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Strategies & Market Trends : TA Science Projects & Experimental Indicators
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To: Smooth Drive who wrote (188)6/10/1998 11:41:00 PM
From: ftth   of 237
 
As far as experimenting with Bloch's two favorite indicators, he
doesn't give enough information. Divergence analysis means different things to different people, and he doesn't say "divergence between what" either.

Put-call ratio is also too vague to say. He does say specifically OEX, so that narrows it down some, but there are a zillion different ways of using put and call information to form ratios.

Can't say that I've tested, or even looked at, the entire zillion, but one that made sense to me was Bollinger's use of CBOE total put volume. He uses the ratio of today's put volume to today's 10 day MA as the signal. He found it only useful for calling bottoms, and couldn't find a similarly successful ratio for calling tops.

Nope, same setup except using call volume doesn't work for tops. As well, I don't believe any put-call indicator that worked well 10 years ago works well today. Total volume has increase dramatically and average experience level of participants has gone down.

The public bias toward "bullish or nothing" gives call volume a different bias than puts, so ratios that were tweeked 10 years ago need revision. It seems these days, the average joe-market-participant is more likely to buy naked calls on their favorite internet "company" than to sell short "because short selling is too risky" Stocks never go down very long! Naked calls are a no-brainer!

I actually heard that over the wall at work a while back. The truly scary thing is they made a killing on this one. Confidence is high so they'll bet even more on the next one. Eventually, they'll get their head handed to them by the market's evil twin.

dh

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