Chapter 7. Dr. K's Market Direction Model

It may seem decidedly un-O'Neil to consider using a market direction model, essentially a systematic program for generating valid buy and sell signals for the general market indices. While a market direction model may seem like a "timing model," we do not ascribe that term to it, since it does not adequately describe our approach in using such a model. A market direction model, in contrast to a timing model, should be used as a critical tool in understanding when you are in a bull market, favorable to taking long positions, or in a bear market, favorable to taking short positions. In this chapter we will discuss the refinements that we have incorporated along with basic O'Neil concepts of upside market follow-throughs and downside market distribution days to produce what we consider to be the refined framework of a market direction model, and hopefully clear up some of the confusion surrounding the precise price/volume action that characterizes potential turns and reversals in the direction of the general market direction. Readers who have further questions should contact Dr. Chris Kacher at [email protected], or can refer to the web site: www.virtueofselfishinvesting.com.