Thursday, June 17, 2010

Cabot Trend System Flashes A Buy Signal

The Cabot trend following system, as described on their website at, gave a buy signal today. The system is quite simple and reliable. First, for a buy signal the market must be in a long term uptrend as defined by the 20 and 39 week simple moving averages. Both the SP500 and the Merrill Lynch Technology 100 indexes must be above the lower of the two moving averages and that moving average must be rising. Secondly, the market must be in an intermediate uptrend as defined by the 25 and 50 day exponential moving averages (actually they don't say whether to use exponential or simple daily moving averages, but I prefer the exponential). Three out of five of the following indexes must be above the lower of the two averages and that index must be rising two consecutive days: Nasdaq Composite, Merrill Lynch Technology 100, NYSE Composite, SP Smallcap 600 and the SP500. Today, the Nasdaq Composite, MLO 100 and the SP500 meet that criteria and both the SP500 and the MLO 100 are above their rising 39 week smas. Based on this the market is now is new intermediate uptrend adding to the growing list of buy signals.

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