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Hi Earl,
I don't give out the Fear Index algorithm. However, similar
algorithms can be designed using ratios of historical long-term
versus short-term volatility, or Low readings of ADX compared
to other ADX readings. As an example, you could look for the
lowest 14 day ADX reading in a 20 day period....etc. Or if
you wanted to tap into basic market cycles, you could use
the lowest 10 period ADX reading in a 20 day period. Like:
{TS Code for Paint Bar study}
Input: STLen(10),PerAdd(20);
If ADX(STLen) = Lowest(ADX(STLen),PerAdd) then Begin
Plot1(H,"");
Plot2(L,"");
End;
Using tools like these can produce results fairly similar to
the Fear Index. From that point, it is just a matter of analyzing
statistical scenarios of what happened after your values were
reached.
Walt
Earl Adamy wrote:
>
> Walt, interesting post, thank you. How is the fear index calculated?
>
> Earl
>
> -----Original Message-----
> From: Walt Downs <knight@xxxxxxxxxxxx>
> To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
> Date: Tuesday, September 29, 1998 6:12 AM
> Subject: FUTR GEN: Interesting Short-term situation in SP500
>
> >An interesting short-term situation has developed in the
> >SP 500 December futures contract. Indications are for
> >possibly extreme lower prices by Friday. Here's the
> >analysis:
> >
> >The Fear Index reads greater than 99%. Historically,
> >over the last year, the SP has experienced price drops
> >ranging from 50 to 150 points within 4 days of high
> >DFX readings. This indicator is 4 for 5 this year, so
> >the odds are : 80% probability prices 50 to 150 points
> >lower in the short-term.
> >
> >Counter-trend Tuesday's -- This effect is often seen in
> >the SP. Tuesday's tend to reverse the short-term trend.
> >Odds are : 56% probability lower close.
> >
> >Day 6 High/low effect -- The SP tends to trade from 6
> >day highs to 6 day lows. If we hit the highs of 3 days
> >ago, expect to see some monster sell programs. On lower
> >prices with no higher highs, expect a challenge of the
> >most current 6 day low.
> >
> >Modified Taylor Method -- This indicator says today is a
> >"Sell" day. If today's close is higher than it's open, and
> >price touches the high of 3 days ago, then the odds will be
> >80% that Wendsday will be the "Sell" day. If the "sell" day
> >is completed today, expect a short - term "short-sell"
> >up day on Wendsday follwed by an ambivalent Thursday. Today
> >is important to this method and the SP. Friday's action will
> >tend to mimic today's action.
> >
> >
> >Fuzzy Gaps -- This indicator uses fuzzy logic to locate
> >logical gaps that may not be represented by price action
> >Here is the statement, and the odds: If today's Open is
> >greater than yesterday's close, and today's Open is less
> >than yesterday's high then there is a 73% chance that
> >prices will close lower than yesterday's close, and a
> >47% chance that prices will close lower than yesterday's
> >Open.
> >
> >Walt Downs
> >CIS Trading Cos.
> >http://cistrader.com
> >
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