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Subject:  Re: Blending at a Whole New Level Date:  7/22/2008  8:59 PM
Author:  Zeelotes Number:  211407 of 263950

Wow! You guys all focus on the thing that is least important, at least in my view. It is not so much what signal you use that is important, but the fact that it is possible to use it, and raise the blending concept to a whole new level. At least that was my take away message. I certainly wasn't intending to set up a class on timing!

Kev asked:
How are you calculating this? I don't come remotely close to 25%/-8% using Pinnacle AM, ND and NY High-Lows data and ^IXIC from Yahoo. If you don't want to share a trade secret how about something slightly different that I can attempt to independently confirm? I should be able to do this (and optimize) using my software no problem.

As some have said, I only used one exchange's values, not three or a combination of any. That is the first and most important point. The second point is that now Jim has given many ways to accomplish this which really drives home my whole point. The signal used is not what is important here.

Klouche asked:
Are you using the NASDAQ count of new highs/lows for bullish/bearish? If so, how does it (your Blending Method) work using the S&P?

Yes. Do you mean how does the timing method work on the S&P? I'm not clear what you're asking.

Jim wrote:
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.

I'd never do this even for signal development. What I share is always based on a delay of one day and entering/exiting at close prices. Of course, open would probably improve it, but this sort of indicator is not so brittle / sensitive.

This isn't meant to be a trading signal by itself, but it's nice to see the degree of consistency of the signal over time, which is pretty good. I like that you can get quite good results with surprisingly few signals per year, which I have come to appreciate is a very important thing in timing signal development.

Yes, that is right. I'd never use it as a stand-alone trading signal. My purpose was to choose an indicator that was simple to make and update (maybe failed on that one, but to be fair Jim, I don't recall being able to replicate even one of your indicator's either) and captured the general trend where perfection was not needed. Remember, we are 100% invested either way. In fact, it is possible that you remain in the same screen from one signal position to the next.

As to the "few signals per year" comment -- that is most definitely my own findings as well. It is a very rare thing that I would consider a signal with a high turnover rate as being good. The lower the better in almost all cases.

My only question for Zee: how many signals per year did your example signal produce, and what percentage of the time was it bullish?

The signal I developed without a weighted moving average is bullish 72.34% of the time, and has 5.1 signals per year on average. The weighted average signal is bullish just 60% of the time, and has 5.2 signals per year on average.

I broke the results of this indicator into three baskets -- 1978 to 1989, 1990 to 1999 and 2000 to 2008. The results showed out-performance in the first and the last period, but slight under-performance in the middle period. Here is the Long and Cash results of this indicator minus the LTBH of these indexes. Positive means it won.

                                                              1/3/1978  12/31/1989          1/1/1990  12/31/1999          1/1/2000  7/15/2008     
Diff CAGR GSD Sharpe CAGR GSD Sharpe CAGR GSD Sharpe CAGR GSD Sharpe
Combined 3.98% -6.56 0.52 6.87% -4.54 0.80 -4.15% -5.13 -0.13 9.32% -10.27 0.71
^SPX S&p 500 Ruel 2.41% -6.55 0.27 5.59% -6.21 0.46 -5.11% -