I haven’t written a lot lately. Mostly I guess because there doesn’t seem to be a lot new to say. As you can see in Figure 1, the major market indexes are in an uptrend. All 4 (Dow, S&P 500, Russell 2000 and Nasdaq 100) are above their respective 200-day MA’s and all but Russell 2000 have made new all-time highs.
As you can see in Figure 2, my market “bellwethers” are still slightly mixed. Semiconductors are above their 200-day MA and have broken out to a new high, Transports and the Value Line Index (a broad measure of the stock market) are holding above their 200-day MA’s but are well off all-time highs, and the inverse VIX ETF ticker ZIV is in a downtrend (ideally it should trend higher with the overall stock market).
As you can see in Figure 3, Gold, Bonds and the U.S. Dollar are still holding in uptrends above their respective 200-day MA’s (although all have backed off of recent highs) and crude oil is sort of “nowhere”.
Figure 3 – Gold, Bonds, U.S. Dollar and Crude Oil (Courtesy AIQ TradingExpert)
Like I said, nothing has really changed. So, at this point the real battle is that age-old conundrum of “Patience versus Complacency”. When the overall trend is clearly “Up” typically the best thing to do is essentially “nothing” (assuming you are already invested in the market). At the same time, the danger of extrapolating the current “good times” ad infinitum into the future always lurks nearby.
What we don’t want to see is:
*The major market averages breaking back down below their 200-day MA’s.
What we would like to see is:
*The Transports and the Value Line Index break out to new highs (this would be bullish confirmation rather the current potentially bearish divergence)
The Importance of New Highs in the Value Line Index
One development that would provide bullish confirmation for the stock market would be if the Value Line Geometric Index were to rally to a new 12-month high. It tends to be a bullish sign when this index reaches a new 12-month high after not having done so for at least 12-months.
Figure 4 displays the cumulative growth for the index for all trading days within 18 months of the first 12-month new high after at least 12-months without one.
Figure 4 – Cumulative growth for Value Line Geometric Index within 18-months of a new 12-month high
Figure 5 displays the cumulative growth for the index for all other trading days.
Figure 5 – Cumulative growth for Value Line Geometric Index during all other trading days
In Figure 4 we see that a bullish development (the first 12-month new high in at least 12 months) is typically followed by more bullish developments. In Figure 5 we see that all other trading days essentially amount to nothing.
Figure 6 displays the Value Line Geometric Index with the relevant new highs highlighted.
The trend at this very moment is “Up.” So sit back, relax and enjoy the ride. Just don’t ever forget that the ride WILL NOT last forever. If the Value Line Geometric Index (and also the Russell 2000 and the Dow Transports) joins the party then history suggests the party will be extended. If they don’t, the party may end sooner than expected.
So pay attention.
Jay Kaeppel
Disclaimer: The information, opinions and ideas expressed herein are for informational and educational purposes only and are based on research conducted and presented solely by the author. The information presented does not represent the views of the author only and does not constitute a complete description of any investment service. In addition, nothing presented herein should be construed as investment advice, as an advertisement or offering of investment advisory services, or as an offer to sell or a solicitation to buy any security. The data presented herein were obtained from various third-party sources. While the data is believed to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information. International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets. Past performance is no guarantee of future results. There is risk of loss in all trading. Back tested performance does not represent actual performance and should not be interpreted as an indication of such performance. Also, back tested performance results have certain inherent limitations and differs from actual performance because it is achieved with the benefit of hindsight.
In “A Simple Way To Trade Seasonality” in the September 2019 Stocks & Commodities, author Perry Kaufman describes methods he uses for measuring the seasonality in markets and approaches he uses for trading these patterns
Editors note: The full article can be obtained from Stocks & Commodities magazine at http://technical.traders.com/sub/sublog2.asp#Sep the system rules are from the article and are based on these rules
1. Average the monthly frequency of the past 4 years.
2. Find the last occurrence of the highest frequency and the last occurrence of the lowest frequency using the average frequency in step 1. That is, if both March and April have a frequency of 70, we use April.
