Using MIDAS with the Indices—The S/R Curves
Now, let's directly apply the MIDAS S/R curves to the market indices. Start by looking at an index for which accurate daily trading volume data are available, such as the New York Stock Exchange Index, a cap-weighted index of all of the common stocks trading on the New York Stock Exchange. Figure 6.3 is its weekly bars chart from before the all-time market peak in 2007, through the crash of 2008, and well into the subsequent retracement in 2009.
The volume data that are used here are those reported for this stock exchange every day in the Wall Street Journal, and which are collected and made available by Reuters DataLink under their symbol, KNYSV.
This chart supports a typical hierarchy of four MIDAS ...