Friday, October 03, 2008

Weekly Pivots Update

This little spreadsheet has been uncanny in it's predictive power for (short term) upcoming range expansion or contraction. Per last week's update the indication was for significant range expansion, which is shown by the yellow range tracking bars. Unfortunately, 3 of our 4 ETF basket closed on the low bar of the weekly range, which suggests more negative pressure to come.
For the coming week, only the XLF has a 4 week range/pivot ratio that is greater than the current % pivot range, suggesting relatively muted volatility in that ETF for the coming week. For the past 2 weeks, the XLF has shown the least range expansion of the basket, which may be indicative of a longer term bottoming process in progress.
I'm going to add several more metrics to the study over the next week as well as a graphical interface to thumbnail the data. So far, the study has been a great tell for short term range volatility even in the face of deteriorating trends in all 4 ETFs.
It would be nice to have a coded algorithm for these computations so that a wider universe of ETFs and indices could be quickly scanned for maximum risk/reward potential, but I'm not sure when I'll get around to that little project. If any of you bored coders want to seriously take a crack at it, email me and I'll send the full expanded excel file for you to fiddle with.

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