3. Only trade if the high frequency is 75% or greater and the low frequency is 25% or lower.
4. If the high frequency comes first, sell short at the end of the month with the high frequency. Cover the short at the end of the month with the low frequency.
5. If the low frequency comes first, buy at the end of the month with the low frequency. Sell to exit at the end of the month with the high frequency
The importable AIQ EDS file and Excel spreadsheet for Perry Kaufman’s article can be obtained on request via email to info@TradersEdgeSystems.com. The code is also shown below
!A Simple Way to Trade Seasonality
!Author: Perry Kaufman, TASC September 2019
!Coded by: Richard Denning, 07/21/2019
!www.TradersEdgeSystem.com
C is [close].
year is 2019.
len is 4000.
OSD is offsettodate(month(),day(),year()).
FirstDate is firstdatadate().
EOM1 if Month()=2 and valresult(month(),1)=1 and year()=year.
EOMos1 is scanany(EOM1,len) then OSD+1.
EOMc1 is valresult(C,^EOMos1).
EOM2 if Month()=3 and valresult(month(),1)=2 and year()=year.
EOMos2 is scanany(EOM2,len) then OSD+1.
EOMc2 is valresult(C,^EOMos2).
EOM3 if Month()=4 and valresult(month(),1)=3 and year()=year.
EOMos3 is scanany(EOM3,len) then OSD+1.
EOMc3 is valresult(C,^EOMos3).
EOM4 if Month()=5 and valresult(month(),1)=4 and year()=year.
EOMos4 is scanany(EOM4,len) then OSD+1.
EOMc4 is valresult(C,^EOMos4).
EOM5 if Month()=6 and valresult(month(),1)=5 and year()=year.
EOMos5 is scanany(EOM5,len) then OSD+1.
EOMc5 is valresult(C,^EOMos5).
EOM6 if Month()=7 and valresult(month(),1)=6 and year()=year.
EOMos6 is scanany(EOM6,len) then OSD+1.
EOMc6 is valresult(C,^EOMos6).
EOM7 if Month()=8 and valresult(month(),1)=7 and year()=year.
EOMos7 is scanany(EOM7,len) then OSD+1.
EOMc7 is valresult(C,^EOMos7).
EOM8 if Month()=9 and valresult(month(),1)=8 and year()=year.
EOMos8 is scanany(EOM8,len) then OSD+1.
EOMc8 is valresult(C,^EOMos8).
EOM9 if Month()=10 and valresult(month(),1)=9 and year()=year.
EOMos9 is scanany(EOM9,len) then OSD+1.
EOMc9 is valresult(C,^EOMos9).
EOM10 if Month()=11 and valresult(month(),1)=10 and year()=year.
EOMos10 is scanany(EOM10,len) then OSD+1.
EOMc10 is valresult(C,^EOMos10).
EOM11 if Month()=12 and valresult(month(),1)=11 and year()=year.
EOMos11 is scanany(EOM11,len) then OSD+1.
EOMc11 is valresult(C,^EOMos11).
EOM12 if Month()=1 and valresult(month(),1)=12 and valresult(year(),1)=year.
EOMos12 is scanany(EOM12,len) then OSD+1.
EOMc12 is valresult(C,^EOMos12).
YEARavg is (EOMc1+EOMc2+EOMc3+EOMc4+EOMc5+EOMc6+EOMc7+EOMc8+EOMc9+EOMc10+EOMc11+EOMc12)/12.
AR1 is (EOMc1 / YEARavg-1)*100.
AR2 is (EOMc2 / YEARavg-1)*100.
AR3 is (EOMc3 / YEARavg-1)*100.
AR4 is (EOMc4 / YEARavg-1)*100.
AR5 is (EOMc5 / YEARavg-1)*100.
AR6 is (EOMc6 / YEARavg-1)*100.
AR7 is (EOMc7 / YEARavg-1)*100.
AR8 is (EOMc8 / YEARavg-1)*100.
