Cycles  |  FEB 2008

Can Technical Factors Gauge What Works In The Stock Market? by Mark Vakkur

Can Technical Factors Gauge What Works In The Stock Market? by Mark Vakkur In the second part of this series we look at the technical factors you can use to gauge the magnitude and direction of the trends in the S&P 500. Using only month-tomonth, close-to-close figures, it is difficult to find any meaningful, consistent information in the price performance of the Standard & Poor’s 500 itself by using technical analysis. This does not mean that technical analysis is useless, just that when looking at the monthly trend it is difficult to find exploitable patterns. ARE DOWN YEARS FOLLOWED BY RISING ONES? The rate of return indicator is one of the oldest and most robust gauges of the magnitude and direction of an asset’s trend. Trendfollowers will buy an asset whose rate of change is high and rising. Swing traders can use it as an oscillator, helping to identify periods when the asset is oversold (very negative) or overbought (very positive).

by Mark Vakkur, M.D.