Quote Originally Posted by ernsttanaka View Post
Pascal, Billy,

I am wondering if the market is changing.

We had a recent top in the IWM of 85.89 and most recent low is 74.88.

The DMF20 has not been able to pick up on this down move of more than 10%. That is either a sign that the move is not followed by big money, or the market is changed from the days DMF20 was developed. I note that the VIX was also late to the party, which would point to the first reason.

Considering your thoroughness I presume the 20 part of DMF was decided upon after an statistical optimization process. If you would do that optimization again over recent months - would 20 again be the optimal, or is a short average more effective.

Appreciate your insight,

Ernst
Ernst,


The 20DMF issued a short signal but it was orverruled because not confirmed by the inversed ETFs.
Just as a reminder, I modified the 20DMF rules I believe around september 2009, when I had to "hand-overrule" the 20DMF's short signals because I saw large players selling SDS. At that time, I decided to use an SDS confirmation in the programmed tools. Later on, I moved to an average of the four most traded ETFs, to have sometning that followed the global market more closely.

The question is: now that we are out of the POMO days again, isn't it better to respect a 20DMF short signal without waiting for a confirmation?

This is what i am studying right now. moving from a 20DMF to a 10DMF would shorten the cycles and maybe push us to overtrade. That however is another study that I could make later. I remember that I did some tests in 2009 and the 20D was what worked best, compared to 10D and 15D.


Pascal