AR9 is (EOMc9 / YEARavg-1)*100.
AR10 is (EOMc10 / YEARavg-1)*100.
AR11 is (EOMc11 / YEARavg-1)*100.
AR12 is (EOMc12 / YEARavg-1)*100.
EOMc if firstdate < makedate(1,20,2019-20).
AR if EOMc.
The EDS code is not a trading system but a way to get the data needed into an Excel spreadsheet to enable you to make the seasonal calculations. The EDS file should be run on a date after the end of the year being calculated. Each year for which data is needed must be run separately by setting the “year” variable. Multiple symbols can be run at the same time by using a list of the desired symbols. Each time a year is run, the “AR” report must be saved as a “.csv” file. Once all the years needed have been run and saved to separate “.csv” files, they all should be cut and pasted to a single Excel sheet. They then can be sorted by symbol and each symbol can be copied and pasted to a tab for that symbol.
Figure 6 shows the rolling four-year frequency for the S&P 500 ETF (SPY) and Figure 7 shows the annual trades resulting from applying the seasonal rules to the frequency data.
FIGURE 6: AIQ. Shown here is the rolling four-year frequency for the SPY.
FIGURE 7: AIQ. Shown here are the annual trades resulting from applying the seasonal rules to the frequency data for SPY.
On my last Bartometer I stated that we were #1 On Buy signal, #2 the Dow Jones and the stock market had Bullish Ascending triangles patterns, #3. Money flow and On Balance Volume were breaking out to NEW HIGHS when the stock market wasn’t. This shows demand for stocks over and above the price. These 3 indicators were telling me and I was telling you that I thought the market would breakout to new highs, AND IT DID. The stock market broke out of the bullish ascending triangle, (see index on the next page about ascending triangles)*. On the S&P I said that it had to breakout of 3030 and it did. It is now 3093. I said the Dow Jones had to breakout of the 27400, and it did. It is now 27681.
Where does is go from here and could we get a little pull back?
See chart below for an explanation.
An excerpt from Fundamental Economist Dr. Robert Genetski: from Classical Principles.com:
Stocks benefited from encouraging news of a potential trade agreement between the US and China as well as some good news on the economy. Markets seldom move in only one direction. The S&P500 is now within 3% of its fundamental value. A pause or even a slight correction is overdue, particularly if there is any negative news. Even so, with stronger fundamentals and the Fed purchasing securities, any correction should be fairly mild. Stay bullish on stocks.
Adding to Bob’s his Comment:
Signs of strength in the economy combined with gains in stock prices led to a sharp jump in intermediate and longer-term interest rates. This week the interest rate on 10-year T-Notes moved 25 basis points higher. The latest moves turned the yield curve to a more normal shape. As with stocks, interest rates have spiked higher and are overdue for some correction. However, after more than a decade of interest rates declining and being well below their fundamental levels, rates remain 200 basis points below fundamental levels. While the Fed’s low target places a limit on how high interest rates will go, there is still a lot of upward potential for longer-term rates. Fixed-income portfolios should remain defensive.
On the Technical Side:
Over the last almost 22 months, the Dow Jones FINALLY broke out to new highs from the old highs set on Jan 31, 2018 at 26,714. That is a POSITIVE. Money Flow and On Balance Volume are still at a new high, but the markets are again becoming overbought. So, could the market comes down a little now? YES, the markets are now overbought and there could easily be a slight decline to 27191 to 27298, a decline of around 2%, and the S&P to decline to 3029 area, a decline of 2% or so, BUT no more than that, because if the markets GO BACK BELOW THE BREAKOUT it can cause traders to start selling in mass. So look for a possible test of the breakout, but IF the markets close below the breakout of 27300 to 27384 on the Dow Jones or 3030 on the S&P convincingly, then I will be getting Very Cautious. If that doesn’t happen then I am still moderately bullish. But I realize the market are now OVERBOUGHT and in my opinion, it is not a time to go out and invest a lot of money in the markets. Dollar cost averaging is fine. I stated in my January Bartometer that I thought the S&P could reach 3130 to 3180+ this year. At 3093 currently, that is about 1-3% from here.
