The Problem: Mean Reversion in Sideways Markets
While there's no obvious flaw in the logic that binds these five principles, there's one overriding weakness associated with the final tenet of what follows the end of a trend and a significant change in market sentiment.
This weakness can be seen in the large number of occasions in his lectures when Paul Levine identifies the ends of trends as significant trend reversals. Yet of course this need not be the case; the end of a trend can equally herald a resting phase in market activity. While market resting phases create problems for standard MIDAS S/R curves, it's possible to create a new MIDAS-based indicator to cope with it. This indicator is the subject of the present chapter.
Technicians describe ...
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