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Those channels can "predict" reversals for ranging markets only. When
market is trending they don't produce tradable signals. Sometimes
price makes a short living correction then penetrates boundaries and
keeps going on. Sometimes it penetrates even without correction. For
trending market of 2003 I counted 5 "tops" that were "predicted" but
never happened.
Channels of all types are estimators for volatility, not predictors
for directional movements or reversals.
Alex.
Monday, October 4, 2004, 11:47:32 PM, you wrote:
JW> This is a a supplement to Ben's call for a significant top today. Whereas
JW> Ben's analysis was based on a macro view of the markets, my methodology
JW> includes macro models as well as a detailed look at individual stocks in the
JW> OEX and NDX. My forecasting methodology also is predicting a reversal this
JW> week but the macro models of the markets have yet to flash a sell signal.
JW> The most likely reversal days appear to be Wednesday or Thursday.
JW> To get an opinion of the magnitude of the decline, I look at the individual
JW> stocks. The more stocks in an index contributing to the reversal, the
JW> greater it will be. Those of you following Clyde's work on Hurst channels
JW> realize that the chance of a reversal is greatest at the boundaries of the
JW> channel. I measure channel location along with forecast signals to get a
JW> feel for the extent of an index move. Yesterday, 29 of the NDX 100 stocks
JW> were at a channel boundary and near a reversal - today's up move resulted
JW> in 50 of the 100 being in reversal territory.
JW> I expect some rounding action in the next two days with more stocks entering
JW> their time and price limits for a reversal so the decline could be
JW> substantial.
JW> I have also exited fund positions and began to enter on the short side.
JW> I urge caution this week.
JW> Jim White
JW> Yahoo! Groups Links
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