BUG / SCPCUG INVESTMENT SIG MEETING by Arthur N. Moyer The Investment SIG meets one hour before the regular BUG meeting in the Oleander Room of the Satellite Beach Civic under the leadership of Arthur N. Moyer. This meeting took place on September 19, 1994. Nine people including myself were present. I have written two stock market programs. Horace Browne helped me with the graphics. Both are up on the BUG and SCPCUG Bulletin Boards. STOCK2.ZIP has stock and market files on 31 stocks for 224 trading days. STK5.ZIP has stock and market files on 6 stocks for 47 recent trading days. I have written a program so these more recent files can be appended. At this Investment SIG meeting I demonstrated these two programs. Both Horace Browne and Charles Shannon believe in tracking both 200 day and 50 day moving averages. Charles Shannon brought a chart of Data General from March 1, 1994 to September 16, 1994. Both Charles Shannon and Jerry March said that when the 50 day moving average rises to meet the 200 day moving average, it is a good time to buy a stock. I was also tracking this same stock at the same time. Shown below is a portion of data written to disk during this time frame. I not only predict the next-day % price change, but also compute the % standard error associated with this % price change. I divide the next-day predicted price change by its % standard error. I call the quotient of this division RATIO! I set the following arbitary standards. A BUY signal is given if RATIO! is greater than +1.7. A HOLD signal is given if RATIO! is greater than -1.7 and less than + 1.7. A SELL signal is given if RATIO! is less than -1.7. I define CHANGE IN DIRECTION as follows. If the predicted % price change has a minus sign for the last two days, and then on the third day has a positive sign, then a BUY signal is given. If the converse is true, then a SELL signal is given. If neither of these is true then a HOLD signal is given. If the predicted % price change is greater than + 2, then a BUY signal is given. If the predicted % price change is less than -2, then a SELL signal is given. If the predicted % price change is greater than -2 and less than +2, then a hold signal was given. I felt that I needed another signal in my program. Alot of people seemed to be dissatisified with the program I wrote because it contained too much variability. So I decided to use another well-known program indicator based on different principles. It is called the stochastic oscillator. This stochastic oscillator compares a security's latest price over the range during the last 15 trading days expressed as % of this range. The maximum price is set to 100% and the minimum price is set to 0%. A BUY signal is given when the stochastic oscillator rises from the bottom of the chart and a SELL signal is given when it falls from the top of the chart. Shown below is the data written to disk during this time frame. DATE AVERAGE PREDICTED RATIO! CHANGE IN STOCHASTIC PRICE % CHANGE DIRECTION OSCILLATOR 0822 7.97 -0.15 -.17 1- 44.3%, falling 0823 7.91 -0.88 -.74 2- 7.7%, low 0824 7.97 -0.28 -.30 3- 16.7%, bottom 0825 7.97 -1.38 -1.65 4- 16.7%, bottom 0826 8.16 +2.03 +1.74 1+, CID 66.7%, rising 0829 8.25 +2.92 +2.45 2+ 91.7%, rising 0830 8.63 +5.05 +2.92 3+ 100.0%, at top 0831 9.06 +7.91 +4.42 4+ 100.0%, at top 0901 8.94 +2.11 +0.88 5+ 89.3%, falling 0902 9.34 +1.69 +0.52 6+ 100.0%, at top 0906 9.25 -0.13 -0.04 1- 93.3%, falling 0907 9.00 +3.85 +1.31 1+ 76.0%, falling 0908 9.13 +1.69 +0.60 2+ 84.7%, rising 0909 9.09 +2.30 +0.82 3+ 82.7%, falling 0912 9.16 +1.09 +0.51 4+ 87.0%, rising 0913 9.28 +0.91 +0.59 5+ 95.7%, rising 0914 9.47 +0.47 +0.24 6+ 100.0%, at top 0915 9.88 +1.26 +0.44 7+ 100.0%, at top 0916 9.88 +2.32 +0.96 8+ 100.0%, at top 0919 9.78 +1.79 +0.72 9+ 94.3%, falling 0920 9.47 -5.87 -2.06 1- 67.3%, falling In the above paragraph are IF statements that could be incorporated into a computer program. I couldn't make any reliable IF statements for the stochastic oscillator. For the stochastic oscillator, I believe one must look at a chart graph of the data. Shown below are the signals given for PREDICTED % CHANGE, RATIO!, and CHANGE IN DIRECTION if one uses the results of the above if statements. DATE AVERAGE PREDICTED RATIO! CHANGE IN NOTES PRICE % CHANGE DIRECTION 0822 7.97 HOLD HOLD HOLD 0823 7.91 HOLD HOLD HOLD 0824 7.97 HOLD HOLD HOLD 0825 7.97 HOLD HOLD HOLD 0826 8.16 BUY BUY BUY CID, - to + 0829 8.25 BUY BUY HOLD 0830 8.63 BUY BUY HOLD 0831 9.06 BUY BUY HOLD 0901 8.94 BUY HOLD HOLD 0902 9.34 HOLD HOLD HOLD 0906 9.25 HOLD HOLD HOLD Must be two - 0907 9.00 BUY HOLD HOLD days for a CID. 0908 9.13 HOLD HOLD HOLD Still + days. 0909 9.09 BUY HOLD HOLD 0912 9.16 HOLD HOLD HOLD 0913 9.28 HOLD HOLD HOLD 0914 9.47 HOLD HOLD HOLD 0915 9.88 HOLD HOLD HOLD 0916 9.88 BUY HOLD HOLD 0919 9.78 HOLD HOLD HOLD 0920 9.47 SELL SELL HOLD I am not very perceptive of what the market will do. But both Charles Shannon and Jerry March are very perceptive of what it will do the next day. Now here is my understanding of what they said. Jerry March said the market dropped on very heavy volume of Friday, Sept. 19. He said the market is usually up of Fridays. He said it is bearish when the market drops on high volume, and that it is doubly bearish because the market is down when it is usually up. This Friday was options expiration day, and that could affect the results. When all this was put together, it suggested to me that Data General should be sold on the following Monday at 9.78. Charles Shannon said the same thing. At the Investment SIG meeting, Charles said he expected a big market drop the next day. The next day, September 20, the market(DJIA) dropped 67.63 points. If the stock owner of Data General had followed the advice of these two gentlemen, he would have sold Data General at 9.78. Since stock owner of Data General bought in at 8.16, this would work out to be a % profit of 100 * (9.78 - 8.16) / 8.16 or 19.9% profit. This computation does not include losses due to commissions. Charles Shannon will present the program at the October meeting of the Investment SIG. Charles uses a market switching system based on the 50 day moving average of a popular market index. Examples will be given for several stocks and mutual funds which also have their own 50 day moving averages. Charles says his system will keep you in stock funds during bull markets and in the safety of money market funds during bear markets with a goal of 15 to 20% annual return. This is the end of this Investment SIG report.