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Strategies & Market Trends : Waiting for the big Kahuna
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To: Rich1 who wrote (55125)9/20/2001 12:54:05 PM
From: bearshark  Read Replies (1) of 94695
 
Here is my take on the ARM's index. I use it and its components in a variety of ways. The plain old ARM's 5-day index has been giving buy signals for months as you mentioned. Another well-kown fellow uses a 10-day ARM's and a 1.3 to signal a buy and 1.5 to signal a further low. That also has provided false reads--at least to some extent.

The ARM's index includes two items--volume and shares. Quite often volume and shares go out-of-balance (as I refer to it). That simply means that the up and down volume are not consistent with up and down shares. When the components of the ARM's are out of balance, it will give false reads. In November 1999, the 5-day ARM's was screaming sell and the INDU moved up 10 percent or about 1,200 points in the ensuing months. However, the shares component was distorting the volume component. I read that as the last stand of the small investor.

For the last two to three months, the shares component was again distorting the ARM's. This again has made the 5-day ARM's unreliable. The key is to analyze the components separately and compare them to a variety of ARM's averages. I consider this one index and its component information to be extremely valuable. Many individuals who use the ARM's toy with it and create their own ARM's based index. One fellow that has done something novel and interesting is an individual named Hoopes and he can be found here. I do not do what he does. However, his posts over the past two years have been very interesting. You will find some of his notes here.

csf.colorado.edu
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