All traders, even the most short-term, should know what the primary trend is for the instrument they are trading, as well as the main market indices, states Martin Pring. This is because the primary trend has a great determination on the outcome of overbought and oversold conditions, whether waves are impulsive or corrective, range breakouts, congestions, and so on. The primary trend is revealed through both Dow theory, and the LT KST (Know Sure Thing), a momentum indicator based on multiple weighted and smoothed ROC’s developed by Martin Pring. Know sure thing is not a certainty, it’s just his way of making fun of market mavens who introduce indicators they ‘guarantee to work 100%, all times’ because we all know there is ‘No sure thing’. As he constantly reminds: “there’s no such thing as a Holy Grail.”
The other KST’s are the Short and intermediate; when all three are in ‘commonality’, or moving in the same direction, that is almost always when the biggest moves occur – when they are in conflict, or giving different signals, rangebound , sideways and lesser moves are usually the rule. An example is the move off the April 2009 low, which was due to a panic. The s-t and intermediate were so oversold that the it bounced right up to the July high, running against the primary trend the entire time which was still DOWNWARD. It then turned over, while the LT was still flat, causing the H&S. At that time the LT KST then turned up in a strong primary uptrend, causing the pattern to wash out. Thus it was easy to see (in hindsight for me LOL)the low probability of the pattern.
The other way to use the three KSTs is through the Special K, (which Martin kindly named after Keirsten J) which combines the three into one indicator, simplifying the picture somewhat, but my preference is still for the three stack
If you go to pring.com, you can receive a FREE pdf explaining the KSTs, precise formulas for them, complimentary videos on the Special K, free calculation of the Special K for any NA symbol, info on Martin’s other proprietary indicators,subscription button for and demo of TIGER pattern recognition service and be sure to check out and subscribe to his amazing youtube channel. It’s a chance to learn from a member of the trading hall of fame, in the business for almost 40 years , who wrote some of the standard texts on TA, and actively manages money. He uses these indicators among others to do that successfully, but that is a whole different subject, team, and website.
Major Points:
1)ST much smoother than dialy MACD (tend to track each other)
2) Help avoid whipsaws
3) Based on four-year business cycle, LT KST USUALLY runs for about one year (11-14 months)
3)The LT ‘oversees’ the others, it is the primary. But, because of its construction, the LT is always about 4 weeks behind the other two, so it will tend to quite often ‘bend’ or break one way or the other rather abruptly as the last month’s data is filled in..so it always has to be considered in conjunction with the action of the other two.
4) Best used in conjunction with other excellent FREE research from Martin, posted to his youtube channel. Highly reccomend subscribing.:)
5)Use only as a guideline, even the strongest trend can change quickly.. you might visualize the LT KST as ‘price pressure’, a guiding force in the direction of the primary trend.
6) Martin’s book The Definitive Guide to Momentum Indicators is the authoritative word on the subject IMO
Hope this is helpful/entertaining/edifying J
