6 replies to this topic

[Douglas]

As a self-confessed indicator junkie, I am always on the lookout for new, effective indicators.  One of my favorites over the years has been Terry Laundry's Magic "T".  In addition to the Magic "T" indicator which Terry was famous for he also produced an MFI "T" which could occasionally point out a turn in advance.  In all Terry's material that I saw on the subject, he used the default 14 day MFI indicator to plot the left side of a  "T" from an MFI peak above 80 to a low below 20 sometimes centering the post or left side of the "T" between a series of peaks or lows. The MFI can be plotted with a cycle indicator to produce the "T" with varied look back periods at popular charting web sites like www.stockcharts.com.

 

What I have found is that unless the market has a sustained movement in the up and then in the down direction, the 14 day MFI will not cross both 80 and 20.  What I have begun doing is forcing a cross of both by dropping the look back period from 14 to 13, to 12, etc. until I get a cross in both directions giving me the left side and post of the "T".  

 

The reason I'm noting this now is that a 9 day SPY MFI "T" turn was signalled roughly in the middle of the current large Turn Risk Cloud which I mentioned in my last note, so it caught my attention.   

 

Regards,

Douglas

[opinionated]

I to am a junkie...

But confused here. Terry's work never sunk in no matter how I pushed. Are you saying we are at the center of the T? Or the right tip? Any possibility of a chart doug?

[Douglas]

We are somewhere near the end of the right cross arm of the "T" which signals a possible turn.  Because the left side of the "T" involves multiple peaks above 80, the current right side of the "T" location is a bit nebulous.  Terry, if my memory serves me, located posts or left "T" ends in the middle of such multiple peaks.  Like all my indicators, it is hit or miss. Since I'm searching for a turn in the middle of all this risk, I thought it worth while to point this out.  Given yesterday's end of day action and the futures' this morning, the sharp turn down I was expecting in SPY is not developing, so this indicator may be producing a dud signal. 

 

To study it for yourself, go the www.stockcharts.com, choose SPY as the security, add MFI as an indicator and adjust the interval to 9 days, then at the lower left corner of the chart select Annotate.  In the Annotate chart select the cycle indicator, then peg the start of the cycle in the middle of the two humps in the MFI above 80 on the left dragging the cycle end to the touch of 20 in the MFI.  The next cycle line which appears a few days ago is the end of the right side of the "T" which should have marked a turn (so far no cigar).  As to this turn, I'm afraid I'm a bit like a thirsty man in a desert always seeing mirages of water just at the edge of the horizon.

 

Regards,

Douglas

[opinionated]

Doug,

 

Thank you very much.... 

 

Keith

[Douglas]

Well, given it produced a dud signal this time, that's very kind.  Like a lot of indicators I follow, it is far from perfect, just another rusty tool in the box.  I find reversal detecting indicators fascinating even though my system is trend following.  Hope over better judgement I guess. 

 

Speaking of my system, it's currently in cash, but may be forced back long in the next couple of days if this rally persists.  The next risk window appears to be in the second half of next week with the center of the risk cycle action on Thursday the 11th.  The end of the following week, say the 19th, is a lot more interesting risk wise. 

 

Regards,

Douglas

[tria]

Well, given it produced a dud signal this time, that's very kind.  Like a lot of indicators I follow, it is far from perfect, just another rusty tool in the box.  I find reversal detecting indicators fascinating even though my system is trend following.  Hope over better judgement I guess. 

 

Speaking of my system, it's currently in cash, but may be forced back long in the next couple of days if this rally persists.  The next risk window appears to be in the second half of next week with the center of the risk cycle action on Thursday the 11th.  The end of the following week, say the 19th, is a lot more interesting risk wise. 

 

Regards,

Douglas

 

Douglas,

 

It was Parker Binion, he worked for Terry, who introduced to us the MFI-T and Terry did endorse it.

 

As far as I am concerned the short/medium term SPX bullish mfi-T with its Left Side on 6/27

and its Center Post on 7/18, was due to expire last Friday 8/5 +/-2td.

Bottom line, the jury is still out.

 

Left Side is the Price low date

Center Post is the highest MFI >80 date

Right Side expiration is an equal time to (CP date)- (LS date) extended to the right of the CP.

 

[Douglas]

Tria, you're right, and he called it "Money Flow Indicator Inverted T's".   I agree that using his method last Friday the 5th was the predicted turn. 

 

I have been tinkering around with his technique for a while trying to use different MFI intervals and both the 20 and 80 level penetrations by the MFI to find additional "T's" that don't show up using the standard MFI(14).  The technique I described pointed to a possible turn early last week near the middle of a risk cloud which didn't occur.  A turn on the 5th using the original technique is at the end of that large cloud of risk cycles I noted, so having the end of a "T" also located there would be consistent with an elevated risk of a turn.  Tomorrow will tell the tale. 

 

Regards,

Douglas