Investing with the Trend: A Rules-based Approach to Money Management

Chapter 13Measuring the Market

Weight of the Evidence Measures

I have been fond of a weight of the evidence approach for more than 30 years. The concept of “weight of the evidence” came from Stan Weinstein who published the newsletter, The Professional Tape Reader, and author of Secrets for Profiting in Bull and Bear Markets. Back in the early 1980s, most analysis was done manually. We did not have computers, Internet, or e-mail. Our data came from subscriptions or newspapers. I was a religious user of the Barron’s Market Laboratory pages. I was working with Norm North of N-Squared Computing then, designing technical analysis software (yes, it was DOS-based and ran on 5.25′ floppies). Norm had started a database of about 130 items from the market lab pages and each Saturday, I would go to the nearby hotel, buy a copy of Barron’s, update the database then upload it to CompuServe so our clients could download it—all at the lightning fast speed of 300 baud. I’m somewhat of a packrat, and have many ring binders full of charts and notes; Figure 13.1 is the weight of the evidence approach I used back then. Wish I could print like that now.

FIGURE 13.1 Greg Morris? Weight of the Evidence Worksheet from Mid-1980s

I have totally stopped using the sentiment measures because I think the data collection process is not reliable. If you have ever taken a survey, especially an unsolicited ...