The Keystone Oscillator 2011

The Keystone Oscillator is a major component of Keybot and provides the turn signals.  When the algo number dips under the signal line that signals time to go short. When the algo number moves above the signal line that signals time to go long the market.  This chart shows the interplay between the algo number (Series 1) and the signal line (Series 2) for 2011. This data is based on weekly numbers so it serves as a simplified version of the year.

Note the bullishness in January and February with the algo number favoring the upper side of the signal line.  Note how the blue line dropped under the red line in July to signal the top in front of the August waterfall crash.  Going into 2012, the blue line is above the red line so Keybot is currently long the market.  Note the overall downward-sloping vibe for the chart, the highs for Keybot were in early 2011. The low number for Keybot was after the August crash occurred.

Like any oscillator, the overbot and oversold levels (+ and - 80% levels or +/- 70% levels) indicate that a trend change is coming, and the 0% level serves as a direct market indication of bullishness or bearishness. Early in the year the 80%-ish numbers show markets overextended to the top side.  The August bottom was marked by the blue line under -80%. Currently the algo number and signal line are moving sideways just under the 0 line indicating that bulls and bears are fighting it out in a tug-o-war and it is unclear which side will win. Keybot will show the way.