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Dr K Market Direction Model
Dr K's MDM and the relation to the current trend

Q: I know your model relies primarily on price and volume action in conjunction with the action of leadership. However, I was wondering if you had tested the reliability of the signals based on its relation to a certain trend. For example, have you found the signals to be more or less reliabile based on the prevailing trend. e.g., a buy signal issued when the 200 day moving average is uptrending vs. downtrending or buy signal taking place with price above or below the 200dma or 50dma?

A: Your idea is a good one, but I have found little value to whether the 200dma is uptrending or downtrending, since big reversals in trend from down to up can occur when the 200dma is downtrending such as March 12, 2009, and likewise, true buy signals can also occur naturally when the 200dma is uptrending. Further, whether the buy signal takes place above or below the 200dma or 50dma also has little predictive value in terms of true vs false signals.

First published: 7 Sep 2010
Last updated: 7 Sep 2010