Are you interested in identifying market turning points – buying when prices are near a low and selling when they are at a market high? If you’re like most investors, you would answer an emphatic yes to that question recognizing how valuable such information would be. Believe it or not it is actually possible to generate 100% objective signals that identify when the market is about to turn either positive or negative. Yes you read that correctly – there is a technique that can be used to identify when the market is about to go up or down!
How can this be achieved? Through years of research, Murray Ruggiero, chief systems designer for Tuttle Tactical Management – a company that manages over $200 million in assets – has researched techniques and developed software to identify these turning points. Back in the 1990s, he developed a method he called “intermarket divergence” which can generate 100% objective trading signals that are highly correlated with market turning points.
How Does Intermarket Divergence Work?
Intermarket divergence is based on six basic fundamental ideas:
- All markets are interrelated. This means that no markets ever move in isolation.
- Intermarket work provides important background data.
- Intermarket work uses external, as opposed to internal, data.
- Technical analysis is the preferred vehicle.
- Intermarket relationships are not only for futures, but also for stocks, ETFs, and various indices or sectors.
- We will first try to understand the premise behind a relationship. This means viewing it visually on a chart and then developing mechanical signals based on this relationship.
The last point is especially important for building robust systems that can accurately identify turning points. It is imperative that no matter what you choose to trade, you understand the premise of your system. For example, trading soybeans to copper doesn’t have much of a logical premise, but the relationship between the dollar and gold does. Consider 1oz of gold as being representative of some fixed value. When the dollar strengthens it takes fewer of those dollars to buy that same 1oz of gold. When the dollar weakens it takes more dollars to buy 1oz of gold. Therefore, we would say that the dollar and gold are inversely correlated – meaning that as the dollar goes down, we would expect gold to go up, and vice-versa. This is a very, very simple example, however it illustrates the point well that we need to have a good premise for our systems. The secret then to doing intermarket analysis right is to demonstrate that intermarket relationships exist, why they exist, and how they can be incorporated into our technical work to predict future price moments.
The Proof Is In The Chart
For all traders, the proof of concepts lies in the charts and historical backtested results. Using the concept of intermarket divergence and the Intermarket Divergence Pro TradeStation add-in that is available as part of this bundle, Murray created an intermarket system of gold relative to the PHLX Gold/Silver Sector (XAU). The results are shown below.
Notice how in the chart above, the system reasonably accurately identifies the market turning points in gold prices. When there is a short in the chart above, usually the gold prices will fall. When there is a buy signal, usually gold goes up. While this is not 100% perfectly predictive, it was very profitable. The results shown above made $40,000 in less than one year (from September 2011 until April 2012) using one standard lot.
The equity curve below (in red) and the equity curve moving average (in blue) shows how well the system did overall.
The equity curve shows that the system managed to make quite a bit of money off of some trades but overall had no significant drawdowns. Also, notice how for a slight bit of time the moving average crosses below the equity curve. This is actually a great time to stop trading the system. Many intermarket divergence systems can be improved by stopping trading them when the equity curve goes below the moving average and then resuming trading when it crosses above. In this case, it would have eliminated all of our minor losing trades and we would have just been left with nothing but winners! As you can see, in less than one year (these results are from September 2011 until April 2012), this system made over $40,000 and was built only with the software available in this bundle!
How Can I Use Intermarket Divergence?
If you have been following the markets recently you have probably been hearing about how strong the dollar is. Given our example above, you might be asking the following question: is the dollar strong enough that we could reasonably assume that gold prices will fall? Historically, this has not been an easy question to answer, but with Murray’s new software tools – Intermarket Divergence Pro and 3D Optimizer (both included in this bundle) – this question is actually now relatively easy to answer.
In the videos below, Murray shows you how to use Intermarket Divergence Pro to answer a different question which is “are bonds positively correlated with utility stocks”? Put another way, can we use bonds to identify market turning points in utility stocks and either go long if we expect a rise in prices or go short if we expect prices to fall?
Indeed, you could do similar analysis for the dollar and gold, for example. Other common intermarket divergence possibilities are:
- Oil prices predicting oil exploration stocks
- Gold prices predicting gold mining stocks
- Bond prices predicting utilities
- The dollar predicting gold prices
- The steel stocks predicting S&P500
- The dollar predicting Dow Jones Industrial Average
- EWC MSCI Canada ETF predicting the Canadian Dollar
- And many others!
Or you can test any hypothesis of which you can dream. The choices are endless.
To repeat, this software:
- Requires no coding.
- Can identify market turning points.
- Can test an unlimited number of hypotheses.
- Works seamlessly with TradeStation.
- Is 100% open-source. Learn from the code of an experienced TradeStation user!
Normally you might expect such a proficient platform from an expert in the field to cost as much as $1,000.00, but this software is being sold for *just* $199 if you act now! This software is a fantastic deal at $199 using our special limited time coupon code IDPBUNDLE at checkout.
But That’s Not All…
As good as a deal as this software is for $199, Murray is even throwing in more value into this bundle! Also included is his 3D optimization tool. This is normally $69 alone on our site, but it is included absolutely free in this bundle.
It is very important to ensure that your system is very robust. One of the ways in which Murray ensures this in his own systems is to visualize the 3D parameter space and calculate statistical significance. This utility works for TradeStation outputs meaning you can use it with the Intermarket Divergence Pro utility.
In fact, see how easy it is to check the robustness of a system with this tool by watching this short video below:
You can see from the video above how easy it is to see how your system works across the intermarket relationship parameters. For example, in the system in the video, Murray showed that we had some very high peaks for about a third of the parameter combinations. We can also see from the video that this particular system did not have any severe negative downsides but did have some basically flat combinations. The more “peaks” and high points you have, the more robust the system is and the more profitable it can be.
Visualizing the 3D parameter space is an important part of ensuring your system is robust. You do not want to trade a system for which only only a couple of parameter choices work. Rather, you want a solid premise so that you have quality returns across a wide range of parameters. With Murray’s tool, you can visualize two parameters on the X and Y axes and net profit or net profit to drawdown on the Z axis. This helps ensure that your system is robust and that it’s not a fluke that say param1 = 2 and param2 = 4 works but everything else fails miserably. This helps you, as system designer, see trends.
One of the other things that this utility offers is the ability to calculate statistics in order to see if the results we are experiencing are statistically significant or not. We can calculate the means and standard deviations for our systems to ensure that they are robust and will hold up in out-of-sample testing.
Intermarket Divergence Pro Bundle
Use code IDPBUNDLE at checkout to save!
Buy Now, This Won’t Last Long!
This package will only be available on this site for the next two days so act fast! For just a one-time payment of $199, you can get:
- Intermarket Divergence Pro – for TradeStation users (normally $249).
- 3D Optimization – Excel add-in (normally $69).
Normally this would cost $318 to buy separately or $299 to buy our bundle package, but we are giving you the opportunity to own both for 33% less than our original bundle price! For just $199, you can be on your way to using intermarket divergence in your own strategies and research!
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.