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September 01, 2004 at 04:00 AM
These are the 10 mechanical models used at Abraham Bedick Capital to determine whether to be in the market or to go to cash. Only when nine of the 10 models agree on the upward trend of the market is a buy decision made.
Model 1
This is a weekly system, based on the research of Dick Fabian, and is run after the market close at the end of the business week.
A BUY signal is indicated when the S&P 500 closes higher than its 39-week moving average and the Dow Jones industrials index is higher than its 39-week moving average, and the Dow Jones transports index closes higher than its 39-week moving average.
A SELL signal is indicated by the inverse, when each index closes below its 39-week moving average.
Model 2
This is based on the McClellan Oscillator, which is included in most trading systems.
A BUY signal is issued whenever the Oscillator crosses from below to above zero. The Oscillator number is the difference between the 39- and 19-period moving averages of the number of New York Stock Exchange advancing issues minus the number of NYSE declining issues. We smooth the resulting number with a two-day moving average.
A SELL signal is issued whenever the McClellan Oscillator crosses from above to below zero.
Model 3
A BUY signal is issued whenever the S&P 500 closes higher than the 20-period and the 40-period moving average of the S&P 500.
A SELL signal is issued by the inverse, whenever the S&P 500 falls below both moving averages.
Model 4
A BUY signal is generated whenever the Dow Jones industrials, utilities, and transports increase 4% over their weekly lows while the Dow industrials also closes above its 20-week moving average.
A SELL signal is issued by the inverse, i.e., whenever the three Dow averages fall more than 4% below their weekly lows and below their 20-week moving averages.
Model 5
This is a system combining both breadth and price.
A BUY signal is issued whenever the S&P 500 rises above a 20-week moving average, when there is a one-day increase of more than 3% in the S&P, and when the number of advancing issues is greater than 75% of all the issues traded that week. This model allows investors to become involved in the market after a down period, and when there seems to be a possibility of a new move up.
A SELL signal is issued with a trailing stop of 10%.
