Hello LG,
You might recall a question of mine sometime back as follows:
Les, (and thread) for a bit of Sunday group think<g> I would appreciate thoughts on how to bastardize Doug Fabian's two basic indicators (trend based) on being in or out of the market.
Fabian was interviewed in this months TA&SC. His two primary indicators are 1) "Propritary, but there's no complicated black box behind it. It's a composite of five widely held stock funds that gives us a picture of the trend of the overall stock market; and 2) "We use the Dow Jones Composite Index as a confirming Indicator. When both of these indicators are above their 39 week moving average, we have a buy signal en effect, and you should be fully invested. When they are below there 39-week averages, we move to 100% money market funds. We don't ask why, discuss it, or wait for tomorrow's market action. We follow our plan". He's goes on to describe some recent entries, exits and return.
So, for fun and education. What would be five indexes that would "Give us a picture of the trend of the overall stock market"? Perhaps the S&P 500, Value Line, NDX, ??? And, what would be a logical way to crate a composite of these five indexes using a 200 day MA?
You suggested that I try an average of the NYSE & Naz Composite and, I've got to tell you that was dead on the money.
(NOTE: I've never seen Fabian's newsletter but his web site is at fabian.com
As you know, I lead with point and figure charts but I've been interested in tracking some kind of a logical overall market trending system as well (kind of a back up system to the ole P&F charts. (I have two sump pumps in my basement -- it's my nature<g>)
Well, I just recently managed to get Fabians buy and sell dates going back to 77. I've run a spread sheet using a straight 200 DMA system and one using 150 DMA with percentage bands and compared it to Fabians buy sell dates -- and the results have been interesting. My Excel data only goes back to mid 84 for the Dow Jones and Naz Composite but I have the NYSE Composite back to 75. I would like to run this system from say 1970. If anyone can provide this info in Excel format I would be grateful.
Anyway, I'll post the results below but something I also did was create a Birinyi overbought/oversold indicator for these moving averages and noticied a number of interesting items. First, if you look at the healthy market drops, they always happen in a certain percentage range above/below the 200 or 150 DMA. And, the major drops are after the market pulls back to/or below the ma's. My TC2000 has the Dow Jones Industrial Average back to the mid 20's. Placing the two referenced moving averages on the graph and just going forward is interesting.
Here's the results:
DJ COMP
WITH
NYSE &
NAZ 150 DMA
COMP WITH
FABIAN 200 DMA BANDS
B 4/18/77
S 10/23/78
B 3/28/79
S 10/23/79
B 11/16/79
S 3/18/80
B 6/23/80
S 7/23/81
B 8/27/82
S 12/7/84
B 1/17/85 B 7/26/85 B 7/26/85
S 9/12/86 S 10/15/87 S 9/12/86
B 10/30/86 B 6/8/88 B 1/7/87
S 10/16/87 S 1/15/90 S 10/15/87
B 4/11/88 B 5/17/90 B 4/8/88
S 4/15/88 S 8/2/90 S 9/1/88
B 6/2/88 B 1/28/91 B 9/9/88
S 11/14/88 S 8/13/92 S 12/20/89
B 12/6/88 B 9/10/92 B 1/2/90
S 1/23/90 S 9/22/92 S 1/12/90
B 3/19/90 B 10/28/92 B 5/14/90
S 3/22/90 S 3/29/94 S 8/3/90
B 5/18/90 B 8/30/94 B 1/24/91
S 8/7/90 S 10/4/94 S 6/22/92
B 1/25/91 B 1/6/95 B 11/25/92
S 8/24/92 S 7/15/96 S 3/29/94
B 11/6/92 B 7/18/96 B 8/30/94
S 3/31/94 S 7/22/96 S 11/23/94
B 8/30/94 B 8/1/96 B 1/13/95
S 11/23/94 S 8/27/98 S 7/15/96
B 1/9/95 B 11/5/98 B 8/7/96
S 7/16/96 S 8/14/98
B 9/16/96 B 11/5/98
S 8/11/98
B 11/9/98
You can see some whipsawing in all three systems. I'm going to experiment with a few different band settings. If anyone has an interest in results let me know. Otherwise, thanks for the logical suggestion -- it was just the ticket. You can see that it hit a number of Fabians buy/sell dates.
Take care,
Eric |
