Chaser
Member
Everyone knows that the way to make money in the stock market is to “Buy low and sell high”. Applying this cliché means stocks should be bought at their worst and sold at their best, which is very hard to do psychologically. Knowing where the market tops and bottoms are seems to me to be the key to selling high and buying low.
While the lagging 20/50 ema is a good indicator of short term versus intermediate performance of a fund, on further reflection, it may not be the best indicator of cyclical market turns (market bottoms and tops). The excellent chart that Spaf uses in his “Kingdom of TSP” weekly reports contains RSI, 15/50 MA, SAR, & MACD charts.I use a CCI chart in place of Spaf’s Slow Sto chart. It is possible to see which of these charts best predict market tops and bottoms based on past performance.
If you load a sharp chart for a fund at stockcharts.com using a line instead of candlesticks for the sake of clarity in the chart type box and use the annotate function to draw vertical lines on the daily chart at the market tops and bottoms you can compare which indicators were best predictors for market tops and bottoms in the past.
At this point, it appears to me that the peaks and valleys of the MACD histogram best predict market tops and bottoms. The current bars on the histogram are extra large compared with the size of the histograms in the past shown on the chart. Does this mean it is a more powerful indicator? I don’t know; I’m just starting to try to figure this stuff out.
This analysis is easier done in hindsight of course. It is hard to know when a histogram is peaking on a daily basis and it can make a great deal of difference if buys or sells are not executed on a timely basis. The advantage to this method is that it is more of a real-time indicator compared with a moving average, which lags real-time conditions depending on how many days are used in the averaging calculation.
Other indicators can help determine when a MACD histogram is peaking and indicating a market top or a bottom. On Friday, May 19 there was a large black volume bar, which indicates a high volume price increase. There was only one other day that had a volume this large in 2006. Some say a high volume day with a price increase may show a healthy uptrend. The RSI and CCI charts show oversold conditions indicating a favorable time to buy.
To summarize: the MACD histogram confirmed by volume, CCI, and RSI indicators show that the market may be at a bottom and this may be a good time to buy. I am canceling my transfer from C to G and what I said above about the C fund seems to apply to the S and I stock funds as well. I think this is market bottom and is a good time to buy or hold the stock funds.
This is Spaf's chart from last week which I am using to illustrate what I'm talking about:
While the lagging 20/50 ema is a good indicator of short term versus intermediate performance of a fund, on further reflection, it may not be the best indicator of cyclical market turns (market bottoms and tops). The excellent chart that Spaf uses in his “Kingdom of TSP” weekly reports contains RSI, 15/50 MA, SAR, & MACD charts.I use a CCI chart in place of Spaf’s Slow Sto chart. It is possible to see which of these charts best predict market tops and bottoms based on past performance.
If you load a sharp chart for a fund at stockcharts.com using a line instead of candlesticks for the sake of clarity in the chart type box and use the annotate function to draw vertical lines on the daily chart at the market tops and bottoms you can compare which indicators were best predictors for market tops and bottoms in the past.
At this point, it appears to me that the peaks and valleys of the MACD histogram best predict market tops and bottoms. The current bars on the histogram are extra large compared with the size of the histograms in the past shown on the chart. Does this mean it is a more powerful indicator? I don’t know; I’m just starting to try to figure this stuff out.
This analysis is easier done in hindsight of course. It is hard to know when a histogram is peaking on a daily basis and it can make a great deal of difference if buys or sells are not executed on a timely basis. The advantage to this method is that it is more of a real-time indicator compared with a moving average, which lags real-time conditions depending on how many days are used in the averaging calculation.
Other indicators can help determine when a MACD histogram is peaking and indicating a market top or a bottom. On Friday, May 19 there was a large black volume bar, which indicates a high volume price increase. There was only one other day that had a volume this large in 2006. Some say a high volume day with a price increase may show a healthy uptrend. The RSI and CCI charts show oversold conditions indicating a favorable time to buy.
To summarize: the MACD histogram confirmed by volume, CCI, and RSI indicators show that the market may be at a bottom and this may be a good time to buy. I am canceling my transfer from C to G and what I said above about the C fund seems to apply to the S and I stock funds as well. I think this is market bottom and is a good time to buy or hold the stock funds.
This is Spaf's chart from last week which I am using to illustrate what I'm talking about:
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