Just to piggyback on this topic, I wanted to see if this filter that John made would work well with the downturn that we had this year in Feb/March. Looking at it, it does do a good job at indicating the market downturn as expected, showing 3 red arrows at the end of Feb. The market started going back up in the middle of March. The stochastic indicator shows a green ghost arrow at that time along with green months on the RUT, but the MACD continues to show red for another 4 months. Going off of the “3 arrow rule” would mean that we would not start trading the bull strategy until August/September.
Do I have that right? My concern is the missing 5 months in the green by protecting myself from 1 month in the red, but then again maybe that is the price you pay for being a 1-trick pony and only using the bull strategy. 🙂