Larry and everyone who's been talking about market turns,
When the COT went short this summer, I was one of those who figured it was going to happen any day now. I dropped some very profitable bull market trades that would have worked out. It was a good education in what the COT really is. It's not a way to time the market.
But,in going back and testing the COT, I saw that there were some trades that wouldn't have worked out nearly so well if you took your time and tried to impose your own wishes or beliefs about market direction. So I was pretty sure that I needed to let go of my own guesses and follow the smart money.
It the last few weeks working on my own system, I became concerned in how it would work in a crash like 10/87. Larry, you told me, quite rightly, that if I sold when the 26w EMA was hit that I'd be okay - that there's always a warning before a crash. In the last few posts though I thought I heard you say that we really can't know. So I'm confused. If there really is warning, then there would seem to be an edge in riding the trend until the warning when the COT turned against the trend. If there isn't warning, there would be a clear edge in following the COT signals ASAP. I've seen evidence for both views. I'm probably trying to be too concrete. Can you help clear up my confusion?
Thanks,
Howard

i look forward to larry's answer to your question(s) but while we wait...

i think the cot system is great - strat 1, 2, 3, 4 ALL have their strenghts. you just have to find the one that suits you. if none do then you have to ask yourself why? and what can i do to "fix" it?

i have asked myself this regarding the entry part of the system. i am convinced that using the cot to determine bias is excellet (see strat #3) and i love the money management aspect of strat #4 - adding leverage when the price MA is in your favor... but the entry IS, to be kind, not exact.

borrowing from larry's 40 week MA system idea in strat #4 it occured to me that a 20 DMA added to the entry system (when the cot flops to bullish AND when the price is above it's 20 DMA - go long.)

i think it will work (larry agreed on another post) but i just haven't had time to check it.

also, i'm a little behind on my reading so i'm just now learning the p&f charts. i REALLY like them and wonder if adding a bullish p&f signal to the cot for entry wouldn't be better than a MA??? i wish a computer could do this quickly and easily for me so we'd have an answer NOW!!!

anyway... i want to hear larry's tho'ts on your questions - just tho't i'd chime in!

-ja

Howard,

You make an excellent point. I would be confused as well by what I said yesterday. Market crashes are rare. But it is true that I know of no severe and sudden market decline that could reasonably be called a “crash” that hasn’t been proceeded by clear warnings. But since we don’t have a lot of samples to go by, it would be dangerous to assume that it will always be that way.

Market historians like me have problems when markets do things they never have done before. We lose our bearings because we lose our reference points. My problem with this market is that just from a price perspective we’re in just a regular, garden variety, overbought market. And markets can stay overbought for a long time. But from a sentiment perspective it’s in uncharted territory as far as I’m concerned. I have never seen a time when there was so much complacency. And that’s extremely dangerous. It tells me that if this market gets rolling to the downside it will just blind side a lot of people and catch them completely off guard. And I’m not sure how they’ll react. Hopefully, we will get a warning and it would still be my best guess that we will. But I can’t be sure because I’ve never seen anything like this.

I have no problem with COT systems that get you out at stop points and have triggers to get you back in. I just haven’t found one that I think is better than the strategies I’ve already posted. It’s easy to design one that would have worked for the last seven months. But, for me to use it, it needs to have held up well over the last 18 years through all kinds of markets.

By the way, some time during this long weekend I’m going to take a good look at the system you’re working on. Maybe I can make some suggestions.

Larry

Larry or anyone else,
Do you know where we can get daily data on $spx from 86 on? What we'd need is date, open, high, low, and close. I'd be happy to work up a spread sheet (it wouldn't be longer than 5000 lines) that could help us do these kinds of calculations. If there is no place for the data, would you be willing to sponsor a "subscriber commons" on your site where we could all add to a database and so cooperatively create one for our common use?
Howard

http://finance.yahoo.com/q/hp?s=^SPX

All available free from Yahoo at the above link.

Cheers
Andy

Yep, the link that Andy gave you is the one I use.

Larry

Do you have to pay a subscription? When I try the link all I get is the header and the menu on the left but otherwise empty where you'd expect the data to go.
H

No, there's no subscription. I don't know why it's not coming up for you. The link is good. Maybe this one will work better for you...

http://chart.yahoo.com/d

The symbol for the S&P is ^SPX

It that doesn't work, just go to Yahoo Finance, Research, Historical Quotes. You can download the data straight to your spreadsheet.

Larry

Thanks, guys, it worked. Can you tell me the yahoo symbol equivalent to $compq on bigcharts? When I do the look up I don't see anything that looks like the basic nadsaq. thanks
Howard

try this link
http://finance.yahoo.com/m1?u


Nasdaq 100 = ^NDX
Nasdaq comp = ^IXIC

regards
Andy

Thanks.
h