Quazimoto’s Market Direction Indicator is based on daily volume and advancing / declining issues. This is a super-modified ARMS index type leading indicator that give long term market direction. We define ”long term” as several days to one or two months based on past history. Check out the one year Nasdaq composite chart below for historical buy sell areas…
The red signal lights and red rectangles indicate sell zones. The green signal lights and green rectangles indicate buy zones.
The advantages of using this system are many. At the very least, the market direction indicator keeps buyers out of those zones where the market is heading south. Conversely, short sellers could very easily take advantage of these zones.
Also, there are actually many short term buy opportunities in these long term sell zones, and short term sell opportunities in the long term buy zones. For now these short term buy and sell areas will not be posted.
As you can see, this market direction indicator does not pick the exact tops and bottoms of a market cycle. August 2007 area is a good example of this. Be that as it may, our actual testing of Quazimoto’s market indicator shows that traders who bought stocks only in the “buy zone” areas increased their percentage of winning trades. We define winning trades as those trades that resulted in a gain; sell price higher than buy price excluding commissions. Traders that consistently buy and sell stocks throughout the year with a 50% winning trade record should be able to increase that winning percentage to 70% simply by choosing the correct market cycle. We think that using Quazimoto’s Market Direction Indicator should help the average trader stay on the right side of the trade.
Here is a look at the signal lights that are posted on the right sidebar…
Flashing green indicates a buy zone. Buying low and selling high are alway easier in a buy zone.
Flashing green-yellow indicates that a shift from a buy zone to a sell zone may be approaching. Set stops accordingly.
Flashing red indicates a sell zone. While there may be opportunities for profitable buying, the market is most likely in a selling mood. Buying stocks during this time will include higher than normal risk. If you need some “down time” from trading, now might be a good time.
Flashing red-yellow indicates that a shift from a sell to a buy zone may be approaching. Start searching for some good buys and get ready to pull the trigger when the green light appears.
Always keep in mind that this is a long term indicator. There will be ‘down’ days in a buy zone and ‘up’ days in a sell zone. Quazimoto’s Market Direction Indicator is most valuable when determining where the market is headed. By knowing this, your portfolio can be adjusted to suit these changing market conditions.
Quazimoto’s Market Direction Indicator is best suited for higher priced microcap traders and those who trade the more expensive stock traded on the NASDAQ, AMEX, and, NYSE. Penny stocks and sub-penny stocks are influenced more by momentum. Overall direction of the market is important to consider but this is not the primary factor for these type of stocks.