Hi Tom,
Hope things are going well for you and yours...
In looking at the upper half of the graphic first, I notice that the S&P500 track (green line) is never the highest of the three indices for the entire year. The Dow and the NASDAQ Comp take turns leading the way to the upside.
That leads me to speculate whether or not the normalization formula doesn't have an unintended bias built into it for the non-S&P indices. It would be interesting to compare other commonly used indices as well to see if the bias holds true or if this anomaly is merely coincidental because of the very short time frame captured in the graphic.
Turning to the bottom half of the chart, as you indicated, the Value Wave Indicator tracks nicely with the chosen indices, with perhaps a week or two lag time, which is probably "normal", as it takes some time for the markets to digest news and fully react to events and or pricing changes.
I'm curious about the bullish/bearish delineation at <30% being bullish and >50% being bearish. How were these numbers chosen? Trial and error? Supporting data over a longer time frame? I further presume that the 31% to 49% range represents a "fairly priced" market or no man's land? In other words, the markets are neither oversold nor overbought? Just guessing, here...
Is the ValueWave Cash Indicator a representation of cash available for investments expressed as a percentage of some total, or does it represent the movement of cash from cash savings vehicles to the markets? The former choice would be an indicator or predictor of events yet to come, while the latter would represent a graphic depiction of events that have already transpired (or a history of the movement of cash from say money market accounts into stocks).
This is interesting stuff though, especially if the general market trend could be predetermined and investments made accordingly... By way of example, go long on stocks when the indicator is bullish, and then protect any gains via options plays when the indicator turns bearish, (almost) never selling the original investment...
Nice work...
EK!!! |
