As of the close of Thursday, September 8, 2011, p-indicator results for SPY and QQQ show a negative short-term bias for 3%, 4% and 5% price envelopes.
The probability of a short-term upward move and of a short-term downward move are the long success rate and the short success rate of the p-indicator, P-long and P-short, respectively, as shown on the screenshot. P-long, for example, is a measure of the probability that a long position initiated at the open of Friday, September 9, 2011, will result in a profit for the corresponding profit target/stop-loss values of 3%/3%, 4%/4% and 5%/5% . A more useful measure is the difference between the long and short probabilities, P-delta, which is a measure of the bias, or tendency, of the market to move towards the long or short direction. In this case, the bias is negative across the board for all target/stop pairs used. This holds for both SPY and QQQ. The significance S of all probabilities is low, however, and this is the only concern about the reliability of these results.
It should be pointed out that the p-indicator calculations change on a daily basis. Thus, the calculations of the probabilities are valid until the close of the next day when the indicator is recalculated. The same applies to all technical analysis indicators. Furthermore, probabilities are not related to events themselves but only to their frequency of appearance, in the sense of the low of large numbers. At least this is just one of the many interpretation of probability.
Like all indicators, the p-indicator also generates false signals. Experience helps in interpreting correctly the values and patterns of most technical analysis indicators, including the p-indicator.
For more p-indicator past results click here.
Disclosure: No relevant positions
Disclaimer: The author is not a financial advisor and does not recommend the purchase of any security or advise on the suitability of any trade or investment in any timeframe. ETF, stock, futures, forex and options trading and investing involves substantial financial risks and can result in total loss of capital. If investment or other professional advice is required, a licensed professional should be consulted.
