Contents For
APR1989

A simple cycle finder by Curtis McKallip Jr.
ARTICLE SYNOPSIS ...A simple cycle finder
by Curtis McKallip Jr.
Cycle signatures are patterns created by cycles. If you're familiar with Fourier analysis and maximum
entropy methods of cycle analysis you know they produce a pattern called amplitude spectra which
requires a computer to calculate.
In some situations where you might not wish or be able to use a computer, I have an effective method
that, compared to computerized mathematics, is crude. Literally, it is a backof theenvelope method.
Yet it is fast and gives you critical information identifying when your next trading window will arrive.
This metho...
BY: Curtis McKallip, Jr.

Alphabeta trend following system Version II, tuning for performance by Anthony W. Warren Ph.D.
ARTICLE SYNOPSIS ...Alphabeta trend following system
Version II, tuning for performance
by Anthony W. Warren Ph.D.
Several years ago, I published the alphabeta trend following method in Technical Analysis of Stocks &
Commodities. Although similar in concept to the classic moving average crossing systems, this method
utilized an uncertainty band or trend channel to eliminate most of the false signals associated with
moving average crossings. In addition, it graphically represented the preferred times to go long, go short
and to stay out of a particular stock, bond or commodity market.
One of the prob...
BY: Anthony W. Warren, Ph.D.

Cyclic personalities by John Ehlers
ARTICLE SYNOPSIS ...Cyclic personalities
by John Ehlers
Are there basic differences in the cyclic behavior of various commodities? Although theory predicts
shortterm cycles will come and go, there is no theory predicting different cyclic ""personalities"" for
different commodities. My experience has been that cyclic trading is successful for some commodities
but not for others. My curiosity about the cyclic behavior of different commodities was aroused during
the development of a Maximum Entry Spectral Analysis program (MESA) that provided backtesting.
Using the program, I measured the cycles of 12 commodities ...
BY: John F. Ehlers

Discipline in trading by James Covington Bryce
ARTICLE SYNOPSIS ...Discipline in trading
by James Covington Bryce
I would like you to bear with me for a moment and consider something that, at first, might appear to be
a little ""far out."" Let's say all of a sudden you found yourself going about your daily tasks but you didn't
have your body! Now I know it is a crazy idea, but consider it for a moment. How would you describe
yourself? What would you be? You only live in your body. What you are really is not tangible, i.e., it
cannot be measured by any of the five senses.
This, my friend, is a very important exercise relative to stock and futures trading bec...
BY: James Covington Bryce

Hines ratio by Ray Hines
ARTICLE SYNOPSIS ...Hines ratio
by Ray Hines
In 1982, I found the best way to design an indicator that stays with a trend until it has run its course is to
isolate the factors that correlate highest with the price trend and monitor their intensity.
The relative intensity of correlating factors is the primary influence on price behavior and overcomes the
weakness of ""fixed"" trend indicators that contain the analyst's preconception of what length a trend
should be.
This result forced me to become an even bigger fan of investor emotion and the monetary areas because
of their powerful influence on price behavior...
BY: Ray Hines

Letters To S&C
ARTICLE SYNOPSIS ...LETTERS TO S&C
From one author to another
Dear Dr. Anthony,
Congratulations on your excellent article on the alphabeta trend following system (S&C, April 1989).
Three questions:
1. ML is the ""lag,"" or onehalf of the moving average. Your default value is 15. Is the moving average 15
or is it 30?
2. MS default of 6. Is the moving average 6 or 12?
3. YS is the number of standard deviations. How long a period do you use to calculate one standard
deviation (the number to be multiplied by 2.5)?
If you have time to answer, many thanks!
ARTHUR MERRILL
Chappaqua, NY
......
BY: Technical Analysis, Inc.

