Hi Barbara:
I probably use the 5-day sum simply because that is how my source for this information used it. However, for the 10-day and the 20-day, I do divide the sum by 10 and 20. I do not keep a moving average of the ARMs. The sum is working fine and I would be afraid to experiment with it as long as it is working.
I think trendlines or trend-channels are excellent. The trend is our best friend. For example, take a look at CDG. The trend appears to be in the process of changing now or making a pattern but before that it stayed within its trend-channel down.. CDG was a Christmas treat. Take a look at the industry pattern--OSX. It is almost identical to CDG and several other stocks in the oil-service sector. CDG and the OSX were moving in tandem. Now couple the trend with some fundamentals. Insider selling within the oil-service sector; significant drop in oil prices, etc. Couple this with the ARMs data (to get a short-term trend in the NYSE) during that period, short or buy puts when the ARMs was under 4, and fatten up the bank account. For example, on Friday, 1/2/98, we had a 3.72 (overbought) in the ARMs. CDG just moved above 50 on Monday, 1/5/98. By Friday, 1/9/98 or Monday, 1/12/98, it was either in the low 40s or high 30s. (The CDG prices are from memory but I think they are close.) At the end of the day on 1/9/98 the ARMs was at 8.54 and screaming buy. CDG did rally a bit on that next move.
There are times when the clouds part and manna falls to the earth. It is up to us to identify the break in the clouds and grab all the manna we can get when it is falling. Eventually, the same thing will again happen. I hope I can find the right spot and the right clouds. |
