Long-Term Secrets to Short-Term Trading by Larry Williams

Author:Larry Williams
Language: eng
Format: epub, pdf
ISBN: 9781118184684
Publisher: Wiley
Published: 2011-10-31T00:00:00+00:00

As you can see, it has done a credible job of ferreting out which market rallies are good and which ones are not. The high in September 2010 is a great example in which Willspread simply refused to give a buy signal all the way down. Admittedly, when it did give a signal in January 2011, it was not a strong one. The lesson is: Don't rely on any one thing, but examine everything to gain additional insight.

WILLSPREAD AND THE S&P 500 STOCK INDEX

This same idea works quite well in helping us catch short-term swings in the various stock index contracts such as the New York Stock Exchange, Dow Jones, Value Line, and the Mini S&P, in addition to the S&P 500 full-size contract.

Although Gold makes the world of Bonds go around, it does not have as strong an impact on stocks. As you now know, however, interest rates do, so I suggest you use either T-Bills or Bonds in your Willspread setup. Using 30-minute bar charts, I am employing the difference between a three-period and 15-period exponential average. Admittedly, this is a lot of work to do by hand, but the better quote software such as Omega's Trade Station and Genesis Data have now built my indicator into their programs.

Instead of just randomly choosing time periods to present to you to illustrate the value of Willspread I am first going to show you “The Anatomy of a Crash,” by highlighting the biggest crash of all time, the 1987 debacle, as well as the 1997 and 1998 waterfall slides.

The Crash of 1987

Here it is in all its glory: the largest stock market decline in the history of the world! A decline that changed lives and fortunes, a decline of such disastrous proportions lawyers were still suing for damages from the drop five years later. Even now, books are written claiming to know why it took place or explain it away. Academics have suggested many ways to prevent the damages of such speculative busts in the future. Big deal, I say; it was predictable—then, not now—with Willspread (see Figure 9.11). This amazing index dipped into the negative zone on October 14 at 311.50, staying short all the way through the debacle and thus informing its followers that the bottom was not yet in sight. Interest rates vis-à-vis T-Bills were not supportive of the market and without that confirmation we should not look for any buy signals. Indeed, just about any buying, other than the absolute low, would have proved costly.

Figure 9.11 S&P 500 Index (30-Minute Bars). Graphed by the Navigator (Genesis Financial Data Services)

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