Thursday, January 22, 2009

10 minute NYAD

Those of you who've followed me for a while know I rely heavily on the NYAD (NYSE advance/decline line) for trigger confirmation. In a dynamic arena of constant head fakes, maker maker games and iceberg orders, the NYAD is a fairly transparent peekhole into the pulse of the market. Like the TICK, which often requires a volume component to validate the signal, the relative strength of the NYAD signal (for lack of a better term) can be enhanced by observing a market volume component, a concept which I'll explore further later this week.
For today's study I've just posted 8 days of the NYAD on 10 minute bars, with an overlay of my usual 8 & 16 SMAs (white, yellow lines) and a 3,14,3 signal line (blue) (which is the MA. component of the MACD).
Green arrows reflect bullish 8/16 crosses, white arrows reflect bearish 8/16 crosses. Unfortunately, due to the scale of the chart and the fact that some days the NYAD has hovered all day in the teens or low teens (low ATR), the visibility of the crosses is a bit constrained, so you really need to blow up the chart to see the crosses clearly. Nevertheless, this very simple indicator provides solid results when used in conjunction with the major indices or a basket of ETFs, such as my Qs,IWM,XLE,XLB mini basket.
This is not necessarily recommended as a stand alone system, but I constantly use it to provide confirmation for my trigger signals using the parabolics and the 8/16 crosses in smaller time frames such as the 2 and 5 minute bars and perhaps more importantly . . . to help me avoid premature exits, sometimes called ED (exit dysfunction) which are otherwise a costly annoyance.

2 comments:

ramon said...

hey bzb, thanks for the great posting as usual. Quick question - it appears that there is a bullish 8/16 cross on the 6th day, (a few hours after the bearish cross that you have marked with a white arrow), why doesn't this qualify as a bullish cross and get a green arrow?

bzbtrader said...

ramon,
You actually looked at the chart!
I'm impressed. As usual, your keen inspection has detected a bull cross I neglected to indicate. Thanks for pointing it out. I'm glad to see somebody's looking over my shoulder to help an old coot like myself stay on the right path.