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Strategies & Market Trends : Galapagos Islands -- Ignore unavailable to you. Want to Upgrade?

To: Challo Jeregy who wrote (28387)	2/23/2003 1:26:46 AM
From: PuddleGlum	Read Replies (2) \| Respond to of 57110

You're posts just exude bullishness, Challo. So here's something for you (but you may find this more confusing than helpful, because I try to stay slippery when making market prognostications): Wednesday, for the 5th time in 4 1/2 years, my system gave a strict Bottom Confirmation signal. This is a (VIX-based) signal that tells you that you may have just missed the bottom within the last week or so. Of the 4 previous times that this signal was triggered, 1 was highly profitable, and three were slightly profitable provided one exited on the next sell signal. The Bottom Confirmation appeared once in a bull market, and thrice before during the current bear. Since this signal has only happened 4 times previous to the most recent signal, one cannot ascribe statistical significance to it. After all, Don Sew has indicators that have been right 13/13 times, and he still considers them to be statistically insignificant. My difficulty with the current market is that I show a buying climax on 11/25/02 that, along with 5/21/01 and 12/7/01, is among the three strongest buying climaxes in the 4 1/2 years of data that I have, and such a significant event should have a sphere of influence that extends for some 2 or more months (further extended by the continuation pattern on 1/6/03). Note that The Bubble was on a bigger scale than my indicators are capable of handling, so it didn’t appear as a buying climax, though it gave VIX-based sell signals in mid January 2000 (low confidence) and early March 2000. The greatest selling climaxes occurred on 8/31/98, 9/20/01, 7/23/02, and 1/27/03. Normally I disregard a climax if it is within roughly 2 months of the previous one, unless it is greater in magnitude than its predecessor. My measurements of bullish and bearish percent have a small amount of asymmetry to them, which makes buying climaxes look slightly weaker in comparison to what is in reality an equivalent-strength selling climax. The selling climax on 1/27/03 is therefore nearly equal in magnitude to the buying climax of 11/25/02, making it unclear whether the selling climax negates, or is merely a reaction to, the buying climax. The other problem here is that my system is still morphing, albeit slowly. Some of my data didn't make much sense until about a month ago. Because I don't have a lot of confidence in this signal, I only put a small amount of new cash to work. And I retain my QQQ puts, in addition to several (too many) long positions. And as an aside, one of the reasons why the two-month time period is important to me is because two months works out to about 42 trading days. And 42 is the answer to all the questions of the universe, I'm sure some of you know. Actually, I've determined that 42 days is the typical memory span of the average trader/investor. Anything good or bad that happened more than 42 days ago is completely forgotten.