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Long or Short using major indices

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hotqld

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Hi
Been working on a indicator when to long or short combining 3 indices.
Criteria:
XJO, XJO futures and SP500. Daily Charts. all three add:
On balance volume [/B]with a 10sma -SHORT when 10SMA is above OBV.
Macdh 12/26/9 - short when negative.
XJO add 34EMA - short when close is below 34ema.
When the seven indicators agree - go hunting for individual stocks shorts
on resistance breaks with vol above 15SSMA avearged over 150 days.

Backtesting is proving positive.
Has anyone else worked on similiar criterea to support market setiment?
My logic behind this is similiar to the ocean swell ...being the major indices and then catching the smaller waves in the same direction as the swell.
Cheers
 

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Indexes can be used as filters in many ways and I know of systems traders who have one or so as a filter.
How you govern trend is personal as is use.
Long/Short/Stand aside.
 
Yep indices are very useful as a prevailing trend indicator for the overall market that you're trading in. Personally i don't use MAs and work more with where the price is and likely points for turn arounds to avoid the lag.. on that, MA type crosses can just be confirmation.
 
Monday 14 June 2010

An index is already a composite of a selection of stocks, some of which are performing better than, some worse than, and some equal to the index. Putting together a grouping of averages does not seem to be the most productive use of effort.

An idea for consideration that would yield more productive results would be to track XJO, for instance, and when you see it at a support area or a potential breakout, then look for the strongest stocks that are outperforming the index as purchase candidates, for they are already proven to be relatively stronger, and will continue to outperform the underlying index when it turns up or breaks out. The same holds true in reverse, using weakness.

Buying relative strength and selling relative weakness will provide an edge in participating in greater price momentum when selecting individual stocks.
 
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