When it comes time to decide “Should I be in the market or out?”, this indicator is the litmus test. It has been remarkably reliable since 1995. It provides confirmation of up turns and down drafts, and the more you work with it, the more useful it becomes. The latest revisions have made it even more accurate.
It is constructed with a one year chart of the NASDAQ Composite, using an oscillator and a moving average over the price bars. A buy signal is confirmed when the oscillator penetrates the zero line to the upside, and the price bars penetrate the moving average to the up side. If the price bars come back down through the moving average, but the oscillator stays positive, a buy signal is maintained. An example of this can be seen on the Historical charts (See the historical charts listed below the dog graphic in the left menu bar.) in October of 1999 and February of 2000.
A sell signal is generated with just the opposite chain of events.
The addition of trend lines can provide slightly earlier signals. Notice the oscillator double top formed from November of 1999 through March of 2000 (Historical charts to the left). A simple trend line below the oscillator double top (ending near where the red arrow is on the oscillator chart) would have provided earlier confirmation that the price break below the moving average line line was for real and it was time to take profits. Also, a down trend line on the oscillator from the mid March 2000 peak down through the right hand excursion of the late May double bottom provided earlier evidence that the price break from the March 24th – May 17th down trend line would be significant.
The break of the oscillator neck line in the head and shoulders pattern in the 2001 historical chart (which also correlates with the price trend line break) provided further warning of the pending break down.
The UnRuly Dog Lead Dog Indicator and The Lead Dog Oscillator are property of UnRulyDog.com. Their construction and use are proprietary and cannot be used without written permission. The UnRuly Dog Lead Dog Indicator and The Lead Dog Oscillator Copyright
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