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43

AIRUNE MOVE PREDICTION

27 OCT 1988

PCRCENfrAQEGAM 0 4 812 16 20 24 203238

FUriNSTKSen

• CONTINENTAL

♦KLM

NATIONAl.

AMEmCAN

WORLD AIRMMTS

TRATWORLO

MN AMERICAN

DEUA

NORTHWEST

EASTERN

-7

SEABOARD WORLD

RACinC SOUTHWEST

WESTERN

UNITED

« BRANIFT

AVERAOE QAIN -21 •

The Techniques At Work On Group Averages

SAVINGS AND LOAN GROUP MOVE PREDICTION

8 NOV 1968

12 18

fCEKTAGC GAIN 20 24 28 32 38 40 44 48 52

BUDGET INDUSTRIES

UN N CORP.

FIRST CHARTER

GREAT WESTERN

jflJITED nNANOAL AMERICAN CRED<T WLMILVnNANCE "

AMERICAN INVESTMENT

BENEFICIAL FINANCE FINANCIALFEDERATION "uBiERTYLOAN GlBRALtER FINANCE »<P£RIAL CORP. TRANS-WORLO CALIFORNIA FINANCIAL HOUSEHOLD FINANCE

FIGURE -

/U/ERAGE GAIN - 212» Another Group-Move Prediction



; 38 by Lope Instead of by Guess

PREDICTION OF THE AVERAGES

The operation began on 23 October 1968 with the analysis of the DJIA described at the start of this chapter. The analysis was extended by envelope and half-span average methods to produce the first three predictions shown in Figure vni-6.

In this figure, the solid vertical bars show the times of predictions made, and the arrowed leaders indicate the time-price regions predicted. Prior to 23 October, the market was on the upside. The analysis called for an immediate drop to the 930-950 area, followed by a rise to between 960 and 1000. This was to be followed by a steep drop to between 890 and 930.

As time progressed, the initial short-term low was achieved, and on the 12th of November, the time region for the expected major high was refined and expanded as shQwn.

On the 25th of November, the time of the target low at 910 was revised from late December to early January 1969. Note that this prediction was being refined even before the expected top in the vicinity of 1000 was reached!

The final prediction of the series was made on the 4th of December. At this time the market had reached the target zone for a top-out, but had not as yet started the subsequent decline. Although the experiment was terminated shortly thereafter, the following market action shows how precise the prediction of the low to foDow turned out to be.

THE RESULTS OF INDUSTRY GROUP PREDICTIONS

Figure Vin-7 shows the results of the first Industry Group turn prediction of the experiment, and the subsequent price moves of all issues in the group during the experiment. The minimum move was 8.2%, the maximum was 37%, and the average move was 21.5%. Recalling that the experiment objectives were 11.1% gross, the predicted move provided an average safety factor of more than 2.0.

The Savings and Loan Group move was called on the 8th of November with nearly identical results, as indicated in Figure VIII-8.

SPECIFIC ISSUES INVOLVED

The tabulation of Figure VIII-9 shows the specific issues analyzed and tracked through buy and sell signals during the experiment. All action signals for these stocks (as well as for the Dow and Industry Group Averages) were noted as they occurred and reported by daily memorandum to impartial observers. The asterisks of the figure indicate issues on which actual portfolios were managed. The remaining action signals were not acted upon, but were used as insurance to assure 100% time investment of funds (which was achieved throughout the experiment). The buy and sell pric are the actual values recorded by memorandum on the dates indicated, or the actual buy and sell prices for those cases where funds were invested.



TnuJiog Expetiment Results Analysis of Buydl Recommoidations (10/23/68 Through 12/10/68)

* 1. 2.

* 3. 4.

* 5. 6.

* 7. 8,

* 9. •10.

13. ♦14. *15. *16.

17. *18.

19. *20.

23. •24.

27. •28.

29. *30.

34. **3S.

CAl.

sew ox

Buy Date

11/12/68

11/13/68

11/7/68

11/8/68

11/6/68

11/6/68

11/7/68

11/12/68

12/3/68

11/12/68

11/29/68

11/14/68

11/12/68

11/7/68

11/7/68

11/12/68

11/8/68

U/8/68

11/8/68

11/8/68

11/8/68

11/12/68

11/12/68

11/13/68

11/26/68

11/12/68

U/13/68

11/25/68

11/25/68

11/26/68

11/26/68

11/26/68

12/3/68

12/5/68

SeS Date

11/29/68

11/18/68

11/12/68

11/29/68

12/10/68

12/2/68

11/15/68

11/22/68

12/10/68

11/15/68

11/14/68

12/10/68

12/10/68

11/18/68

11/18/68

11/12/68

11/22/68

11/15/68

11/12/68

11/18/68

11/27/68

11/15/68

11/22/68

11/29/68

11/22/68

11/27/68

11/15/68

11/13/68

12/2/68

12/2/68

12/10/68

11/29/68

U/27/68

12/5/68

12/10/68

Buy Level

38-1/4 6M/2 59-1/2 85-3/4 17-3/4 35

39-1/4 30

23-1/2 13-1/4

27-1/2

45-1/2 30-1/2 157 38

27-1/2 20-7/8 15-1/2 35-1/8 20

25-1/4 9-3/4 14

9-3/4 35-1/4 21-1/2 35-1/2 65-1/2 90

16-1/2 14-1/4 32-1/2

Sett level

42-1/2 68-1/4 69

95-1/4 18-3/4 38-5/8 46

34-1/2 25-5/8 14-3/4 53-7/8 31

37-1/8 54-1/2 50-1/4 34 174-1/4 42

29-3/4 23-1/2 17-1/2 39

22-3/4 0-1/4 10-7/8 15-5/8 10-7/8 39-1/8 23-3/4 38-7/8 71-3/8 90-1/4 17-1/2 15-7/8 35-7/S

+11.1 +11.0 +15.9 +11.1 +05.6 +10.3 +17J +15.0 +09.0 +11.3 +07.7 +12.7 +09.2 + 13 J +10.4 +11.5 +11.0 +10J +08,2 + 12.5 +12.9 +11.0 +13.5 +19.8 +11.5 +11.8 +11.5 +10.7 +10.4 +09.5 +09.0 +00-3 +06.0 +11.4 +10.4

Invested

17 05 OS 21 34 26 . 08 10 07 03 07 U 26 06 11 05 10 07 04 10 19 07 10 17 09 01 03 01 07 0? 14 03 01 02 05

•Represenu transactions in which actual funds were invested.

Ave.% =+11.1%

Ave, Days = 9.7 D Ave.%/Day = 1.14%/D Ave. % Costs = 2.2%

•Note; Multiple predictions per issue brought the total number of completed transactions to 42.

FIGURE VIlI-9

CONCLUSIONS

This trading experiment was conducted at a tempo which precluded exhaustive analysis. Only the absolute minimum of graphical work could be accomplished on the 40 to 60 issues of each weekly "stable" of stocks. It is undoubtedly true that such a



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