The Happy Family Theory Of Markets
Posted by lasertrader on October 17, 2010
Just for fun I want to pass on a theory that can be used as a tool in watching for a sustained market move to perhaps come to an end and pullback or reverse. It is the HFTOM, Happy Family Theory Of Markets, tool. I learned of this theory several years ago from a poster on Silicon Investor and IHub that goes by the name of ajtj99 . To the best of my knowledge it is ajtj99 who named it and popularized it.
The Happy Family Theory Of Markets is simple. It states “If one major index makes a new high or low, the other indices should eventually follow suit.” This theory can be applied in different time frames but for this discussion we have all recognized that the Nasdaq 100 (QQQQ) made a new high for the year this past week. Lets now watch for the SPX (SPY), DOW (DIA) and Russell (IWM) to potentially follow suit.
Although I haven’t done back testing on this, I have been watching it for several years and it has played out enough times to stick in my mind as I assess how long a move may last.
As I said at the beginning of this article…Just for fun!