True Strength Index (TSI) - Settings and Techniques

*
Today's post will attempt to briefly address some of the recent interest I have heard expressed for the reasons various True Strength Index (TSI) indicator settings may be used.  I will show you some of the choices available, as well as demonstrate advantages to each.  The buy/sell techniques of the ZERO line crossover and the trend line break will be illustrated, as well.
*
This first chart simply makes the point that the TSI (7,4) setting is faster than the TSI (13,7).  Trust me, the larger you makes those setting numbers, the slower and FEWER the signals will become.
*
Click on any chart to ENLARGE

*
This second chart demonstrates the technique of the trend line breakout of the indicator and compares the timely BUY signal generated first by the TSI (7,4) on an hourly chart of GLD, followed within 2 hours with a BUY signal generated by the Money Flow Index (MFI) indicator.
*
A bit of trivia.  Notice the date of the chart.  July 28.  
*
WAS JULY 28 IN FACT THE BOTTOM IN GOLD?  
*
Everybody take a deep breath and scream - YEEEEEEEEEEEEESSSSSSSSSSSSSSSSSSSSSSSSSSSS!!!!!!!!!!!

*
A reader asked me to suggest a TSI setting that would be well suited to his interest in buying and holding a position for weeks at a time.  I developed this chart and interpretative technique to accommodate his trading style.  Perhaps this is your preferred trading style as well!
*
This is a WEEKLY chart of GOLD.   The TSI setting is (7,7).  The interpretative technique is pretty darned simple.  If the TSI is rising, price is rising.  If the TSI is falling, price is falling.
*
Does it work perfectly?  Nope.  Does anything work perfectly?  Nope.  Does it work profitably?  Yup.

*
This chart compares the daily TSI (7,4) setting with the (13,7) setting.  Admittedly, there is 'a bit much' going on in this chart so here is the bigger point it tries to illustrate.  The larger the TSI setting numbers you use, the slower the indicator is to give you a signal AND the few signals you will get.
*
And by the way, using (13,7), though not my preference, has a great advantage over (7,4) in that it is less 'busy' and when it gives a signal it is probably NOT a head fake.  (13,7) is an excellent daily setting for an individual who is more of a trend trader as opposed to a guy who likes to drive Porsches in the fast lane.

*
Finally, this is yesterday afternoon's chart of the current put/call ratio for GLD.  You may recall I wrote an article and did a post in which I said we had a lot of fools playing the gold market poorly?  Guess what?  Nothing has changed.  
*
After one week of being destroyed by a sharp rise in the price of gold, the bears do not believe a thing has changed.  There are still 12 bears leveraged and betting on a drop in gold, to every 10 bulls making money as gold screams higher.  I find this absolutely incredible.  It so speaks to our human nature, doesn't it?  We humans have this unenviable characteristic called 'denial'.  When things go wrong we don't change.  Instead, for as long as possible, we pretend there is no problem.   
*
Folks, in the end these gold bears are going to join our bull team.  But as long as they stay where they are, gold will go higher and higher and higher.  Only when too many of them give up will there be a correction of some magnitude in gold price.  That is because the gold bull will do anything and everything to keep as few riders on his back as possible.  When sentiment gets too bullish, he throws as many riders off his back as possible with a wicked price drop or some other temporary scare tactic.  That's just how the bull does his thing.....and if you keep this in mind, you can ride him to the top.
*
So for those wondering if they should sell all their gold stuff now, I say, 'what, are you crazy?'  And for those wondering if it is too late to jump in, I say, 'what, are you crazy?'