Frequently Asked Questions
Q: Regarding distribution days, I was wondering if your model takes into account the "zone of relevant action", when counting dist days. ie. when the NASDAQ moves up 5% from a dist day, does that dist day comes off of the dist day count?
A: Yes, my model takes the zone of relevant action into account. I have found, however, that it is generally unnecessary to drop distribution days just because the market moves up by a certain percentage. Generally speaking, if a market is strong, there will not be enough distribution days within a time frame that would warrant a sell signal. In other words, strong uptrending markets do not issue enough distribution days to issue a sell signal. Dropping distribution days is thus usually unnecessary just because the market has moved up x%. March 2009 would be one of the few exceptional circumstances.
Also, there are other factors that can come into play. Leading stocks may be shaping up, ready to move higher, even though the model is on a sell or neutral signal, as it was in March to part of April 1996. In these rare instances, one should start buying leading stocks that are issuing buy signals at proper pivot points. The model is meant to catch intermediate term trends in the general averages. Thus overriding the model's signals to buy or short individual stocks that have excellent set ups is an option. In such times, we will send out reports to members. For example, before the model switched to a buy signal on September 1, 2010 we emailed out reports on a number of leading stocks issuing pocket pivots even though the model was still on a sell signal.