[pcabc]

Danger indication, another zoom in, 2006-7

Another zoom in.  Again not at a major crash to see if indications were false alarms or useful indications of deteriorating breadth:
   

1. Alert before an approximately 120-130 point drop, 9% drop peak to peak.   Useful, but would need good execution / low costs to be better off than riding the whole pullback.  However, considerably better than waiting until a few months later to sell.
2.  Useful indication that things are about to get worse.  This is the start of the stage 3 leading ot the stage 4 decline trhat includes the 2008 crash.
3. Spurious whipsaw?I'm not sure that it is foretelling the drop 6 weeks later.  It seems to be minor noise in both the Momentum Index and the % stocks above their 200 day EMAs.
4. Rolling into stage 4, no surprises.
5. False alarm, or expected as breadth is improving, but not enough yet?

I think this is useful, I just need to use it correctly.  I'm wondering if I need to add a filter that warnings are acted on only if asserted for 3 or more days to get rid of some of the whipsaws.  But the indicator is designed to be fast and given 1987 and definitely recent events it needs to be.  I think I won't mask the indicator but I will add a further flag if asserted for 3 days or more.