Position Trading The S&P by Clifton Mitchell, Ph.D.
Use linear regression to predict short-term trend changes of the Standard & Poor’s 500.
Psychologically speaking, bar chart lows represent
the lowest price that sellers are willing to take
for a security or commodity. If sellers are not willing to go lower on their selling price, then buyers must pay more and, consequently, prices rise. This is why a series of higher lows has long been accepted as a general indicator of prices moving higher. Evidence of this is most commonly seen when trendlines indicating upward movement are drawn such that they touch the lows of uptrending bar charts. Trends with more higher lows than lower lows can easily be recognized after they have developed. Often, however, this is too late in the move to use as a buy signal, particularly for the short-term position trader. By the time the trend is evident, most of the move is over.