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Subject:  Re: Blending at a Whole New Level Date:  7/22/2008  4:11 PM
Author:  mungofitch Number:  211399 of 263254

Like KBGlenn, I didn't understand your high/low signal construction at first.
But, incomprehension can be good too. This spurred me to try out
several different ways to do this, and they all work to some extent.

All figures using Nasdaq composite 1978-present, both for the highs
and lows and for the trading on those highs and lows.
Signal at close, assuming trading the index that moment at close, no friction.
i.e., not very realistic, but probably OK for signal development if
the number of signals per year is small enough.

EMA of daily high-low number > 0
Bull: 20.8%
Bear: -6.6%
Signals/year 9.62
Bullish 66% of the time

Do two EMA's of the daily high-low number, a longer one and a shorter one.
shorter EMA > longer EMA
Bull: 26.6%
Bear: -5.6%
Signals/year 18.29
Bullish 55% of the time

MACD of high-low number
(take EMA1, EMA2, difference of those, EMA of difference, and check diff>EMA(diff))
Bull: 22.4%
Bear: -8.4%
Signals/year 8.83
Bullish 66% of the time

Trickier one:
Build a high/low line. Start at 0 on day 1. Value on day 2 =
value on day 1 + highs on day 2 - lows on day 2.
Then, create an SMA on that line.
Then, bullish if the high/low line is above SMA(high/low line)
Bull: 20.4%
Bear: -6.0%
Signals/year 8.7
Bullish 67% of the time

And, just for fun, YATS on all the above: take a vote on the sub-signals.
Simply sum the four signals above. If any are bullish be bullish, else bearish.
Bull: 21.3%
Bear: -17.6%
Signals/year 10.0
Bullish 76% of the time

Alternative YATS: bullish if 1 or more of the sub-signals are bullish.
Bull: 22.0%
Bear: -9.7%
Signals/year 9.36
Bullish 68% of the time

And lastly, as above, but with whipsaw reduction to reduce signal count.
If 3 or more of the 4 are bullish today, go bullish.
If 0 are bullish today, go bearish.
Otherwise, stay with previous day's state.
Bull: 22.8%
Bear: -10.5%
Signals/year 6.41
Bullish 67% of the time

Just for interest's sake, here are the last few signals for the last version.
Bullish at close 2006-08-18, Nasdaq at 2163.95
Bearish at close 2007-03-02, 2368
Bullish at close 2007-03-22, 2451.74 (prior bear signal was wrong)
Whipsaw: one day of bearishness triggered at close 2007-06-27, loss .12%
Bearish at close 2007-07-20, 2687.6
Bullish at close 2007-09-04, 2630.24
Bearish at close 2007-10-19, 2725.16
Index now is 2285. Ignoring the one-day whipsaw, that's 5 out of 6 good.
If you could have traded the index with this long & short without friction,