60 Stochastic embedded over 80% system

    Posted by matt on 18th of Mar 2024 at 09:51 am

    $SPX - Chart Link- I used to discuss this all the time, haven't been but here's that old chart that highlights the 60 length Stochastic when it is embedded above 89%. When such a condition is present you are in a momentum uptrend. In fact some of the mean reversion systems look at this condition.

    When the stochastic is in such a state, you can use a fast indicator oscillator gets oversold to trigger a mean reversion long. Indicators such a a 2 length RSI, a 4 length fast stochastic, and a 5 length Williams % R

    I'm posting not because it's giving you any signal now, but some of you save our charts and you can save this one. 

    again all trends eventually come to an end so eventually the 60 Stochastic will fall below 80%. What can happen in those situations is that you may trigger a long from one of the indicators, then a day or couple days later the 60 Stochastics falls below 80%, in such a case you would just treat that as as stop loss, exit

    anyway I show all the buy signals that would have occurred via the dotted vertical lines - 9 mean reversion signals would have occurred in this condition since December

    Matt, was wondering for the

    Posted by rmoore100 on 18th of Mar 2024 at 04:09 pm

    Matt, was wondering for the future, if the 60 stoch system in a bear market was imbedded, say below 20, would this system also indicate a pullback when any of those 3 indicators reached overbought status ?     or is it best only for upward trending bull markets ?        Thanks !!!

    ugh....sometimes but it doesn't stay

    Posted by matt on 18th of Mar 2024 at 07:32 pm

    ugh....sometimes but it doesn't stay like that for as long of a period of time like it does for uptrending markets.

    again remember that downtrending markets do not behave as the inverse of an uptrending market, meaning you can't just place a mirror in front on an uptrending market and see how the market would behave in downtrending market.

    topping is a process and can go on and on and on at times, longer than you think, as we've seen with this market. 

    downtrending markets tend to be more violent and volatile, but washout and are done/over much more quickly, vs just trending down and down for long periods of time. The emotion of fear manifests itself differently than greed and complacency in an uptrending market.  Remember that's why the default KISS systems that are long only doesn't work well on inverse ETF's and stocks because it's generally best instead of trailing stop to just exit after a strong move - I mentioned a couple weeks ago that if I added a profit target to the KISS systems then they work better for shorts. 

    (lurker observation here ..) Mathematically, if

    Posted by momo11 on 19th of Mar 2024 at 05:49 am

    (lurker observation here ..)

    Mathematically, if you have a certain long-only strategy (e.g. KISS) that beats buy-and-hold on a certain instrument over a specified period (say X% vs. Y% for a certain year), then by going short the instrument (not long the inverse ETF) instead of going to cash, you increase your return to 2X-Y%. Works very nicely for QQQ for example. Should work even better with the high-performance version, without even trying to optimize the short entry (as long as they consistently trash buy-and-hold). 

    Thanks Matt for that explanation

    Posted by rmoore100 on 18th of Mar 2024 at 08:44 pm

    Thanks Matt for that explanation and for sharing that 60 stoch chart with us.    I've sure got it saved for continued later viewing.  Thanks Again !!!!

    Nice. Thanks for sharing.

    Posted by kab34 on 18th of Mar 2024 at 09:53 am

    Nice. Thanks for sharing.

    anyway I show all the

    Posted by matt on 18th of Mar 2024 at 09:53 am

    anyway I show all the buy signals that would have occurred via the dotted vertical lines -  9 mean reversion signals would have occurred in this condition since December

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