Some of the INDEXES of the markets both equities and interest rates are below. The source is Morningstar.com up until November 9th, 2019. These are passive indexes. *Dow Jones +20% S&P 500 +24% NASDAQ Aggressive growth +31% I Shares Russell 2000 ETF (IWM) Small cap +19% International Index (MSCI – EAFE ex USA) +16% Moderate Mutual Fund +14% Investment Grade Bonds (AAA) +13% High Yield Merrill Lynch High Yield Index +11% Floating Rate Bond Index +4.0% Short Term Bond +4.0% Fixed Bond Yields (10 year) +1.75.% Yield
The average Moderate Fund is up 14% this year fully invested as a 60% in stocks and 40% in bonds and nothing in the money market.
S&P 500
Ascending Triangle is above, and is Bullish as long as it stays above the breakout of 3027-3030
The S&P 500 is above. The S&P 500 contains 500 of the largest companies in the US. The 2 top companies by market value are Microsoft and Apple. But there are 498 other stocks in it. If you can see above the ASCENDING TRIANGLE that is BOLDED. Notice the clear breakout to new highs. This is clearly BULLISH like I thought would happen last month. And it did. Now that it has risen 2% ABOVE the breakout, a BREAKDOWN below the 3030 convincingly would get me VERY Cautious. It is normal to come back down to test the breakout, but not to break down below it. So if you see the S&P close below 3030 convincingly on heavy volume, I will be getting Cautious to Very Cautious depending on the reason. But the market is now at fair value to me and there may be another 1-4% more for the year in my opinion, but not much more unless there is incredible news from the Political or Tariff front. It is not a great time to go out and buy a lot in the stock market in my opinion as well.
The Middle graph is called the SK-SD Stochastics model. It shows the markets as being overbought when the indicator is above 88 where it is above the 88 horizontal line. Notice every time the indicator was above 88 it seemed to peak out and sell off. This is not guaranteed but it is good indicator.
The 3rd indicator is MACD or Momentum this indicator is still bullish until the pink line breaks down below the blue line. As of right now, momentum is still higher, but the markets are over bought, so be careful.
An ascending triangle is a chart pattern used in technical analysis. It is created by price moves that allow for a horizontal line to be drawn along the swing highs, and a rising trend line to be drawn along the swing lows. The two lines form a triangle. Traders often watch for breakouts from triangle patterns.
See the pattern above? It’s an Ascending triangle. Ascending triangles are BULLISH as long as they don’t go back below the breakout. If this is a successful Ascending triangle the S&P can rise to 3130-3180 first and possibly higher IF the breakout isn’t broken convincingly on the downside or breaking and closing below 3030.
On-balance volume (OBV) is a technical analysis indicator intended to relate price and volume in the stock market. OBV is based on a cumulative total volume.
Money flow is calculated by averaging the high, low and closing prices, and multiplying by the daily volume. Comparing that result with the number for the previous day tells traders whether money flow was positive or negative for the current day. Positive money flow indicates that prices are likely to move higher, while negative money flow suggests prices are about to fall.
A Support or support level is the level at which buyers tend to purchase or into a stock or index. It refers to the stock share price that a company or index should hold and start to rise. When the price of the stock falls towards its support level, the support level holds and is confirmed, or the stock continues to decline, and the support level must change.
Support levels on the S&P 500 area are 3027-3030, 3017, 2952, 2922, and 2812. These might be BUY areas.
Support levels on the NASDAQ are 8251, 8144, 8080 and 7771.
On the Dow Jones support is at 26,285, 25,763, and 25,458
These may be safer areas to get into the equity markets on support levels slowly.
RESISTANCE LEVEL ON THE S&P 500 IS 3130 and the Dow Jones breakout is 27,400. If there is a favorable tariff settlement, the market should rise short term.
