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I am not sure what all the concern is about.
Assuming there is agreement that CMA and its projection are being correctly
calculated the question remaining is what to do with the plot. As with any
indicator, chart construction, optimization, MAs, etc. (essentially anything
that we use) there are limitations. Understanding the limitations of CMA
techniques provides the basis for deciding whether or not they mesh with a
particular trading style. They do provide valuable input,
particularly when used with other indicators. The accuracy of CMA
projections tends to decrease with projection time. But for short
times a reasonable fit often occurs between price action and the envelopes
for several bars into the "future" (demonstrated a number of times by with
SwingMachine's Hurst program). And even when things fall apart
and the bands/envelopes are broken this in itself is useful input. In
addition, the CMA takes into account the time lag present in a normal MA
presentation. As a result, there might be merit in looking at the CMA
projection through the last bar instead of or in addition to the normal non-time
adjusted MA presentations. Bottom line, it is another tool that some
find useful but one that has as many warts as other
TA.
Bill
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