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Strategies & Market Trends : MDA - Market Direction Analysis

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Jan 23 4:00 PM EST

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To: jjs_ynot who wrote (16157)	6/5/1999 10:42:00 PM
From: Berney	Read Replies (2) of 99985

Dave, I used to play a lot with the weekly MACD's on the DJIA stocks. Had a little model that I called BAMBI and I still update it periodically. I divided the picture into six groups: 1) bullish signal, 2) bullish, 3) bullish but reversing, 4) bearish signal, 5) bearish, and 6) bearish but reversing. I found that the strongest price moves were in group 6. The problem was that in a fast moving market, by the time the bullish signal was given, all or the bulk of the price move had already occurred. I also found that there was a natural movement from 1 to 2 to 3 to 4 to 5 to 6 and back to 1. The time to be concerned is when I see a lot of backing up. In other words, stocks not going from 6 to 1, but back to 5. The problem with MACD analysis is that as most TA or FA, it is attempting to view historical results and project future direction. It will work ... most of the time. However, MACD has a particular problem in a non-trending market. I also found that the MACD was of dubious value when the stochastics was above 80 or below 20. Just my observations. Berney

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