version is used by a couple of us here.

Both have signaled
today (check the MACD which are based on EMA crossovers):

https://schrts.co/xkYcCGJf

Two related signals based on bullish versus bearish PnF chart patterns also went bullish today:

https://schrts.co/UnwYYZqn

https://schrts.co/KaIwiqvQ

Since April is usually bullish, if these signals remain intact until April, I suspect they’ll last to the beginning of May.

rrjjgg

7 Likes

Jim gave a indicator for a bull correction in a bear market using $nahl: check crossovers of the 13d
EMA above the 42d EMA, when the 13d EMA is negative. A 9 day version is used by a couple of us here.

It was intended for use after a serious, sharp, really major bottom…an early sign of when it might be safe to get back in.
In effect, it’s trying to get you into the market early, during the usual strong rally before the more conservative NH-NL positive test can kick in.
It’s hard for NH-NL to be positive if the market is much nearer its one-year low than near its one-year high.
If the index is in the low end of the range, most individual stocks will be as well, so they won’t generally be hitting new highs yet.

We don’t seem to be in that situation right now.
Though it may have other uses, I don’t know of any value to that test at other times.

(my version did not look for either value being negative or not, it was a simple crossover test)

Jim

8 Likes

Jim,

‘(my version did not look for either value being negative or not, it was a simple crossover test)’

You implied the 13d EMA was negative when you say it’s useful when we are coming out of an ongoing bear market and,
‘It’s hard for NH-NL to be positive …’.

Once we are in bull mode (13d EMA>0), as you indicate, the test is no longer useful.

rrjjgg

You implied the 13d EMA was negative when you say it’s useful when we are coming out of an ongoing bear market and,
‘It’s hard for NH-NL to be positive …’.

I use a different lookback for my “NH-NL positive” test and my “NH-NL rising” crossover test.
I don’t look for anything to be negative in the “NH-NL rising” test, but sure, it’s likely that both will be negative.

It did well in backtest to be long if either of those signals was bullish.
But the sting in the tail is that essentially all the gains from adding the “NH-NL rising” test were in a couple of specific historical stretches.
Sharp rebounds from very major bottoms.

For that reason, I don’t act on it any more, other than keeping an eye on it.
My bottom detectors have worked better for me.

I’ll go out on a limb with a prediction:
An index short opened now, closed on my next major bottom signal, will be nicely profitable.
I’m not sure what index would be best. Russell 2000 maybe? It’s at 2067.

Jim

14 Likes

R2k short is still a great candidate. Weakest of the US mkts, below 10m MA, In a bear… but as you know Jim, there goes madness / max pain, but I suspect you have the trading chops there. And “madness is like gravity - it just takes a little push” :wink:

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Jim - I’ll go out on a limb with a prediction:
An index short opened now, closed on my next major bottom signal, will be nicely profitable.
I’m not sure what index would be best. Russell 2000 maybe? It’s at 2067.

Probably a good call.

Monday 10:45

IWM -0.56%
QQQE -0.63%
IEMG -1.42%

DBC +3.39%

GD_