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I love to look at indicators to see what they might forecast for future stock performance. This morning I had noted that the McClellan Summation Index has closed above the +1998 reading. It has run from the July lows where it had an approximate reading of -2000 up to it's present level of almost +2000.

What i wanted to backtest was what this reading has meant in the past. So I ran a quick backtest with the following parameters:

Buy at the market the day following a cross of a reading of +1997.

Sell when either you hit a 4.5% profit target or a 5% stoploss

I ran this on the SP500, Nasdaq 100, and the Semiconductor Index.

This event has occurred on 4 occasions since 1986 which is the beginning of my data for the Summation Index.

The crossing happened on these dates:

July 17, 1997 held (held 57 days)

May 12, 2003 (held 14 days)

December 29, 2003 (held 15 days)

November 15, 2004 (held 173 days)

Each and every time this has occurred, the indexes hit their profit target without hitting their stoploss.



Draw your own conclusions from the data.


Have a Great Day!

Dave Johnson

dayvejohnson@gmail.com

http://dayvejohnson.blogspot.com

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