Market Reversals And How To Spot Them

[scifos]

Has anyone read this article or seen/used this technique? Seems from the article that it has done pretty well in spotting market tops/bottoms. I've been working up something to test this. Here's what I have so far. You can play with the Inside and Outside window and the setting used to determine if its a market top or bottom(its the slope of the regression line for that number of periods, a pretty bad way to figure if its signaling a top or bottom, but you could figure that out pretty easily by eye.) all you need to do is copy and paste in historical data from yahoo. Unfortunately, the spreadsheet only looks at the adjusted closing price because otherwise it would take splits/etc as price changes. Working on fixing that and adding something that would show %return over the time period for the given settings (so I can find the optimum settings).

Article: http://www.investopedia.com/articles.../04/031004.asp

Spreadsheet: http://www.mytempdir.com/229532

[Runner]

Hey Scifos thanks for sharing. I’ll need to go through the info when my brain is working right. Smoked right now. First glance looks interesting!!

[dmk112]

Hey Scifos thanks for sharing. I’ll need to go through the info when my brain is working right. Smoked right now. First glance looks interesting!!

Runner, what are you smoking?? lOL

[scifos]

Anybody read the article or have commments on it?

[mimo_100]

scifos,



thanks for posting the links(s).

I would love to dig deeper into this. Where are we today as regards this "model"? Inside? outside?

[scifos]

I've finished up the excel worksheet, but I've got class and I"m on a pub. computer. I'll upload the newer version today. You can tinker with the variable (inside box, outside box) and see what you get. I think that as far as the way I figure out the market trend (so I know if its giving me a buy or sell) is kinda weak, so I'd look more at the days it say "REVERSAL" and pay less attention to the "Buy" and "Sell" cells.

[scifos]

here's the latest version of the spreadsheet
http://www.mytempdir.com/238450

[Runner]

Scifos, I’ve played with your spreadsheet and not sure how to read it. Is this a 10 day break out system? On the Q’s today I come up with outside high 39.05 and outside low 38.42. What is the O tab that has Position 38.78?

[scifos]

it takes a long time to calculate, about 45-60 seconds for all the daily data for qqqq, be sure to fill down the columns h through o. I noticed that on the last line I had left some manually entered text where equations should be, so don't fill that down.

Column: Explainaton
A: The date
B: Open
C: High
D: Low
E: Close
F: Volume
G: Adjusted Close
H: Calculates how many days since start of data
I: Highest High for period from cell+e2 to cell+e1+e2
J: Lowest Low for period from cell+e2 to cell+e1+e2
K: Highest High for period from cell to cell+e2
L: Lowest Low for period from cell to cell+e2
M: Checks if K>I and L<J This would signal a reversal
N: Determines if the market is in an uptrend or downtrend (based on G1) Reversals of uptrends generate sells, reversals of downtrends generate buys. It also looks to see if it is a new buy/sell or if the previous signal was the same as this one then it ignores (ie ignore a buy signal if the last signal was also a buy and vice versa)
O: is the change in cash from buying/sellling 1 share at the open following a reversal day.

Basicall, how I understood the article is you create 2 "windows", an Inside and Outside that contain however many days/weeks/periods you choose. These windows are like combining those periods into one candlestick. When you get an engulfing (more recent window is higher and lower than the previous window) then you have a reversal. E1 and E2 are the settings for the window sizes(how many periods to lump together). Columns N and O rely on the slope of the regression line of G1 periods (determining the market direction) to figure out if the engulfing is bullish or bearish.

[Runner]

Scifos, thanks for the info. I’ll need to get a better understanding on the set up. Seems similar to a 10 break, but not sure on this. Great effort you’ve put in on the spreadsheet!!

[scifos]

Scifos, thanks for the info. I’ll need to get a better understanding on the set up. Seems similar to a 10 break, but not sure on this. Great effort you’ve put in on the spreadsheet!!

Thanks, some of the formulas were a little mind-bending.