THE BOTTOM LINE:
The Dow, the S&P 500 and the NASDAQ are at new highs after rallying over the last 3 weeks. Normally the markets after reaching new highs become overbought and may come back down towards the breakout areas to see if the breakouts area holds. lf breakout of 3030 are holds then the markets tend to drift back towards the old high to see if it can break out again. If it does then 3130 to 3180 could be the next target. If 3030 doesn’t hold on the S&P and starts to break down below 3030 then I will be getting cautious or very cautious.. I WILL CONTINUE TO ANALYZE THE TECHNICALS OF THE MARKET. The seasonal patterns of the markets are bullish towards the end of the year. Last year the markets fell in December. It looks like the market still wants to go up, but with tweets coming out hourly, market timing will be more difficult.
Best to all of you,
Joe Bartosiewicz, CFP®
Investment Advisor Representative 5 Colby Way Avon, CT 06001 860-940-7020 or 860-404-0408
SECURITIES AND ADVISORY SERVICES OFFERED THROUGH SAGE POINT FINANCIAL INC., MEMBER FINRA/SIPC, AND SEC-REGISTERED INVESTMENT ADVISOR.
Charts provided by AIQ Systems:
Technical Analysis is based on a study of historical price movements and past trend patterns. There is no assurance that these market changes or trends can or will be duplicated shortly. It logically follows that historical precedent does not guarantee future results. Conclusions expressed in the Technical Analysis section are personal opinions: and may not be construed as recommendations to buy or sell anything.
Disclaimer: The views expressed are not necessarily the view of Sage Point Financial, Inc. and should not be interpreted directly or indirectly as an offer to buy or sell any securities mentioned herein. Securities and Advisory services offered through Sage Point Financial Inc., Member FINRA/SIPC, an SEC-registered investment advisor.
Past performance cannot guarantee future results. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Please note that individual situations can vary. Therefore, the information presented in this letter should only be relied upon when coordinated with individual professional advice. *There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss in periods of declining values.
It is our goal to help investors by identifying changing market conditions. However, investors should be aware that no investment advisor can accurately predict all of the changes that may occur in the market.
The price of commodities is subject to substantial price fluctuations of short periods and may be affected by unpredictable international monetary and political policies. The market for commodities is widely unregulated, and concentrated investing may lead to Sector investing may involve a greater degree of risk than investments with broader diversification.
Indexes cannot be invested indirectly, are unmanaged, and do not incur management fees, costs, and expenses.
Dow Jones Industrial Average: A weighted price average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.
S&P 500: The S&P 500 is an unmanaged indexed comprised of 500 widely held securities considered to be representative of the stock market in general.
NASDAQ: the NASDAQ Composite Index is an unmanaged, market-weighted index of all over the counter common stocks traded on the National Association of Securities Dealers Automated Quotation System
(IWM) I Shares Russell 2000 ETF: Which tracks the Russell 2000 index: which measures the performance of the small capitalization sector of the U.S. equity market.
A Moderate Mutual Fund risk mutual has approximately 50-70% of its portfolio in different equities, from growth, income stocks, international and emerging markets stocks to 30-50% of its portfolio in different categories of bonds and cash. It seeks capital appreciation with a low to moderate level of current income.
The Merrill Lynch High Yield Master Index: A broad-based measure of the performance of non-investment grade US Bonds
MSCI EAFE: the MSCI EAFE Index (Morgan Stanley Capital International Europe, Australia, and Far East Index) is a widely recognized benchmark of non-US markets. It is an unmanaged index composed of a sample of companies’ representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends.
Investment grade bond index: The S&P 500 Investment-grade corporate bond index, a sub-index of the S&P 500 Bond Index, seeks to measure the performance of the US corporate debt issued by constituents in the S&P 500 with an investment-grade rating. The S&P 500 Bond index is designed to be a corporate-bond counterpart to the S&P 500, which is widely regarded as the best single gauge of large-cap US equities.
