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At 07:17 AM 12/7/97 +0000, Steven Buss wrote:
>The S&P 500/100 show the daily Stoch(5) and Stoch(13) both well above 80 and
>the weekly Stoch(5) also well above 80 (and looking like the daily
>Stoch(13)).
>
>The DowInd, Nasdaq Comp, and Nasdaq 100 stochs of the type noted above are
>below 80 and rising.
>
>I assume that this MIRAT Buy Signal, then, would be based on market action
>in which the Stoch for the two S&P indices would remain above or close to 80
>for at least as long as it takes the other indices to catch up. Is this a
>correct interpretation?
>
>Frank, my memory is that you're the one who posted the recent note about a
>Stoch that doesn't drop being trend indicating (or something like that, I
>can't find the note). (c.f., latest issue of TASC on the "Pop-Stochastic").
>
>Sometimes a Stoch drops below the 80 signal line and this is an extremely
>important thing to pay attention to because the drop to below or close to 20
>will turn out to have significant price implications. But sometimes the
>drop below 80 is very short-term and the return to a reading above 80
>signals continuation of the trend. (The article in TASC points out that the
>return to a reading above 80 is itself a signal of the continuing trend, as
>Frank's(?) note also pointed out.)
>
>My question is this: Are there one or more indicator(s) one can use in
>conjuction with the stoch that provides some significantly reliable insight
>into whether a below-80 faltering stoch signals the beginning of a
>significant correction or merely a breather before the stoch moves to above
>80 again?
>
>In the VERY FEW cases I've looked at, it seems like a default parm MACD
>provided some early insight into what might be the actual future of the
>stoch in the kind of case I've laid out above.
>
>Thoughts?
>
>Steven Buss
>Walnut Creek, CA
>sbuss@xxxxxxxxxxx
>
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Steven -
MIRAT does not use Stochastic in its algorithms. Another Tools for Timing
program, the user interpreted TIMER PROFESSIONAL, does make available
Stochastic of Price and its version of an Advance/Decline Line. I've
uploaded to my web site a page showing this. The URL is:
http://www.usinternet.com/users/fbg/tpstoc.htm. I like what I see in that
graph, the two Stochastics rising rapidly, with Price leading both. If
Price were lagging behind, I would not think as I do, that the Market will
be going up for at least the next few days. I don't have a crystal ball,
but I do see Price leading the two Stochastics, which will have to do in
its place!
A couple of notes on Stochastics in this context; MIRAT uses Signal Lines
of 25 and 75 and you are using 20 and 80. I only point it out for when
comparing graphs. Also, on my web site page I am showing the DJIA and not
the S&P 500, so the Stochastics of Price is that of the S&P 500.
Stochastics of the Advance/Decline Line is of the NYSE, the same with DJIA
and the S&P 500.
You ask about confirmations of Stochastics. One I use, already mentioned
above, is Price. Remembering that Stochastics are Moving averages of the
relationship of Price to the Range of Prices over a given period of time, I
look at Stochastics as a representation of how well Price is doing against
that Range of Prices. If Price and Stochastics keep going up, I see
Stochastics confirming Price. In up movement, it will be Stochastics
confirming Price, as Stochastics, by its Moving Average nature, must lag
behind Price, more volatile that Stochastics. Stochastics can lead price
if Closes are consistently higher from one day to the next and those new
highs (for that immediate time period, but not necessarily 52-Week or other
longer than a few days time period) are small. In other words, if Price is
moving up slowly and each day brings a new high, then Stochastics can lead
Price in its rise.
If Stochastics snake along between the Top Signal Line (75, 80, whatever)
and the top of the graph, then I see that as simple confirmation that the
upward Price move is strong and will probably continue for the next little
while.
Williams %R and RSI (Relative Strength Index) are two Indicators I have
used in corroboration with Stochastics. I've also used Stochastics with
longer parameters, say 21 days and higher and lower Signal Lines (85 or 90
and 10 or 15) as more of a confirmation of a trend. I should add that I
only use Signal Lines for points of reference, not saying that something
has to be done when one is crossed, concentrating more on the direction,
rate of change and consistency of Stochastics.
I believe that everyone should have a few Indicators or other tools with
which they become comfortable in using, Indicators that they come to trust,
and Stochastics is the one for me! For the record, the others are Moving
Averages and Linear Regression (Line of Least Squares). As I see more and
more of Jim's Channel stuff, I am feeling more comfortable with Channels.
-- Frank :-)
High Return on Investment using Technical Analysis
http://www.usinternet.com/users/fbg/
Minnesota Long Distance Canoe Racing
http://www.usinternet.com/users/fbg/mnlong/
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