|  JAN 1989

The Wall Street Week index by Arthur A. Merrill

The Wall Street Week index by Arthur A. Merrill Every six months I have been checking the accuracy of more than 40 indicators over a span of several years. On the last test, the indicator that came out on top was the Wall Street Week Technical Market Indicator (WSW Index) reported on the Wall Street Week public television program. In the test, the scores are in the form of a batting average. Each indicator is asked each week whether it is bullish or bearish, and the number of times this opinion is right or wrong is determined by the direction of the market in the next 13 weeks, six months or a year. In the last 10-year test period, the WSW Index was 70.6% accurate in forecasting 13 weeks ahead, 78.5% accurate over 26 weeks, and 80.7% accurate forecasting one year in the future (Figure 1 ). These scores were checked for significance with the chi square test and found to be highly significant. They wouldn't have been obtained by chance in many thousands of repetitions of over the 10-year period. The WSW Index is a consensus index of the diffusion type, using 10 market indicators. The index number is calculated by subtracting the number of bearish indicators from the number that are bullish. For example, if in a certain week, five indicators were bullish, four neutral and one bearish, the net score for the WSW index would be (5-1)=4 The WSW index was created and has been improved through the years by Robert Nurock, who has been a regular panelist on the television program since its inception in 1970. He includes a discussion of the index and its prospects in his newsletter The Astute Investor. For interpretation, he recommends this scale: ...

by Arthur A. Merrill, C.M.T.