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Strategies & Market Trends : Stock Attack II - A Complete Analysis
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To: SpecialK who wrote (25726)12/7/2001 1:26:36 PM
From: TechTrader42  Read Replies (2) of 52237
 
One big problem with the complacency indexes is defining sell signals. The signals are really any reversals from extreme overbought or oversold levels. But the extremes can change under different market conditions. One is left guessing how high or low they might go.

The reversals from the 90s might be taken as sell signals now. But the market has been so bullish that I've been tempted to wait for the CI's to hit 100 intraday and close very near 100, to get certain signals. But those signals might not occur.

Further, the market can reverse at midrange levels, when the indexes are near 50.

So it isn't really a system. It's not reliable. It's just a guide on where complacency is.

Today, I have no idea whether the indexes will continue down to the midrange and reverse, reverse quickly here and continue back up toward 100, or head back down toward 0.
The indexes can't be used as a guide for predicting the market. They look back, not forward.

When the indexes are at extremes, the likelihood of a reversal is high, but as you point out, they can stay overbought or oversold while the market moves higher or lower.

Because of all these flaws in the indexes, I'm offering subscribers a 3% reduction in weekly fees. I've raised the weekly subscription fee by 13% in advance, to make this discount possible.
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