Trading System & Indicator Review

By Lawrence G. McMillan

With the “fiscal cliff” dominating the news, the media tries to link every market wiggle to what some politician has just said about it.  Meanwhile, there are plenty of real market forces that are influencing the stock market, but those seem to only be of interest to participants who aren’t media addicts – i.e., only a few.  It is our contention that these “real” factors are what is actually driving the market.  This is not only a time of the year when seasonal factors apply, but because of the selling in October and November, some very interesting trading systems are in effect with new or recent signals.  We have developed a number of such systems ourself (and published them in this newsletter) over the years, so in this article, we’re going to review most of them in order to try to arrive at a somewhat logical conclusion as to where the market is heading.  This conclusion will not have anything to do with the “fiscal cliff,” by the way.  The only thing I’ll say about that is this: if the politicans do indeed screw things up, then the market will decline, and stops will be set off in the various trading systems that are bullish (or sell signals will be generated by sytems that are bearish), and it really shouldn’t change things...

The trading systems and indicators that are reviewed include: 

• Total Put-call Ratio
• Post-Thanksgiving Seasonal Trade
• VXX/VIX System
• Daily Sentiment Index
• Investors Intelligence
• Spread between T-Bond and Junk Bond ETFs
• Breadth Oscillator Differential
• Composite Implied Volatility
• Frequency Of “90% Days”
• The “Basic” Indicators