Technical Analysis of STOCKS & COMMODITIES
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Article Archive For Mark Vakkur, M.D.
DownloadSell In May And Go Away
ARTICLE SYNOPSIS ...The S&P 500 continues to make most of its gains between November and April and underperform between May and October. Here is an updated look at this phenomenon and how you can put it to use. ...
Exploiting The Holidays With The Stock Market
ARTICLE SYNOPSIS ...Yes, Virginia, there is (still) a Santa Claus rally. And more!...
What Works, What Doesn't In Stock Market History by Mark Vakkur
ARTICLE SYNOPSIS ...What Works, What Doesn't In Stock Market History by Mark Vakkur Using Summary Statistics, In Over 60 Years And here for your education and edification, Standard & Poor's 500 summary statistics from January 1945 to May 2007! Some factors are strongly correlated with rising or falling markets. Find out what they are, in part 1 of a two-part series. In trading, as in poker, it pays to know the odds. Although the Standard & Poor's 500 is far from predictable, certain factors are strongly correlated with rising or falling markets. There is no guarantee that these relationships will continue, but...
Can Technical Factors Gauge What Works In The Stock Market? by Mark Vakkur
ARTICLE SYNOPSIS ...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 R...
Stochastics Of Earnings Yields by Mark Vakkur, M.D.
ARTICLE SYNOPSIS ...Stochastics Of Earnings Yields by Mark Vakkur, M.D. By combining technicals and fundamentals, you can make a realistic analysis of the market. Pure stock market technicians ignore fundamentals. To them, the chart tells the whole story, while the fundamentals are distracting and misleading. Pure fundamental analysts, on the other hand, ignore price action. Here's a method that synthesizes the best of both: converting a fundamental variable -- the interest rate?adjusted earnings yield on the Standard & Poor's 500 index -- into a technical indicator to maximize risk-adjusted returns. VALUATION ...
Using Expert Commentary by Mark Vakkur
ARTICLE SYNOPSIS ...Using Expert Commentary by Mark Vakkur One of the most neglected features of TradeStation is the ability to create and modify a study's Expert Commentary. And you don't have to be an expert to use it; if you can create a study, you can create expert commentary. This feature can add a new dimension to your chart analysis. Used correctly, TradeStation commentary can jog your memory for important associations, point out interesting or unusual things in narrative text (instead of being a blip buried in a busy chart), and even serve as a substitute for TradeStation's data window, allowing you to ...
Watching DJIA Breakouts by Mark Vakkur, M.D.
ARTICLE SYNOPSIS ...Catching DJIA Breakouts by Mark Vakkur, M.D. Buying breakouts in the Dow Jones Industrial Average works well - but there are caveats. If the trend is your friend, the simplest way to use that idea is to buy only those markets that are breaking out to new highs. But is this really a good strategy? As it turns out, at least for the Dow Jones Industrial Average (DJIA), breakouts are very useful in identifying periods of increased profitability. I studied breakouts on the DJIA from February 1988 to November 1998. If breakouts truly are useful, buying a breakout over this 11-year span should have...
The Volatility Stop System by Mark Vakkur, M.D.
ARTICLE SYNOPSIS ...The Volatility Stop System Here's a step-by-step through the development of a robust trading system for capturing major market moves. Volatility systems have a long and honored history in technical trading. Here, I'll show you a simple, robust version you can use on a weekly basis. I include code in a sidebar and show the results of optimizing the system for the Dow Jones Industrial Average (DJIA), some stocks, and some mutual funds. The results are good across the board. The most robust systems adapt themselves to the market or security being traded. One indicator particularly well suited t...
The Channel Breakout System by Mark Vakkur, M.D.
ARTICLE SYNOPSIS ...The Channel Breakout System by Mark Vakkur, M.D. This is one of the simplest and oldest trading techniques, where trades are initiated based on price exceeding a given historical level. Here's how the channel breakout system works using the Value Line index, IBM, and the Fidelity Southeast Asia Fund. With the proliferation of affordable and powerful system-testing software, it is tempting to create and optimize increasingly complex systems with multiple rules, exceptions, and corollaries. Often, however, less is more. One of the simplest technical analysis systems is also one of the most rob...
On System Development Part 1 by Mark Vakkur, M.D.
ARTICLE SYNOPSIS ...On System Development Part 1 by Mark Vakkur, M.D. Here's one for the first-time developer of a trading system, or someone who's thinking about developing a system. Here are the basic steps this author took to develop a system for the stock market. Successful trading is nothing more than systematically putting the odds in your favor. Our only guide to the future is the past; the trader must hunt down historical associations and hope they continue to hold true. These associations can be as simple as the idea that a close above a rising moving average tends to be followed by higher prices or a...
On System Development; Part 2 by Mark Vakkur, M.D.
ARTICLE SYNOPSIS ...On System Development Part 2 by Mark Vakkur, M.D. Last month, this author introduced the initial steps that someone, novice or veteran, should take when developing a stock market system. This time, he explains the final steps. Last time, I posited that successful trading consists of systematically putting the odds in your favor. Since our only guide to the future is the past, I showed how the trader must find historical relationships and apply them to the markets going forward. I outlined four steps. First, historical data must be gathered; I used monthly closing data of the Standard & Poor'...
