|
PureBytes Links
Trading Reference Links
|
Gerhard,
I can't vouch for the accuracy of this indicator, but I will pass along the
formula. The following two pieces of data need to be tracked in two
columns for five consecutive days (six days for A):
Col A -- Current daily NYSE composite closing price
Col B -- Number of daily new lows on the NYSE
For each of the last five days, a +1 or –1 is assigned to each value in Col
A and Col B. The Col A value is determined by comparing the value for that
date to the value for the previous date. If the current date close is
greater than the previous date close, assign +1. If less than the previous
date close, assign –1. Tally up the score for Col A (between –5 and +5).
The Col B value is determined by assigning a –1 to each day that the number
of new lows exceeds 74; else assign +1. Tally up the score for Col B
(between –5 and +5).
Add the tallies for Cols A and B and you have your "Pitbull Crash Index,"
or PCI.
My copy of this formula is 2-3 years old and may have been refined by Ford
during that period. The number 74 for new lows must have been "optimized"
for all previous crashes. He actually says to use 74 if your data source
is the Wall Street Journal, Dow Jones, or Barron's, and to use 40 if your
data source is Investors' Business Daily. IBD must track fewer stocks on
the NYSE than the other sources.
Following are some of Ford's comments about the indicator:
"The index runs from a –10 to a +10. A –10 is the most negative for the
market and we have always used it as an indicator to exit the market. At
the other end of the extreme at +10, the market is unstoppable, at least in
the short term.
"If the index hits –10 at any time during the week (he recommends checking
it each weekend), exit the market the following Monday morning. Do not
re-enter the market until the PCI hits a +6.
"Here's a rough guideline to follow for interpreting the health of the
market:
10= Raging Bull
8= Very Bullish
6= Short Term Bullish (Reentry point after a crash)
4 to –4= Neutral
-6= Short Term Bearish
-8= Very Bearish
-10= Probability of near term crash"
Regards,
Bill
----------
> From: Gerhard Frischholz <gerhard.frischholz@xxxxxxxx>
> To: Metastock (E-Mail) <metastock@xxxxxxxxxxxxx>
> Subject: U.S. Stock Market Crash Index
> Date: Thursday, August 05, 1999 12:09 PM
>
> Take a look at this site:
>
> http://www.wwfn.com/crashupdate.html
>
> They publish a so called U.S. Stock Market Crash Index, developed by
Henry
> W. Ford. Right now it shows a reading of -10, meaning that a stock market
> crash might be imminent.
>
> Their recommendation is:
> "When the Market Crash Index reaches a -10 we exit the market of any
risky
> short-term long positions, and will increase the number and size of our
> short trades."
>
> Anyone familiar with this indicator ? How is it calculated and how
reliable
> is it ?
>
> Any hints welcome, especially these days when everything falls and falls
and
> falls.
>
> Regards
>
> Gerhard
>
>
> -------------------------------------------------
> Dipl. Ing. Gerhard Frischholz
> Berner Straße 87
> 81476 München
> Internet: gerhard.frischholz@xxxxxxxx
> ------------------------------------------------
>
|