                         BUG / SCPCUG
                        INVESTMENT SIG
                           MEETING
                      by Arthur N. Moyer

     The Investment SIG meets one hour before the regular BUG
meeting in the Oleander Room of the Satellite Beach Civic
under the leadership of Arthur N. Moyer. This meeting took
place on September 19, 1994. Nine people including myself
were present.

     I have written two stock market programs. Horace Browne
helped me with the graphics. Both are up on the BUG and
SCPCUG Bulletin Boards. STOCK2.ZIP has stock and market files
on 31 stocks for 224 trading days. STK5.ZIP has stock and
market files on 6 stocks for 47 recent trading days. I have
written a program so these more recent files can be appended.
At this Investment SIG meeting I demonstrated these two
programs.
    Both Horace Browne and Charles Shannon believe in
tracking both 200 day and 50 day moving averages. Charles
Shannon brought a chart of Data General from March 1, 1994 to
September 16, 1994. Both Charles Shannon and Jerry March said
that when the 50 day moving average rises to meet the 200 day
moving average, it is a good time to buy a stock. I was also
tracking this same stock at the same time. Shown below is a
portion of data written to disk during this time frame. I not
only predict the next-day % price change, but also compute
the % standard error associated with this % price change.  I
divide the next-day predicted price change by its % standard
error. I call the quotient of this division RATIO!  I set the
following arbitary standards. A BUY signal is given if RATIO!
is greater than +1.7. A HOLD signal is given if RATIO! is
greater than -1.7 and less than + 1.7. A SELL signal is given
if RATIO! is less than -1.7.  I define CHANGE IN DIRECTION as
follows. If the predicted % price change has a minus sign for
the last two days, and then on the third day has a positive
sign, then a BUY signal is given. If the converse is true,
then a SELL signal is given. If neither of these is true then
a HOLD signal is given. If the predicted % price change is
greater than + 2, then a BUY signal is given.  If the
predicted % price change is less than -2, then a SELL signal
is given. If the predicted % price change is greater than -2
and less than +2, then a hold signal was given. I felt that I
needed another signal in my program. Alot of people seemed to
be dissatisified with the program I wrote because it
contained too much variability. So I decided to use another
well-known program indicator based on different principles.
It is called the stochastic oscillator. This stochastic
oscillator compares a security's latest price over the range
during the last 15 trading days expressed as % of this range.
The maximum price is set to 100% and the minimum price is set
to 0%. A BUY signal is given when the stochastic oscillator
rises from the bottom of the chart and a SELL signal is given
when it falls from the top of the chart.  Shown below is the
data written to disk during this time frame.

DATE  AVERAGE  PREDICTED  RATIO!  CHANGE IN  STOCHASTIC
      PRICE    % CHANGE           DIRECTION  OSCILLATOR

0822  7.97     -0.15      -.17    1-         44.3%, falling
0823  7.91     -0.88      -.74    2-          7.7%, low
0824  7.97     -0.28      -.30    3-         16.7%, bottom
0825  7.97     -1.38     -1.65    4-         16.7%, bottom
0826  8.16     +2.03     +1.74    1+, CID    66.7%, rising
0829  8.25     +2.92     +2.45    2+         91.7%, rising
0830  8.63     +5.05     +2.92    3+        100.0%, at top
0831  9.06     +7.91     +4.42    4+        100.0%, at top
0901  8.94     +2.11     +0.88    5+         89.3%, falling
0902  9.34     +1.69     +0.52    6+        100.0%, at top
0906  9.25     -0.13     -0.04    1-         93.3%, falling
0907  9.00     +3.85     +1.31    1+         76.0%, falling
0908  9.13     +1.69     +0.60    2+         84.7%, rising
0909  9.09     +2.30     +0.82    3+         82.7%, falling
0912  9.16     +1.09     +0.51    4+         87.0%, rising
0913  9.28     +0.91     +0.59    5+         95.7%, rising
0914  9.47     +0.47     +0.24    6+        100.0%, at top
0915  9.88     +1.26     +0.44    7+        100.0%, at top
0916  9.88     +2.32     +0.96    8+        100.0%, at top
0919  9.78     +1.79     +0.72    9+         94.3%, falling
0920  9.47     -5.87     -2.06    1-         67.3%, falling

    In the above paragraph are IF statements that could be
incorporated into a computer program. I couldn't make any
reliable IF statements for the stochastic oscillator. For
the stochastic oscillator, I believe one must look at a chart
graph of the data. Shown below are the signals given for
PREDICTED % CHANGE, RATIO!, and CHANGE IN DIRECTION if one
uses the results of the above if statements.

DATE  AVERAGE  PREDICTED  RATIO!  CHANGE IN   NOTES
      PRICE    % CHANGE           DIRECTION

0822  7.97     HOLD       HOLD    HOLD
0823  7.91     HOLD       HOLD    HOLD
0824  7.97     HOLD       HOLD    HOLD
0825  7.97     HOLD       HOLD    HOLD
0826  8.16     BUY        BUY     BUY         CID, - to +
0829  8.25     BUY        BUY     HOLD
0830  8.63     BUY        BUY     HOLD
0831  9.06     BUY        BUY     HOLD
0901  8.94     BUY        HOLD    HOLD
0902  9.34     HOLD       HOLD    HOLD
0906  9.25     HOLD       HOLD    HOLD        Must be two -
0907  9.00     BUY        HOLD    HOLD        days for a CID.
0908  9.13     HOLD       HOLD    HOLD        Still + days.
0909  9.09     BUY        HOLD    HOLD
0912  9.16     HOLD       HOLD    HOLD
0913  9.28     HOLD       HOLD    HOLD
0914  9.47     HOLD       HOLD    HOLD
0915  9.88     HOLD       HOLD    HOLD
0916  9.88     BUY        HOLD    HOLD
0919  9.78     HOLD       HOLD    HOLD
0920  9.47     SELL       SELL    HOLD

    I am not very perceptive of what the market will do. But
both Charles Shannon and Jerry March are very perceptive of
what it will do the next day. Now here is my understanding of
what they said. Jerry March said the market dropped on very
heavy volume of Friday, Sept. 19. He said the market is
usually up of Fridays. He said it is bearish when the market
drops on high volume, and that it is doubly bearish because
the market is down when it is usually up. This Friday was
options expiration day, and that could affect the results.
When all this was put together, it suggested to me that Data
General should be sold on the following Monday at 9.78.
Charles Shannon said the same thing. At the Investment SIG
meeting, Charles said he expected a big market drop the next
day. The next day, September 20, the market(DJIA) dropped
67.63 points.  If the stock owner of Data General had
followed the advice of these two gentlemen, he would have
sold Data General at 9.78.  Since stock owner of Data General
bought in at 8.16, this would work out to be a % profit of
100 * (9.78 - 8.16) / 8.16 or 19.9% profit.  This computation
does not include losses due to commissions.

    Charles Shannon will present the program at the October
meeting of the Investment SIG. Charles uses a market
switching system based on the 50 day moving average of a
popular market index.  Examples will be given for several
stocks and mutual funds which also have their own 50 day
moving averages. Charles says his system will keep you in
stock funds during bull markets and in the safety of money
market funds during bear markets with a goal of 15 to 20%
annual return. This is the end of this Investment SIG report.
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