V.7:4 (109-111): Master oscillator by William Mason

V.7:4 (109-111): Master oscillator by William Mason
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Master oscillator by William Mason

Is it possible to produce an overall market entry or exit signal based on several indicators/indices? In answering this intriguing question, I asked myself, "What do I look at and look for as my first quick estimate of the market trend and direction?" My answer was that I go to three or four of my favorite indicators/indices and find out where they are in respect to their 10% exponential smoothing average (a 20-day moving average) which has proven, with time, to be a very good short-term support or resistance line.

My next thought was, instead of trying to remember where each indicator/index is with respect to its 10% exponential smoothing curve, why not let the computer keep track of the relationships? Then I thought, "Why not take all of the differences between my favorite indicators/indices, algebraically combine the result and take the average to produce an integrated picture of what I had been doing mentally?" Here's how I proceeded and the results:

STEP 1 - First of all, I picked as indicators/indices the Dow Jones Industrial Average (DJIA), the Technical Index, Relative Strength Index (RSI) of the Technical Index and the Cash Flow Index. The Technical Index is already composed of advancing minus declining issues, up volume minus declining volume, and new highs minus new lows (see Stocks & Commodities, December 1988.) The Cash Flow Index is the accumulated product of the daily net volume times the daily net Technical Index.


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