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Seven Sentinels


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#1 IYB

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Posted 22 March 2008 - 02:57 PM

Here are the Seven Sentinels. They were designed with one overriding idea in mind: ~simplicity~ They were this simple-minded trader's attempt to simplify a complex environment for purposes of defining the prevailing swing trade direction. and to greatly reducing emotion and/or whipsaws. And they are just one small part of the whole big picture of markets, from my point of view. I use them in conjunction with sentiment, cycles, and the direction of the credit cycle. But for me, they work very well in defining the short term ('swing") trend direction.

The simple rule that I use to identify the prevailing swing trade direction (approximately 2-10 weeks) is this: when all seven go to buy mode, that is a buy signal that stays in effect till all seven go to sell mode, which then triggers a sell signal, which stays in effect till....etc. I won't go into "early warnings" at this point.

The exception to that rule is that when the seven go to a buy or a sell without confirmation by the direction of the moving averages, I regard that as a likely whipsaw. For example, if all moving averages are moving down, and we get an upside crossover on all- then that is likely either a false or a premature buy signal. If, on the other hand, the moving averages had already turned in the direction of the crossover, and particularly if they had already set up positive divergences prior to the crossover, then I put a whole lot of faith in the SS's message.

You may find them useful; you may not. Trading is a very individual business. Others have their own effective methods, and that's how it should be. Here are the definitions I use for each, individually, to determine a buy or sell signal:

1. $BPCOMP- when the daily reading crosses either from above into the BB, of from within the BB to under the BB, that is a sell signal for this one indicator. A buy signal is generated in exactly the opposite way.

2, 3, 4, and 5- when the daily reading crosses downward through the MA from above the MA, that is a sell signal for this one indicator. A buy signal is generated in exactly the opposite way.

6 and 7- when the daily reading crosses upward through the MA from below the MA, that is a sell signal for this one indicator. A buy signal is generated in exactly the opposite way.


http://stockcharts.com/c-sc/sc?s=$BPCOMPQ&p=D&yr=0&mn=6&dy=0&i=p03557278111&a=132243312&r=4199.png
http://stockcharts.com/c-sc/sc?s=$NAMO&p=D&yr=0&mn=6&dy=0&i=p95694935821&a=132241851&r=4369.png

http://stockcharts.com/c-sc/sc?s=$NYMO&p=D&yr=0&mn=6&dy=0&i=p67690834570&a=132240665&r=9880.png

http://stockcharts.com/c-sc/sc?s=$NAHL&p=D&yr=0&mn=6&dy=0&i=p28936177142&a=132242597&r=8810.png
http://stockcharts.com/c-sc/sc?s=$NYHL&p=D&yr=0&mn=6&dy=0&i=p11594829525&.png
http://stockcharts.com/c-sc/sc?s=$TRINQ&p=D&yr=0&mn=6&dy=0&i=p85753661837.png
http://stockcharts.com/c-sc/sc?s=$TRIN&p=D&yr=0&mn=6&dy=0&i=p78330912829&a=132242143&r=4628.png

Edited by IYB, 22 March 2008 - 03:07 PM.

“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one.” Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds

#2 Rogerdodger

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Posted 22 March 2008 - 03:12 PM

Thanks Don for the simplified rules.
I placed your post in the Investors University "IYB's SS" thread. LINK

Could you clarify how you use the BPCOMPQ buy signals?
It looks like we got one Jan 24th and again Jan 31st as the BPs went thru both BB's from below.
As well as a double sell on Feb 28 & March 1st.
"1. $BPCOMP- when the daily reading crosses either from above into the BB, of from within the BB to under the BB, that is a sell signal for this one indicator. A buy signal is generated in exactly the opposite way."

http://stockcharts.com/c-sc/sc?s=$BPCOMPQ&p=D&yr=0&mn=6&dy=0&i=p03557278111&a=132243312&r=4199.png

Edited by Rogerdodger, 22 March 2008 - 03:19 PM.


