Regression Lines

Regression lines
Using them to identify trend direction over multiple time-frames.
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One of the things I like about regression lines is it's an easy way to identify trend direction. A regression line identifies the median price based on the time between two points of time. Be it a long, intermediate, or short term trader you can use this tool to find a good entry points. I've drawn in 200, 150, 100, 75, 50, 20, & 10 day regression lines. The 200 day being the longest and 10 day being the shortest. It's pretty interesting to see how the markets turn under these various time-frames.

Here is AGG where you can see the 200 & 150 day regression lines are still rising. The first clue of trend direction would be the 10 day turning down, followed by the 20, then 50, then 75. Had you been invested for a long period of time, you could have used regression lines to find a good exit based on your trading preference.




As an example for the S&P 500, you might wait for the 10 day to turn upward and the 20 day to flatten out before you made an entry into the markets.




When compared to the other markets, you can see how the small caps are clearly outperforming the others. 5 of 7 regression lines are still rising. Go S-Fund!!!




And here you can see EFA falling off a cliff with 5 of 7 regression lines declining.




Lastly, here is a chart of the Dollar. I've added a regression channel based on 200 days of prices. Based on this time-frame when prices rise above the upper channel it's considered overbought and when prices fall below the lower channel it's considered oversold. It's the lazy way to draw trendlines, but I do find it to be an effect way to analyze price direction and entry/exit positions.




Thanks, and take care... Jason

 

[airlift]

JTH,
I admire what you are doing with the different charts and indicators that show various ways to trade trends. Your pragmatism is a very useful instrument to enable one to navigate the uncertain storms in a sea of challenges.

I use your good analyses to test whether or not the more traditional indicators we generally use are being confirmed or not. Many of us either don't have the time or the skills to dedicate much time to this effort. Keep up this enlightening work! Great material!

Question:

Based on what you have studied, has the S&P 500 (SPX) 10 day regression line turned sufficiently upward before making an entry into the markets? Or are we so overbought that the 20 day regression line will probably turn downward an carry the the S fund down with it?
Thank you in advance.

 

[XL-entLady]

Interesting stuff, J! Great job, my friend!

 

[JTH]

Thanks Airlift, those are kind words. I don't think the short-intermediate picture has changed enough to warrent jumping in, if you're already on the sidelines.

Based on this regression channel drawn from 1150 to today, we are overbought and due for another pullback. If we continue going up, I believe 1085 will be a key level.
http://www.freestockcharts.com?emailChartID=15d6cfc9-6e36-447b-b3c3-524dea849a70

The S-Fund has already retraced more than 50% off the lows and has more room to go up within the regression channel, but I'd find it hard to believe it can lead on its own without help from 2 of the big 3. The Transports, NASDAQ or S&P 500.

 

[starfox182]

This is some great stuff!!! Thanks!