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One example is Larry Williams with his "will-spread". He calculates the
ratio of SP-500 / 30 yr treasury bond price. (or 10yr)
The usual presentation is to have your index in one pane and the
will-spread in another. This is somewhat different than your presentation
but it is it the same basic idea.
When the will-spread ratio crosses up over zero (conservative) or turns up
( speculative) it is a favorable market environment to go long stocks.
This obviously is a macro view of one aspect of the investing environment
and may not apply to individual issues. Some add on tools for FastTrack
have incorporated this idea, along with other macro indicators, to generate
an overall market timing signal which some people have found useful.
Cheers
Sid
At 10:56 PM 03/04/2003 -0500, you wrote:
>Criticism sought:
>
>
>Here is a screenshot of a concept I am working on in Amibroker.
>
>The bottom panel has a red line and a green line. They are:
>
>Red - DJX--X an index that is 1/100 of the DJIA.
>Green - TYX--X CBOE 30 yr treasury bond yield index
>
>You can see that the bond yield is much less volatile than the Dow.
>
>When the Dow is trending down, would it be good to move to bonds, until
>the relationship between the two reverses and the Dow again outperforms
>the bonds?
>
>The top panel is a ratio line of the two indexes. It does seem to be true
>that when the Dow is declining with more momentum than the bond yield, the
>ratio line reflects this.
>
>The yellow line shows a recent trend of the ratio that seems to indicate
>the Dow had been performing well. This trend line was recently broken as
>the Dow turned down and bond yield remained relatively flatter.
>
>Often, what has seemed apparent to me as an assumption proved to be
>totally flawed. I seek comments on this idea of using ratio lines to
>compare instruments. The use of ratio lines is demonstrated in Murphy's
>book The Visual Investor.
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