#3 IYB

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Posted 22 March 2008 - 03:58 PM

Could you clarify how you use the BPCOMPQ buy signals?
It looks like we got one Jan 24th and again Jan 31st as the BPs went thru both BB's from below.
As well as a double sell on Feb 28 & March 1st.

Thanks Roger. All I'm looking for is a change of trend. So I use either -from above into, or from into below- as a sell, and the opposite for a buy. When both occur sequentially, then it's just the first one that is operative. The second crossing is redundant and changes nothing. Thus in your example, a buy on this one indicator occurred Jan 24, and Jan 31 was redundant- having no added meaning. Likewise Feb 28 was a sell {in fact it was a full SS sell which I reported here}, and March 1 was redundant, having no added meaning. Hope that helps.....Very Best, D
“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one.” Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds

#4 IYB

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Posted 22 March 2008 - 04:17 PM

I probably should have put this with the sentinels as a frame of reference- so they make more sense. D

http://stockcharts.com/c-sc/sc?s=$SPX&p=D&yr=0&mn=6&dy=0&i=p31378239789&a.png
“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one.” Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds

#5 hedgehawk

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Posted 22 March 2008 - 04:21 PM

Hey thanks for sharing I was wondering about the mechanics behind this signal.

#6 Rogerdodger

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Posted 22 March 2008 - 06:38 PM

So Don, If the BPs go thru the top BB and then back down it's a sell. If they remain inside the BB's and then go back up thru, it would be another buy. Right? TIA

#7 Russ

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Posted 22 March 2008 - 07:47 PM

Thanks for the post Don, just as we can see divergences with the jan low on some of the indicators, the Dow 30 did not make new lows compared to jan. This should be further confirmation...the big blue chips are leading the way up, in theory because the global expansion give them the most business with overseas opportunities.
"Nulla tenaci invia est via" - Latin for "For the tenacious, no road is impossible".
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#8 spielchekr

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Posted 22 March 2008 - 08:50 PM

"The exception to that rule is that when the seven go to a buy or a sell without confirmation by the direction of the moving averages, I regard that as a likely whipsaw. For example, if all moving averages are moving down, and we get an upside crossover on all- then that is likely either a false or a premature buy signal. If, on the other hand, the moving averages had already turned in the direction of the crossover, and particularly if they had already set up positive divergences prior to the crossover, then I put a whole lot of faith in the SS's message."

Don, which moving averages do you refer to here, the exponentials? The simple moving averages from 20 through 200 are all rolled over. Price being "down in the brown" on my smudge chart tells me this is so (price in the white would tell me all sma's are positively-sloped). Double-dipping into the brown is also a bearish trait for these charts.

Posted Image

The very short term ones (2 through 20 sma) aren't much better looking:
Posted Image
If you're seeing positive divergences in the moving averages, it's not in the sma's and/or it's in the moving average indicator processing you're using. Could you specify?

#9 IYB

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Posted 23 March 2008 - 12:34 AM

So Don,
If the BPs go thru the top BB and then back down it's a sell.
If they remain inside the BB's and then go back up thru, it would be another buy.
Right?
TIA

Yes- for that one of the seven, that's exactly right. Of course all seven need to agree {by going to sell simultaneously} to create an SS sell signal....
“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one.” Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds

#10 IYB

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Posted 23 March 2008 - 12:40 AM

"The exception to that rule is that when the seven go to a buy or a sell without confirmation by the direction of the moving averages, I regard that as a likely whipsaw. For example, if all moving averages are moving down, and we get an upside crossover on all- then that is likely either a false or a premature buy signal. If, on the other hand, the moving averages had already turned in the direction of the crossover, and particularly if they had already set up positive divergences prior to the crossover, then I put a whole lot of faith in the SS's message."
------------------------
Don, which moving averages do you refer to here, the exponentials? The simple moving averages from 20 through 200 are all rolled over.....

I'm referring only to the MA shown on each of the seven charts, i.e., the 6 or 13 day simple MA's.....D
“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one.” Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds