19 thoughts on “The Indicator is Green”

  1. Hello, I’ve coded the algo in Quantopian. Exept with the limitation of selecting 500 stocks maximum (instead of russel3000).

    So I’ve chosen 500 stocks between top[1000-1500] listed by marketcap (recalculated every day).

    Here is the result: http://i.imgur.com/xn9QUMp.jpg

    And yes indeed:
    – it’s turning green now.
    – it’s boring as f*.

    1. Hmm, boring huh? Is that the same thing as “reducing risk”? 🙂

      I looked at your chart. It looks broadly similar to my indicator, but yours seems to err on the conservative side. Not sure what might be causing the difference (other than the smaller stock universe perhaps). For example, mine was in the market for most of 2013, through (roughly) April 2014, but yours goes in and out a few times and then nothing beyond August 2013 (eyeballing it). Different parameters get different results.

      Yes this is a pretty conservative indicator. Just because it was “red” didn’t mean I didn’t trade. But I kept my trades on the ‘swing’ side, and was light on the long-term stuff. Now that it’s gone green I’m moving back into longer term trades as well.

      1. Boring like, it does 7 round-trip trades over almost 10 years. Difficult to justify 1% management fee/year, as an hedge fund 🙂

        About the parameters, I don’t know what you mean, I’ve strictly kept: 10 days, 30%+ 60 days lookback, 70 thresold.

        Now, I’m trying to cook other results.

        1. Just curious, what are the start and end dates for positions in 2013 and 2014? I want to see how close they are to mine. Thanks.

    1. Thanks. Here’s what I’ve got. These are the day after either a green or red signal is generated (keeping status quo if signal is neither):

      2013 01 16: enter long
      2013 04 26: exit long
      2013 05 20: enter long
      2014 04 07: exit long

      Which is in the market considerably more than what you’re showing. Not sure why that is.

  2. Don’t you think, this is because it only screens midcaps and doesn’t take into account small caps (higher beta) from the bottom of russel3000?

    1. Could be yes. Different data input, or subtly different calculation. Hard to say. Thanks for publishing that though.

      1. LOL! I love your sense of humor Matt!

        Would you be willing to post a sheet with two columns–the date and the indicator value? I’d love to see all of the history.

          1. Hi Matt,

            In another post you wrote: “I used AmiBroker for my software, and Norgate Premium Data for my numbers.”

            I see that AmiBroker standard is $279. How much is Norgate Premium Data?

            Thanks again!

          2. Hi Todd. There are three components to my data from them. First, there’s the daily updates of EOD data, which is purchased in six-month or yearly packages. The six-month package is $163. Then there’s the historical set of currently-listed stocks going back to 1985, which is a $75 one-time fee. And finally, the “delisted” stock set, which is a one-time fee of $232. There’s a link to their pricing here: https://www.premiumdata.net/products/premiumdata/price.php

            You can get some of this for free by using yahoo or google data. If you’re just getting your feet wet with AmiBroker, that might be the way to start. But free data can often have errors in it (unadjusted stock splits, incorrect prices etc). And you can’t get the delisted data for free, which is really crucial for accurate backtests. It’s definitely worth it in my opinion.

  3. Thanks, so glad you have done this work. Best breadth work I have seen. The stuff from StockBee doesn’t seem to work as well in my back-testing. For example the nbr of stocks up 50% in a month has a small positive return. Sometimes that overbought indicator flashes at the same time your diffusion indicator says oversold.

    Diffusion is a great oversold indicator. Do you have any overbought indicators you like?

    1. Thanks for your comments, Todd. I’m not sure I really think of this as an oversold/overbought indicator. That implies mean-reversion, but this indicator is more of a momentum indicator, in the sense that it says “hey things are good and are likely to continue to be good”, or the opposite. Its major benefit appears to be an early-warning system to get out of the market. It’s conservative to send entry signals, but its exit signals seem well-timed.

    1. Hi Mat. You can see the current state of the indicator (as well as the value) on my home page, under the menu system. It is currently yellow (and weakening). I thought maybe readers wouldn’t find it useful to get a ‘yellow’ indication, which simply means hold the course for now. If/when it turns red, I will post. Thanks!

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