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> -----Original Message-----
> From: M. Simms [mailto:prosys@xxxxxxxxxxxxxxxx]
> Sent: Saturday, September 29, 2001 7:25 PM
> To: realtraders@xxxxxxxxxxxxxxx
> Cc: profitok@xxxxxxxxxxxxx
> Subject: RE: [RT] SPX long term chart
>
>
> Interesting indicator.....but what is the # of weeks (months ?) in the
> linear regression calculation ?
> 20 ? 30 ? 40 ?
Attached, is an updated chart with this month's close. The indicator at the
bottom of the chart is a smoothed instantaneous projection of the rate of
percentage gain/loss on an annual basis. This version of the indicator is a
more mathematically correct presentation than in the earlier chart that I
posted. It takes the log of the price series then determines the slope of a
12 bar (ie, 12 month) linear regression, and uses that value to convert back
to an equivalent annual CAGR. Basically, it is a long-term trend strength
indicator.
The bars that are painted red on the chart, are those bars where the 12
month linear regression slope is negative (in the previous bar). There's a
one month lag because the red bar shows the earliest bar at which we would
have known that the trend went negative. As you can see, in the go-go years
of the 80's and 90's, going to cash when the bars went red, would probably
have left roughly half of buy-and-hold on the table. However, it would've
returned you about 80% of the large move from 1995 to 2000.
PS: the (Not So) Easy Language calculation for the indicator is:
100 * (power(expvalue(LinearRegSlope(log(C), 12)),12) - 1)
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