Trading with ARIMA and stochastics
by John F. Kepka
In the June 1985 issue of Technical Analysis of Stocks & Commodities magazine, I presented some
possible strategies using ARIMA (AutoRegressive Integrated Moving Averages) to trade the September
Standard & Poor's (S&P) 500 Futures. The Stochastics Oscillator was discussed in the May and
September 1984 issues of Technical Analysis of Stocks and Commodities. Now, I will combine ARIMA
from daily data, stochastics, and use half hourly Standard & Poor's (S&P) 500 index futures prices. The
half-hourly price data and the stochastics are obtained from Intra-day Analyst, software specifically
designed for intra-day price analysis.
—ARIMA Sets the Day's Range
The ARIMA forecasted highs, lows, and 50% confidence levels were calculated from a model developed
for the S&P 500 September 1984 futures with EASI/ARIMA—The 2%, Solution . I refer to these
forecast levels as potential action points. Both the regular and the slow stochastics are presented for
comparison in Figure 1 along with the price action. Figure 2 lists Daily ARIMA forecasted values.