Letters To S&C
ARTICLE SYNOPSIS ...LETTERS TO S&C
Fast Fourier Transforms
Editor,
I am a current user of the technical analysis software CompuTrac and have been recently introduced (two
months) to your theory on FFT (Fast Fourier Transform). However, I am puzzled by the fact that Fourier
transforms can be used in technical analysis. As an engineer, I have used Fourier transforms but from an
engineering perspective. I would appreciate it if you could send me more information on FFT as I would
like to seriously study this new form of analysis.
K. GIN
Singapore
As In engineering, Fourier Analysis is used to locate possible p...
BY: Technical Analysis, Inc.

Master oscillator by William Mason
ARTICLE SYNOPSIS ...Master oscillator
by William Mason
Is it possible to produce an overall market entry or exit signal based on several indicators/indices? In
answering this intriguing question, I asked myself, ""What do I look at and look for as my first quick
estimate of the market trend and direction?"" My answer was that I go to three or four of my favorite
indicators/indices and find out where they are in respect to their 10% exponential smoothing average (a
20day moving average) which has proven, with time, to be a very good shortterm support or resistance
line.
My next thought was, instead of trying t...
BY: William Mason

Member and public short selling by Arthur A. Merrill
ARTICLE SYNOPSIS ...Member and public short selling
by Arthur A. Merrill
Total short sales figures, published by the New York and American stock exchanges, are a useful set of
figures for gauging market moods. Total short sales figures are reported in The Wall Street Journal and
Barron's. Exchange members and nonmembers, or the public, make up the total short sales figures.
You can calculate the total exchange member figures by adding the specialist, floor traders and other
member numbers. Deduct member data from the total and you have a figure for the nonmembers or
public.
Some analysts report ""members tot...
BY: Arthur A. Merrill, C.M.T.

Opening range breakout Part 5 by Toby Crabel
ARTICLE SYNOPSIS ...Opening range breakout
Part 5
by Toby A. Crabel
A trade taken at a predetermined amount above or below the opening price of a given day is called an
opening range breakout (ORB).A narrow range four pattern (NR 4) is a day with a daily range that is
narrower than the previous three days' daily ranges compared individually. In my experience, trades using
the ORB technique on a day following an NR 4 pattern tend to coincide with trend day activityand,
consequently, successful ORBs.
Figures 1 and 2 demonstrate an ORB on the day following the NR 4 pattern. The table in Figure 3 shows
the results...
BY: Toby Crabel

Point and figure: Analysis and projection Part 2 by Charles Idol
ARTICLE SYNOPSIS ...Point and figure: Analysis and projection
Part 2
by Charles Idol
The fundamental pattern in point and figure charting  the congestion area  occurs after a
substantial rise or fall in the price of a stock as the investment community adjusts to the new price. This
congestion area looks like sideways price activity within a trading range (Figure 1). As a rule of thumb,
the trading ranges are about 15% of the price for a lowpriced stock, 10% for a mediumpriced stock and
5% for a highpriced stock.
Usually, you use the onepoint box, onebox reversal charts (a 1x1 chart) to study congestion ...
BY: Charles Idol

SIDEBAR: Alphabeta, Version II
ARTICLE SYNOPSIS ...Alphabeta, Version II
This generic QuickBASIC routine for computing alphabeta trend channels and trading filters assumes
that you already have a means of inputing historical time series data into an appropriately dimensioned
array X(M,N), where M >= 4 and N is at least as large as NUM, the number of time points in the input
data.
You also will need some method of plotting the trend channel and trading filter on the same graph....
BY: Technical Analysis, Inc.

Understanding Market Profile Part 6 by Thomas P. Drinka and Stephen M. Ptasienski
ARTICLE SYNOPSIS ...Understanding Market Profile
Part 6
by Thomas P. Drinka and Stephen M. Ptasienski
Range extensions are the intraday price moves that hold good profit potential. Many current trading
systems use them although they are typically called opening range breakouts (See ""Opening Range
Breakout, Part 5"" in this issue). Our research into the range extensions of the Chicago Board of Trade's
Market Profile report suggests there are analyses that Market Profile traders may wish to conduct on a
daytoday basis. We tabulated the frequency and magnitude of range extensions of 12 markets from
February 1 t...
BY: Thomas P. Drinka and Stephen M. Ptasienski