Contents For
AUG1992

Avoiding Bull And Bear Traps by Nauzer J. Balsara, Ph.D.
ARTICLE SYNOPSIS ...Avoiding Bull And Bear Traps
by Nauzer J. Balsara, Ph.D.
Bull and bear traps are gap openings that are reversed the same day and that can cost a trader dearly.
S&C contributor Nauzer Balsara presents his method of analyzing market history to calculate the proper
placement of stops to avoid being caught in such traps.
A bull or bear trap occurs when a market does an about face after an extremely bullish or bearish
opening, leaving a trader who entered a position at the opening price with a possible loss at the end of the
day. Bullish expectations are reinforced by a sharply higher or ""gapu...
BY: Nauzer J. Balsara, Ph.D.

Detecting Seasonality by Lewis Carl Mokrasch, Ph.D.
ARTICLE SYNOPSIS ...Detecting Seasonality
by Lewis Carl Mokrasch, Ph.D.
Seasonal or cyclical patterns, whether real or only imagined, have been a popular topic among traders
for years. Lewis Carl Mokrasch, continuing research published originally in his article in April 1991,
presents this time a generalized method for detecting seasonal patterns. However, Mokrasch warns,
there are certain caveats that the trader should be aware of, and he notes that the trader should take a
good long look at the data involved for significant patterns before risking capital on so called seasonal
trades. Here's how to figure it o...
BY: Lewis Carl Mokrasch, Ph.D.

Ed Seykota Of Technical Tools by Thom Hartle
ARTICLE SYNOPSIS ...Ed Seykota Of Technical Tools by Thom Hartle
Ed Seykota, whose thoughts and insights were chronicled in Jack Schwager's book Market Wizards, has
been involved with trading commodities since the late 1960s. According to Market Wizards, Seykota's
""model account""  an actual customer account  started with $5,000 in 1972 and to date has earned
more than a 250,000% gain. Recently, in a new challenge, he purchased data and software vendor
Technical Tools. S TOCKS & COMMODITIES Editor Thom Hartle interviewed Seykota in a series of written
correspondence that took place over several months ending ...
BY: Thom HartleSUBJECT: Interview

Filtering Trades With A Moving Average Slope by Adam White
ARTICLE SYNOPSIS ...Filtering Trades With A Moving Average Slope
by Adam White
Moving averages are attractive because they simply and reliably execute the ""cut your losses and let
your profits run"" strategy. Moving averages also have drawbacks, however, in that they discard much of
the information that the market offers. A simple moving average represents simple quantified information
 either prices are above it or below it. Can additional information, in this case the slope of the moving
average, be put to use to improve trading performance? Adam White of the Technical Traders Bulletin
shows you how.
Despit...
BY: Adam White

Market Thrust by Tushar S. Chande
ARTICLE SYNOPSIS ...Market Thrust
by Tushar S. Chande
An abundance of articles and letters concerning the Arms index, or the trading index (TRIN), during the
past year was one proof of its popularity. The articles were concerned with both the uses and limitations
of the Arms index. The two major problems with the Arms index, as characterized in the articles and
letters, arose in constructing a longterm Arms index and with using the index in mixed markets. STOCKS
& COMMODITIES contributor Tushar Chande proposes a way to measure market thrust and overcome the
limitations of the Arms index.
Richard Arms invented ...
BY: Tushar S. Chande, Ph.D.

Moving Average Crossovers by Arthur A. Merrill, CMT
ARTICLE SYNOPSIS ...Moving Average Crossovers
by Arthur A. Merrill, CMT
Are moving average crossovers more effective than other indicators? More specifically, how about
moving average crossovers applied to the Dow Jones Industrial Average? S&C contributor Arthur
Merrill decided to research the question using weekly data for the last 24 years, checking out crossovers
with a fourweek exponential moving average and with 13, 26 and 52week exponential averages. Here
are his results.
One of the earliest technical tools, as easy to figure with pens and paper as well as with computer later
on, was a price chart and...
BY: Arthur A. Merrill, C.M.T.

