V.9:8 (310-315): SIDEBAR: A COMPOSITE INDICATOR by Technical Analysis, Inc.

V.9:8 (310-315): SIDEBAR: A COMPOSITE INDICATOR by Technical Analysis, Inc.
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A COMPOSITE INDICATOR by Technical Analysis, Inc.

Interview subject Tim Hayes suggests a modified version of the composite indicator using just three indicators.

You refer to your composite indicator that is made up of subgroups. Can you tell our readers about one or two indicators from each subgroup?

A lot of data and a lot of indicators go into our models. They're very, very broad, and there's too much in there for an individual to try to update without a computer. So what you could do is put a model together with just these three indicators, you take the same approach toward timing the market. Three indicators would be, say, a Value Line slope indicator based on the 30-week momentum of the Value Line composite (Figure 1). We found that if the Value Line momentum goes below -1%, turns around and moves above that, that's a buy. If the Value Line momentum goes above 16%, peaks out and turns down, that's a sell signal. Now that's a simple indicator that an individual can update simply by entering every day what the Value Line is and calculate the 30-week momentum.

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