Floating Rate Bond Index is a rule-based, market-value weighted index engineered to measure the performance and characteristics of floating-rate coupon U.S. Treasuries, which have a maturity greater than 12 months.
I keep seeing headlines about the “imminent” re-emergence of commodities as a viable investment as an asset class. And as I wrote about here, I mostly agree wholeheartedly that “the worn will turn” at some point in the years ahead, as commodities are historically far undervalued relative to stocks.
The timing of all of this is another story. Fortunately, it is a fairly short and simple story. In a nutshell, it goes like this:
*As long as the U.S. Dollar remains strong, don’t bet heavy on commodities.
The End
Well not exactly.
The 2019 Anomaly
The Year 2019 was something of an anomaly as both the U.S. Dollar and precious metals such as gold and silver rallied. This type of action is most unusual. Historically gold and silver have had a highly inverse correlation to the dollar. So, the idea that both the U.S. Dollar AND commodities (including those beyond just precious metals) will continue to rise is not likely correct.
Commodities as an Asset Class
When we are talking “commodities as an asset class” we are talking about more than just metals. We are also talking about more than just energy products.
The most popular commodity ETFs are DBC and GSG as they are more heavily traded than most others. And they are fine trading vehicles. One thing to note is that both (and most other “me too” commodity ETFs) have a heavy concentration in energies. This is not inappropriate given the reality that most of the industrialized world (despite all the talk of climate change) still runs on traditional fossil fuel-based energy.
But to get a broader picture of “commodities as an asset class” I focus on ticker RJI (ELEMENTS Linked to the Rogers International Commodity Index – Total Return) which diversifies roughly as follows:
Agriculture 40.90%
Energy 24.36%
Industrial Metals 16.67%
Precious Metals 14.23%
Livestock 3.85%
Note that these allocations can change over time, but the point is that RJI has much more exposure beyond the energy class of assets than alot of other commodity ETFs.
RJI vs. the Dollar
As a proxy for the U.S. Dollar we will use ticker UUP (Invesco DB US Dollar Index Bullish Fund). Figure 1 displays the % gain/loss for UUP (blue line) versus RJI (orange line) since mid-2008.
Figure 1 – UUP versus RJI; Cumulative Return using weekly closing prices; May-2008-Sep-2019
*Since May of 2008 UUP has gained +17.2%
*Since May of 2008 RJI has lost -60%
The correlation in price action between these two ETFs since 2008 is -0.76 (a correlation of -1.00 means they are perfectly inverse), so clearly there is (typically) a high degree of inverse correlation between the U.S. dollar and “commodities”.
Next, we will apply an indicator that I have dubbed “MACD4010501” (Note to myself: come up with a better name). The calculations for this indicator will appear at the end of the article (but it is basically a 40-period exponential average minus a 105-period exponential average). In Figure 2 we see a weekly chart of ticker UUP with this MACD indicator in the top clip and a weekly chart of ticker RJI in the bottom clip.
Figure 2 – UUP with Jay’s MACD Indicator versus ticker RJI (courtesy AIQ TradingExpert )
Interpretation is simple:
*when the MACD indicator applied to UUP is declining, this is bullish for RJI
*when the MACD indicator applied to UUP is rising, this is bearish for RJI.
Figure 3 displays the growth of equity achieved by holding RJI (using weekly closing price data) when the UUP MACD Indicator is declining (i.e., RJI is bullish blue line in Figure 3) versus when the UUP MACD Indicator is rising (i.e., RJI is bearish orange line in Figure 3).
Figure 3 – RJI cumulative performance based on whether MACD indicator for ticker UUP is falling (bullish for RJI) of rising (bearish for RJI)
In sum:
*RJI gained +45.8% when the UUP MACD indicator was falling
*RJI lost -72.3% when the UUP MACD indicator was rising
The bottom line is that RJI rarely makes much upside headway when the UUP MACD Indicator is rising (i.e., is bearish for RJI).
Summary
Commodities as an asset class are extremely undervalued on a historical basis compared to stocks. However, the important thing to remember is that “the worm is unlikely to turn” as long as the U.S. Dollar remains strong.
