Contents For
AUG1989

A more conservative estimate of risk by Clifford J. Sherry, Ph.D.
ARTICLE SYNOPSIS ...A more conservative estimate of risk
by Clifford J. Sherry, Ph.D.
Risk is, or at least should be, of interest to all investors. One of the traditional measures of risk is the
standard deviation of expected returns (that is, the spread of the expected return around the mean or
average expected return). I think that there may be a better, more accurate, measure of risk, assuming that
we want to define risk in terms of dispersion
First, we need to agree on a few definitions. The first is deviation:
......
BY: Clifford J. Sherry, Ph.D.

Daily stock technician by Thomas K. Lloyd
ARTICLE SYNOPSIS ...Daily stock technician
by Thomas K. Lloyd
For several years, I marketed a proprietary chart service, called Flow of Capital, to major money
managers in the country who generally had at least a billion dollars in equities under management.
Each chart plotted four/variables. The first line showed capital flowing into or out of the stock. Next,
there was a line showing the demandsupply fluctuations. Below that was a rateofchange indicator.
Finally, there was comparative relative strength.
These charts showed that relative strength is the basic raw data for every novice technician to learn a...
BY: Thomas K. Lloyd

Fibonacci profit objectives by Joe DiNapoli
ARTICLE SYNOPSIS ...Fibonacci profit objectives
by Joe DiNapoli
Anyone who has been involved in the market for long has probably heard about Fibonacci numbers
and ratios. We know they somehow mysteriously affect the market; however, most of us resist trying to
understand how they work. I resisted because I thought that Fibonacci numbers, wave analysis and related
systems were very difficult concepts to learn.
Eventually, my desire to better understand the market and to win bigger overcame my prejudice. I quickly
discovered that applying Fibonacci techniques to the market is not very difficult, and that a trader...
BY: Joe DiNapoli

Financial Volume Index by Patrick Cifaldi
ARTICLE SYNOPSIS ...Financial Volume Index
by Patrick Cifaldi
In 1979, the analysis of trading volume was done mainly by hand. Joseph Granville was the foremost
researcher and his books and friendship gave me the tools to start my work. The basic work was tedious
and long, and left little time for experimentation. With the advent of personal computers, I finally had the
time to research volume.
The foundation of volume analysis is that changes in the trend of volume precede changes in the trend in
price. One analogy is that if volume is the tides of the sea, and price is a sailing ship, the ship must wait
for t...
BY: Patrick Cifaldi, C.M.T.

Most active STOCKS by Arthur Merrill
ARTICLE SYNOPSIS ...Most active STOCKS
by Arthur Merrill
The 15 most active issues on the New York Stock Exchange (NYSE) are listed daily in The New York
Times and The Wall Street Journal, and weekly in Barron's. Are these statistics helpful?
The average price statistic can be used to measure the speculative tone of the market. A market
dominated by lowpriced stocks is speculative; one dominated by highpriced stocks is usually
respectable. Because the market becomes speculative at the top of a swing, low values of this indicator
should be found at market peaks.
I use the weekly statistic reported in Barron's...
BY: Arthur A. Merrill, C.M.T.

Point and figure analysis and projection Part 2 by Charles Idol
ARTICLE SYNOPSIS ...Point and figure analysis and projection
Part 2
by Charles Idol
When you start point & figure chart (P&F) analysis, you should start with longerterm data and a l´3
chart like Figure 1, the P&F chart for AT&T. (See ""Point & figure charts: An overview,"" Stocks &
Commodities, March 1989.) AT&T falls under the influence of the downtrend line formed by connecting
the tops of columns 11, 13 and 21. While this line holds, any shortterm patterns indicating upward price
action tend to be optimistic. Price action on the l´l chart (Figure 2) covers a slightly different time period.
(To tie the chart...
BY: Charles Idol

Relative Strength Index by Peter Aan
ARTICLE SYNOPSIS ...Relative Strength Index
by Peter Aan
Rules and Formulas: The formula for computing the Relative Strength Index (RSI) is wellknown
and computerized by dozens of commercial software packages.
Briefly, to compute a 14day RSI, you must first collect 14 days of closing prices. Looking at the daily
net changes (DNC) from the previous close, add all of the up DNCs and divide by 14 to get the up
average. Total the down DNCs and divide by 14 to get the down average.
Divide the average up DNC by the average down DNC. Add 1 to this result and divide the new result into
100. Subtract this figure from...
BY: Peter Aan

Tracking profits: accounting software by Mike Takano
ARTICLE SYNOPSIS ...Tracking profits: accounting software
by Mike Takano
Choosing the ""best"" accounting software package is a difficult task. Given different circumstances and
user abilities, one package may suit your needs better than another. Nevertheless, I liked Monogram's
Business Sense for small businesses, Layered's Insight for small to mediumsized businesses and Great
Plains Accounting Series for large businesses.
If you're in the market for an accounting software package, decide how elaborate a system you need,
including special features, prior to looking at any package. This may prevent you from pa...
BY: Mike Takano

Tradable price patterns by Kent Calhoun
ARTICLE SYNOPSIS ...Tradeable price patterns
by Kent Calhoun
What if you knew tomorrow had an 85% probability of closing higher. Do you think it w w would be
possible to find a way to make money? Such patterns do exist in the markets all the time, but go
unnoticed because traders do not know how to find them. You can estimate the probabilities associated
with any particular pattern of daily closes. Use a computer with your current data or manually tabulate
closing prices from, say, The Wall Street Journal or Investor's Daily.
First, Monday's close is always assigned a value of X whether it is up or down from Fr...
BY: Kent Calhoun

Trading commodity spreads mechanically by Louis P. Lukac & B. Wade Brorsen
ARTICLE SYNOPSIS ...Trading commodity spreads mechanically
by Louis P. Lukac & B. Wade Brorsen
Using a mechanical rule to trade a futures market is not newcountless mechanical methods exist
with the general purpose of creating a profit while eliminating the human factor from trading. One place
where mechanical trading rules have received increased attention lately is in spread trading. Spread
trading involves taking a long position in one market and a corresponding short position in the same or
related market, so the offsetting positions reduce the risk.
If a mechanical rule could be developed for spread tradi...
BY: Louis P. Lukac and B. Wade Brorsen

Using MMI to trade OEX by Dan Downing
ARTICLE SYNOPSIS ...Using MMI to trade OEX
by Dan Downing
My firm uses an indicator derived from the Major Market Index (MMI) Stock Index Future to trade
options on Standard & Poor's 100 Stock Index (OEX). The indicator is used to determine when the MMI
future is in very oversold territory and subject to a shortterm bounce.
Let me emphasize that the phrase ""shortterm bounce"" refers to two or three days, no longer. Our research
has shown that when the MMI future is very oversold, the equity markets are ready for a bounce. Instead
of buying the future however, we purchase OEX calls to take advantage of the an...
BY: Dan Downing