Does the late-week change to the indicator benefit the market? It doesn’t appear so. I removed rule three and just tested on rules 1 and 2:
1) The NYSE must make a new 5-week high this week. 2) The current NYSE/Nasdaq ratio must be at least 3.0% below the 10-week EMA. (The red line must be 3.0% or more below the yellow line.)
The market was shorted if the above conditions were met and covered X weeks later. $100,000 per trade.
The results – listed below - changed very little. When the NYSE is hitting new short-term highs while the Nasdaq is lagging badly, it normally means the NYSE will succumb to the will of the Nasdaq. Like the original study, the expectation over the next 1-10 weeks is negative.