Wouldn't it be great if there was a simple Market direction/trend indicator to tell you Green-Go, Red-Stop? In fact, depending on the type or style of your investment, there are many. Over the last 1+ year, we have consistently followed and zeroed in on the one that has been working very reliably for our style of investing (we are only practicing to have the descipline to always listen to it!). One can comeup with their own simple indicator using any well known market index like S&P 500 and/or NASDAQ-composite too. Our style of investing calls for being nimble and paying attention to where the big money (institutional investments) are headed. This calls for both price and volume movements or momentums rather. Just watching an index fund's (price) trajectory won't always tell what is happening beneath the surface. One good indicator best suited for us is what is called the Bullish Percent Index (BPI). In short it indicates the overall bullishness or bearishness in the market; it is also called depth (corrected on Jan-2) the market-breadth indicator.
Here is a link for more information about the BPI and BPNYA (BPI for NYSE) and the chart (with literally Red and Green signals!) here.
As with any daily-chart views, it gets too noisy and too micro-view to make anything out of it. We played with a couple of smoothing techniques on the BPNYA daily-chart which we now call the Poor man's Market Traffic Light! One is a fast-indicator (for the active and agressive investor) and another is a slow-indicator (for the slow and study).
To plot the fast-indicator on a BPI chart, say for BPNYA, you apply what is called "Renko charting".
To plot the slow-indicator, you apply what is called "Three line break chart", and Voilà, you have your simple and reliable poorman's market direction/trend indicator. Green-Go, Red-Stop. Of course you don't want to immediately get out, you watch how your portfolio holdings are holding-up and then manage your risk accordingly! Sometimes the indicator shows smaller/quicker turn-arounds which you want to wait and watch.
Here is the Renko-chart on BPNYA for the last 1-year (2012). Notice that the horizontal time-axis is not linear (since it doesn't update where there is no price movement, ie, when going sideways!).
Here is the slower-indicator on BPNYA for the last 14 months (since Nov-2011), just to show the begin of the new market-uptrend that started in 2011-December.
Good enough for us to Keep it Simple and Stress-free.
Here is a link for more information about the BPI and BPNYA (BPI for NYSE) and the chart (with literally Red and Green signals!) here.
As with any daily-chart views, it gets too noisy and too micro-view to make anything out of it. We played with a couple of smoothing techniques on the BPNYA daily-chart which we now call the Poor man's Market Traffic Light! One is a fast-indicator (for the active and agressive investor) and another is a slow-indicator (for the slow and study).
To plot the fast-indicator on a BPI chart, say for BPNYA, you apply what is called "Renko charting".
To plot the slow-indicator, you apply what is called "Three line break chart", and Voilà, you have your simple and reliable poorman's market direction/trend indicator. Green-Go, Red-Stop. Of course you don't want to immediately get out, you watch how your portfolio holdings are holding-up and then manage your risk accordingly! Sometimes the indicator shows smaller/quicker turn-arounds which you want to wait and watch.
Here is the Renko-chart on BPNYA for the last 1-year (2012). Notice that the horizontal time-axis is not linear (since it doesn't update where there is no price movement, ie, when going sideways!).
 |
| BPNYA (BPI for NYSE) for 1-year (2012). Green-Go, Red-Stop! [Click on the image to enlarge] |
Here is the slower-indicator on BPNYA for the last 14 months (since Nov-2011), just to show the begin of the new market-uptrend that started in 2011-December.
 |
| BPNYA (BPI for NYSE) for 14-months since Nov-2011. Green-Go, Red-Stop! [Click on the image to enlarge] |
Good enough for us to Keep it Simple and Stress-free.
