Question: Stock market investors are always seeking the Holy Grail a

Stock market investors are always seeking the “Holy Grail,” a sign that tells them the market has bottomed out or achieved its highest level. There are several indicators. One is the buy signal developed by Gerald Appel, who believed that a bottom has been reached when the difference between the weekly close of the New York Stock Exchange (NYSE) index and the 10-week moving average is −4.0 points or more. Another bottom indicator is based on identifying a certain pattern in the line chart of the stock market index. As an experiment, a financial analyst randomly selected 100 weeks. For each week he determined whether there was an Appel buy, a chart buy, or no indication. For each type of week he recorded the percentage change over the next 4 weeks. Can we infer that the two buy indicators are not useful?

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  • CreatedFebruary 03, 2015
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