In the Elder Triple Screen (or Triple Filter) system Dr. Elder (author of "Trading for a Living" or "Come Into My Trading Room") suggests that a trader starts with a Weekly Chart looking for the trend. Once you know the trend go to a daily chart to select an entry point.

One technique Dr. Elder suggests is to use the MACD Histogram changes to indicate the direction of the trend. If the MACD Histogram turned up look for BUY points on the daily chart, if the MACD Histogram turned down look for SHORT entry points on a daily chart.

The screen shots below discuss this method and includes the AMIBroker formula to color the price bars and MACD Histogram

Stock Symbol: QQQQ - PowerShares (NASDAQ 100 Index)

Screen/Filter 1 - Weekly Chart: In the first week of March 2009 there was a very strong bullish divergence, and MACD Histogram turned green showing the trend was up.

Second option for the weekly chart is to use Elder's Impulse System. Both the MACD Histogram and EMA(21) must be moving in the same direction to indicate a BUY or SELL.  When the MACD Histogram is up and EMA(21) is up Price bars are green. When MACD Histogram is down and EMA(21) is down price bars are red. If the MACD Histogram and EMA(21) are moving in two different directions the price bars are blue. 

 "When the impulse system is Green you may go long or stand aside. When the impulse system is red you may go short or stand aside. I wait for the impulse system to go off green before shorting and off red before going long" - Dr. Elder  

Screen/Filter 2 - Daily Chart: RSI was in an oversold condition which allows for a lower risk entry point.

Screen/Filter 3 - Trade Technique: The 3rd Screen/Filter is a technique to enter a trade.

Elder tells us to place a BUY-STOP order above the high of the previous day. This would allow the trader to be "stopped into" the market the next day if prices moved up. This helps to ensure a trader enters a trade with the market moving in the direction of a trade.

Have you ever bought a stock when it was trending down because all the indicators said "BUY" just for the stock to continue moving lower? The BUY-STOP method helps to alleviate that error. This concept can be used for shorting a stock using a SELL-SHORT-STOP order.

Download MACD Price Chart Color Formula from the AMIBroker Web Site.

Download Impluse Price Chart Color Formula from the AMIBroker Web Site.

Download MACD Color Formula from the AMIBroker Web Site.

The MTR-TM issued a Market Down Signal on 6/18. Today the major indexes were down close to 4%.

Markets and Industries 

The VIX shot up 11.36% showing the anxiety in the market today. The Value Line Arithmetic Index (VLAI) losing -3.94%.

The pullback today was widespread all industries losing ground. Oil hit the hardest at -6.58%

 
Daily VLAI

•  -3.74% possible downside risk from the close today for the major indexes based on daily support levels
• RSI broke below 50 and this is negative.
• The Advance Decline Line showed the downside move was followed by most stocks.
• We closed out some shorts today thinking there may be a bounce to the upside to buy shorts on the cheap again.

Weekly VLAI

• MACD Histogram shows the market is in a downtrend from a bigger picture weekly view.
• -4.25% possible downside risk on weekly charts from the close today.
• More likely the downside risk is on the daily resistance of -3.74% from the close today.

Readers of this blog know that the stock market timing model on MTR Investors Group was originally based on the 4% Model discovered by Ned Davis. This model was made widely know by Martin Zweig in his book "Winning on Wall Street."

MTR Investors Group took the 4% Model and enhanced it to come up with the MTR Timing Model or
MTR-TM. This post visually compares the models and provides the 4% Model code that can be used in AMIBroker. The 4% Model code is very simple. It looks for a 4% change in the Value Line Arithmetic Index using current day close vs. the same day prior week close. The original model used Friday vs. Friday of the previous week. If the index is up 4% BUY if is down 4% go SHORT or go to cash.

Ned Davis 4% Model - January 2008 - June 19,2009

MTR Timing Model (MTR-TM) - January 2008 to June 19, 2009

The AMIBroker code for the Ned Davis 4% Model is available for download at AMIBroker.