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Some months ago someone posted a comment that the 5 and 10 day trading index
(Arms index) did not seen to work anymore as an overbought / oversold
indicator. Like any
overbought / oversold indicator you must identify what type of market
enviorment you are in. Test the indicator in all types of markets going back
10 or more years.
I have found that the 5 day oversold Arms index works extremely well in a
trading type market. For the sake of this discussion I have labeled the
year 2000 as such a market.
The criteria for a buy signal is a reading of 120 or higher.
Following is a list of the buy signals for this year:
DATE 5 DAY ARMS
1-4 128
1-28 121
4-14 165
5-3 126
5-25 121
6-9 125
4-30 122
7-5 125
Most of these buy signals were at or near a short term bottom. In some
cases the market went straight up the next day and never looked back.. The
S & P cash went up from 29 to 121 points.
Yesterday (Wednesday) the Arms index closed at 130, we will see if this
buy signals works.
Norman E.
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