Using Normal Distribution For Writing Options by Mark Vakkur, MD
ARTICLE SYNOPSIS ...How can you go about selecting the best strike price for writing an option? Perhaps no branch of knowledge has been as abused or misunderstood as statistics. Yet, without some grounding in basic statistical concepts, our ability to trade profitably is limited. Trading does not require a doctorate in mathematics, but mastering some basic fundamentals should help stack the odds in our favor. This is particularly helpful in developing an options trading strategy. Many trading software packages automatically generate statistics on any tradable or indicator; often included are mean, median, and s...
Basic Options Techniques by Mark Vakkur, M.D.
ARTICLE SYNOPSIS ...Many stock traders and investors avoid options because they seem too complex or risky. Although it is very easy to lose large amounts of money in a very short time misusing options, investors and traders of all kinds should at least consider them as one of many tools to exploit market opportunities. Here's a primer on using options, with common terms and applications of options strategies. Although a thorough discussion of options is impossible in the space of a single article, it is important to introduce a few basics. There are, if nothing else, two outstanding but little-used options stra...
The Basics of Managing Money by Mark Vakkur, M.D.
ARTICLE SYNOPSIS ...Why is money management one of the first items that profes-sional traders stress? Why would you think? Here's an overview of risk and several simple mechanical approaches to money management. Preserving capital is essential to a trader's long-term survival. The only legitimate objective of trading or investing is to make money; if you trade for the thrill of it, you are playing the world's most expensive sport. The objective of any money management system is simple: If followed, it will force you to cut losses short and let profits run. Most novice traders -- and the bulk of today's mutual fun...
The 10% Swing Filter by Mark Vakkur, M.D.
ARTICLE SYNOPSIS ...The 10% Swing Filter by Mark Vakkur, M.D. Price filters identify trends while eliminating noise below a certain percentage change. Here's a trading method using a 10% price filter for the S&P 500 stock index. Although trend-following systems work well during established trends, they can produce disastrous results at market turning points. For example, momentum investors obeying the dictum "Buy high and sell higher" could get crushed if they were fully leveraged at a major market top. Further, oscillators should theoretically help signal a change in trend, but often do so prematurely. A stoc...
New Tricks With the Dogs of the Dow by Mark Vakkur, M.D.
ARTICLE SYNOPSIS ..."The Dogs of the Dow," a popular strategy based on purchasing the highest-yielding stocks each year, is reviewed here using a longer lookback period than originally used, as well as detailed analyses of the risks and rewards. On Beating the Dow, Michael O'Higgins and John Downes outlined two high-yield strategies that achieve substantially greater returns than the Dow Jones Industrial Average (DJIA) with less risk. Here's a statistical analysis of these strategies, extending the study period back to 1957. The two main strategies to analyze the DJIA are simple. Each year, buy equal dollar amou...
The Moving Average Convergence/Divergence by Mark Vakkur, M.D.
ARTICLE SYNOPSIS ...The Moving Average Convergence/Divergence by Mark Vakkur, M.D. Here's a novel way of using the moving average convergence/divergence (MACD) histogram to generate buy and sell signals for stock and mutual fund traders. Not only that, included is a simple means of analyzing risk-adjusted trading system performance. The moving average convergence/divergence indicator, developed by Gerald Appel, is constructed by taking the difference of two moving averages of the closing price -- one short, one long. This difference is smoothed with a moving average, and a comparison is made between the differe...
Seasonality and the Presidential Election Cycle by Mark Vakkur, M.D.
ARTICLE SYNOPSIS ...Seasonality And The Presidential Election Cycle by Mark Vakkur, M.D. Can you combine politics with seasonality? With the Presidential election coming up, here's a review of some trading strategies for the stock market built around this event. The quadrennial Presidential election-year cycle has a profound influence on the stock market. Stocks tend to advance most strongly during the year immediately preceding and the year of the election, but only tread water during the other two years of the four-year cycle. How, then, might a trader incorporate this phenomenon into a trading system and com...
V.14:6 (241-243) Seasonality And The S&P 500 by Mark Vakkur, M.D.
ARTICLE SYNOPSIS ...Looking at the seasonality of the stock market from different viewpoints can give you new insight into an old concept. Here's a look at the best and worst months in which to invest as well as some suggested investing guidelines. By Mark Vakkur, M.D. One of the strongest arguments against the random walk theory is the observation that the stock market tends to make most of its gains during certain months that are far from randomly distributed. As Yale Hirsch points out in The 1996 Stock Trader's Almanac, if an investor were to have invested $10,000 in the Standard & Poor's 500 index in May thr...
Treasury Bond Yields and the S&P 500 by Mark Vakkur, M.D.
ARTICLE SYNOPSIS ...Interest rates have long been tied to movement in the stock market. Here's how to test trading rules for the stock market based on a six-month moving average of the 30-year Treasury bond yield, showing us when it may and may not be profitable to invest in stocks. By Mark Vakkur, M.D. I nterest rates exert a powerful influence on equity prices. Since World War II, there has been a strong, inverse relationship between the movement in the stock market and prevailing interest rates, such as the yield on the 30-year Treasury bond. Here, I will explore the development of a simple trading system tha...
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