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Steven,
I've found that oscillators are great in helping you find entry points within a trend, but aren't very reliable for predicting trend changes. They are usually right at trend reversals, but pick several reversals for each real one. That's why the trend is you friend and I rely on it so heavily in my trading. Trend channels work if you use them right. If you trade on short term trend reversals in the direction of the intermediate term trend and always set a stop under the short term channel, you will come out OK in the long run. You won't catch market tops or bottoms exactly, but you will get in near the bottom and out near the top.
I don't like to send charts to the list, but I'm going to make an exception for the attached Dow Jones Industrial Average chart. If you were trading large cap stocks and using the DJIA for your guide from April of this year you would see that we have been in an intermediate term up trend the from then to now (dashed red lines). That means you should have been trading long positions only. Looking at the short term trend lines (the dashed blue ones) we were in a short term up trend from April to early August so it would be OK to enter new long positions. From early Aug to early September we were in a short term down trend so no new positions should have been entered. That doesn't mean existing positions should have been closed, that should only be done when stocks or targets are hit or in rare cases when there is a better opportunity else where. From mid September to mid October it was Ok to enter new positions again. From mid October to late October we were in a short term down trend again. From late October to now we were in a short term up trend and it was OK to take new long positions.
Note that using this method I still took some hits. It doesn't get you out at the top or in at the bottom, but my portfolio is almost back to its early October high.
Jim
-----Original Message-----
From: Steven Buss <sbuss@xxxxxxxxxxx>
To: Metastock-list <metastock-list@xxxxxxxxxxxxx>
Date: Thursday, December 04, 1997 6:00 AM
Subject: T/A and Recent US Market Action
>A couple questions:
>
>- Anyone else struck by the number of technical analysts who have been
>bearish (including me, although I'm an amateur) and wrong recently on the US
>market?
>
>- I've been trying to determine what the technical indicators were recently
>(since 10/27/97) that should have cautioned me on my bearishness. (I'm
>putting aside the issue of "long-term" vs. "short-term" here. The fact is,
>I was/am very impressed by some massive tops and yet missed a 10% up move in
>the indices.) What should I have noticed? Here's what I have so far:
>
> - A simple 5,3 Stochastics on the weekly index charts would have been
>one caution around 11/1.
> - A weekly default parameter MACD signaled something similar about the
>same time.
>
>What else was there?...
>
>Steven Buss
>Walnut Creek, CA
>sbuss@xxxxxxxxxxx
>
>
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