Rate of Change by Martin J. Pring
ARTICLE SYNOPSIS ...Rate of Change
by Martin J. Pring
Respected and wellknown technician and author Martin Pring debuts as a STOCKS & COMMODITIES
author, writing about the rate of change oscillator, a simple method of figuring advances or declines in a
given period.
The rate of change (ROC) is perhaps the simplest form of oscillator or momentum to understand and
calculate. It measures the speed of an advance or decline over a specific time span and is calculated by
dividing today's level by a level n periods ago and multiplying the result by 100. For example, an
annualized (or 12month) ROC is calculated by di...
BY: Martin J. Pring
BY: Technical Analysis, Inc.
BY: Technical Analysis, Inc.
BY: Technical Analysis, Inc.

SIDEBAR: EXPONENTIAL MOVING AVERAGES
ARTICLE SYNOPSIS ...EXPONENTIAL MOVING AVERAGES
Defining exponentially smoothed moving averages  which, for most traders, would be a series of
closing prices  is simply another form of a moving average. ......
BY: Technical Analysis, Inc.

SIDEBAR: TIME DELAY OF LINEAR EXPONENTIAL AVERAGES
ARTICLE SYNOPSIS ...TIME DELAY OF LINEAR EXPONENTIAL
AVERAGES
Article Figure 2 indicates that if the price goes up linearly, after a while the exponential moving average
will also be a straight line that is parallel to the original. For this to occur, there must be a constant
separation between the lines. Let's designate the separation as ""B."" This situation is pictured in Article
Figure 2. Recalling equation (1):
......
BY: Technical Analysis, Inc.

The Gann Quarterly Revisited by David C. Reif
ARTICLE SYNOPSIS ...The Gann Quarterly Revisited
by David C. Reif
The Gann quarterly chart, a trendfollowing indicator like other range breakout techniques, was
previously described by Jerry Favors in the January STOCKS & COMMODITIES. Most trendfollowing
indicators give less than satisfactory results in the absence of a strong trend, and Reif, whose research
on the indicator goes back a number of years, concludes that the Gann quarterly chart is no exception.
Take a look.
The Gann quarterly chart is a longterm indicator that I began following 15 years ago. In doing so, I
have put together a collection of cha...
BY: David C. Reif

Trading Back Into A Range by John Sweeney
ARTICLE SYNOPSIS ...Trading Back Into A Range
by John Sweeney
Last month in Settlement, I wrote briefly about some simple ideas for defining nontrending periods.
Although exotic approaches are possible, simple things are easier to teach to computer packages. The
program I've been using here for testing, Behold!, has a great worksheet capability and many
sophisticated functions, so virtually anything can be defined mathematically. The problem with this
software occurs when defining trading rules beyond entry and exit. Reversals and addon trades are
tougher if not impossible to program. When trading a range, you ...
BY: John Sweeney

Understanding Exponential Moving Averages by Raymond Rothschild
ARTICLE SYNOPSIS ...Understanding Exponential Moving Averages
by Raymond Rothschild
Do you ever find yourself thinking that maybe you ought to try using the exponential moving average but
find yourself intimidated into paralysis? Don't be. Let Raymond Rothschild be your guide into a
notsoalarming technique.
Moving averages in general have been extensively analyzed by many investigatorsall except the
exponential moving average. The objective in technical analysis is to use every tool available, and that
includes exponential moving averages. But first to review the formula for the simple moving average: in
an ...
BY: Raymond Rothschild

Utilities And Bonds by John J. Murphy
ARTICLE SYNOPSIS ...Utilities And Bonds
by John J. Murphy
Of all the interrelationships between markets, one that has been taken for granted for decades is the
relationship between the Dow Jones Industrial Average and the Dow Jones Transportation Average.
John Murphy, veteran technician and leading proponent of intermarket analysis, points out that the third
Dow Jones average, the Dow Jones Utility Average, can be used for forecasting purposes for stocks as
well as bonds. Murphy explains.
One of the basic premises of the Dow theory is that the Dow Jones Industrial Average (DJIA) and the
Dow Jones Transportation...
BY: John J. Murphy