So, keep an eye on the U.S. Dollar for signs of weakness. That will be your sign that the time may be coming for commodities.
FYI: Code for Jay’s MACD4010501 Indicator (AIQ TradingExpert EDS)
The indicator is essentially a 40-period exponential average minus a 105-period exponential average as shown below:
Define ss3 40.
Define L3 105.
ShortMACDMA3 is expavg([Close],ss3)*100.
LongMACDMA3 is expavg([Close],L3)*100.
MACD4010501 is ShortMACDMA3-LongMACDMA3.
Jay Kaeppel
Disclaimer: The information, opinions and ideas expressed herein are for informational and educational purposes only and are based on research conducted and presented solely by the author. The information presented does not represent the views of the author only and does not constitute a complete description of any investment service. In addition, nothing presented herein should be construed as investment advice, as an advertisement or offering of investment advisory services, or as an offer to sell or a solicitation to buy any security. The data presented herein were obtained from various third-party sources. While the data is believed to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information. International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets. Past performance is no guarantee of future results. There is risk of loss in all trading. Back tested performance does not represent actual performance and should not be interpreted as an indication of such performance. Also, back tested performance results have certain inherent limitations and differs from actual performance because it is achieved with the benefit of hindsight.
The importable AIQ EDS file based on Vitali Apirine’s article in July 2019 Stocks & Commodities issue, “Exponential Deviation Bands,”
and a recreated Excel spreadsheet similar to the one shown in the article can be obtained on request via email to info@TradersEdgeSystems.com. The code is also shown here:
Exponential deviation (ED) bands are plotted above and below a moving average (MA) from which the bands are calculated. An exponential deviation from the moving average is used to set the bands. ED bands can be used with either a simple moving average (SMA) or an exponential moving average (EMA). The moving average dictates direction, and the exponential deviation sets band width. Breakouts from the band and changes in the band’s direction can help identify price trends and price reversals. These bands can be used on a variety of securities with its standard settings.
!EXPONENTIAL DEVIATION BANDS
!Author: Vitali Apirine, TASC July 2019
!Coded by: Richard Denning, 5/15/2019
!www.TradersEdgeSystems.com
C is [close].
Periods is 20.
MA20 is simpleavg(C,Periods). !expavg(C,Periods). !or simpleavg(C,Periods).
MDev20 is (Abs(MA20-C)+Abs(MA20-valresult(C,1))+Abs(MA20-valresult(C,2))+Abs(MA20-valresult(C,3))
+Abs(MA20-valresult(C,4))+Abs(MA20-valresult(C,5))+Abs(MA20-valresult(C,6))+Abs(MA20-valresult(C,7))
+Abs(MA20-valresult(C,8))+Abs(MA20- valresult(C,9))+Abs(MA20- valresult(C,10))+Abs(MA20- valresult(C,11))
+Abs(MA20- valresult(C,12))+Abs(MA20- valresult(C,13))+Abs(MA20- valresult(C,14))+Abs(MA20- valresult(C,15))
+Abs(MA20- valresult(C,16)) +Abs(MA20- valresult(C,17))+Abs(MA20- valresult(C,18))+Abs(MA20- valresult(C,19)))/20.
Dev is Abs(MA20-C).
Rate is 2/( Periods +1).
DaysInto is ReportDate() - RuleDate().
Stop if DaysInto >= 200.
stopEXD is iff(Stop,Mdev20, EXD).
EXD is Dev*Rate + valresult(stopEXD,1)*(1-Rate).
UpperExp is MA20+2*EXD.
MidExp is MA20.
LowerExp is MA20-2*EXD.
ShowValues if 1.
Figure 9 shows the exponential deviation bands centered on a 20-bar simple moving average on a chart of the New York Composite Index (NYA).
FIGURE 9: AIQ. Here are exponential deviation bands centered on a 20-bar simple moving average on a chart of the New York Composite Index (NYA).
