Monday, December 3, 2012

'tis the season(ality) part 3

step 3) add a seasonal projection anchored on the most recent candle:
click the beaker icon on the top tool bar.
add sdi_seapro5, adjust season len to 5, adjust the colors of the plots fl (flat line) and pa (projection average) to something that contrasts well with your background.

you should now have a screen that looks like:
spy with sdi_seapro5 on weekly chart
this shows you the average move that spy, the s&p 500 etf, has made around this time of year. it looks like we should decline a little til the end of february and then rally into april.

do you trust that?  do you trust it enough to put money on it?

this is the problem i attempt to address with some of the indicators. you can average any random set of prices together but average randomness is still random. to be reliable, the individual seasonal projections should bunch up and move together. here's a view of the individual seasons seapro is averaging (you can plot these by selecting show individual seasons):

spy with individual seasonal projections, green are most recent 2, red are oldest 3.
i see the last 2 years were sideways to up, while the oldest 3 years were sideways to down. this is really rather inclusive, imho, and i would not base a trade on this. there are better, more mathematical ways to judge good seasonality which i will explore in the next part.

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