Contents For
JAN1994

Chatting With Marc Chaikin by Thom Hartle
ARTICLE SYNOPSIS ...Chatting With Marc Chaikin  by Thom Hartle
Veteran technician Marc Chaikin, senior vice president of Instinet Corp., got started in the financial
industry with most fortuitous timing: He was issued his stockbroker's license the very day that the bear
market of 1966 ended. Over the years, Chaikin gravitated to trading, turning to technical research when
fundamental research faltered and disappointed, and along the way devised the indicator that bears his
name, today included in many software technical analysis packages. STOCKS & COMMODITIES Editor Thom
Hartle interviewed Marc Chaikin on Octob...
BY: Thom HartleSUBJECT: Interview

Polarized Fractal Efficiency by Hans Hannula, Ph.D., C.T.A.
ARTICLE SYNOPSIS ...Polarized Fractal Efficiency By Hans Hannula, Ph.D., C.T.A.
What is fractal geometry, anyway, and how do you use it? Well, you'll find out here. Hans Hannula of MicroMedia describes the construction and use of an indicator derived from fractal geometry, the mathematics that describe chaotic systems.
Most chaotic systems produce some form of graphic representation. For example, turbulent flow in a
stream produces swirls, eddies and vortices. Early chaos researchers found that the triangles, squares,
lines and cubes of Euclidean geometry simply did not help in describing, studying or understan...
BY: Hans Hannula, Ph.D., RSA, CTA

Price/Oscillator Divergences by W. Lawson McWhorter
ARTICLE SYNOPSIS ...Price/Oscillator Divergences By W. Lawson McWhorter
Have Dow theory divergences always fascinated you? Well, you're in luck. Here's a primer on observing divergence between indicators and prices to generate trading signals.
Divergence, or the nonconfirmation of price movement by a related market, security or technical
indicator, has long been a useful part of the technician's repertoire. The importance of divergence was
first recognized by Charles Dow and his successor, William Hamilton, in what has become known as the
Dow theory. One of the central premises of this method is that any move i...
BY: W. Lawson McWhorter

SIDEBAR: DEMA1 EXCEL SPREADSHEET by Technical Analysis, Inc.
ARTICLE SYNOPSIS ...DEMA1 EXCEL SPREADSHEET by Technical Analysis
This Excel spreadsheet (Figure 4) presents the calculation of the DEMA1 (column G) of the weekly
closing price of the NASDAQ (column D). We will be using the regression coefficients for the
initialization of the single exponential moving averages (column E) and the double exponential moving
averages (column F). Column A is the date, column B is the high and column C is the low for the weekly
NASDAQ. The first step in calculating DEMA1 will be calculating the linear regression of the closing price
to determine the v (slope) and the u (yintercept) ...
BY: Technical Analysis, Inc.

SIDEBAR: Dema1 Derivation by Technical Analysis, Inc.
ARTICLE SYNOPSIS ...Dema1 Derivation by Technical Analysis, Inc.
Here is a nonrigorous derivation of the oneparameter double exponential moving average (DEMA1),
which assumes there is no noise and that the MAs have reached a steadystate value (i > w). The observed
data will be defined as an exact linear process....
BY: Technical Analysis, Inc.
BY: Technical Analysis, Inc.
BY: Technical Analysis, Inc.

SIDEBAR: TICK LINE MOMENTUM by Technical Analysis, Inc.
ARTICLE SYNOPSIS ...TICK LINE MOMENTUM by Technical Analysis, Inc.
The daily closing tick is collected in column C in sidebar Figure 1. The first step is to smooth the daily
closing values using a 10period exponentially weighted moving average. To start this process, we need
to calculate the 10day simple moving average, which is done in cell D11. The formula for cell D11 is:
=TRUNC(AVERAGE(C2:C11))...
BY: Technical Analysis, Inc.

Smoothing Data With Faster Moving Averages by Patrick G. Mulloy
ARTICLE SYNOPSIS ...Smoothing Data With Faster Moving Averages By Patrick G. Mulloy
Has the lag time of moving averages ever irritated you? Well, there is a way around it: a modified statistical version of exponential smoothing with less lag time than the standard exponential moving average that is used in securities technical analysis, a double exponential moving average.
All moving averages smooth or reduce the noise level of a time series such as closing stock market prices
by increasing the moving average (MA) length. But moving averages have an inherent detrimental lag
time that increases as the MA length ...
BY: Patrick G. Mulloy

Stock Market Risk: A Monthly Look by John Kean
ARTICLE SYNOPSIS ...Stock Market Risk: A Monthly Look by John Kean
Have you ever wanted to know what the actual statistics of the monthtomonth risk in the stock market are? This article looks at the question and formulates a possible reason.
Most stock market analysis focuses on whether prices will rise or fall, with much less attention given
to the question of drawdowns, or lows. Occasionally, however, even a month with a substantial stock
index gain will have a draw down that is beyond many investors' stamina levels.
Now take a look at monthly drawdowns in the Standard & Poor's 500 stock index from 1965 on...
BY: John Kean

The Haurlan Index by Paul E. Carroll
ARTICLE SYNOPSIS ...The Haurlan index, which was originated by the Trade Levels, Inc., advisory service, has received comparatively little attention unfortunate, as it has proved to be effective in signaling tops and bottoms. By Paul E. Carroll
The number of advancing and declining stocks each day provides the raw data for a variety of breadth
indicators and trading systems, among which are the advancedecline line, the McClellan oscillator, the
Nicoski index (advancing stocks divided by declining stocks) and the BoltonTremblay indicator, to
mention only a few. And then there is the Haurlan index.
I have found...
BY: Paul E. Carroll

Traders' Tips by Technical Analysis, Inc.
ARTICLE SYNOPSIS ...TRADERS' TIPS by Technical Analysis, Inc.
METASTOCK
The interview this month, with Marc Chaikin, discussed one of his indicators, called the Chaikin money
flow. To create Chaikin's money flow indicator in MetaStock, simply enter and plot the following custom
formula:...
Figure 1 shows the 21day Chaikin money flow plotted below the price chart of COMPAQ (CPQ). Note
how each of the turns in the price of COMPAQ was forewarned by the indicator turning direction before
the price.
Allan McNichol, EQUIS International...
BY: Technical Analysis, Inc.

Using Options In Takeover Situations by Lawrence G. McMillan
ARTICLE SYNOPSIS ...Using Options In Takeover Situations by Lawrence G. McMillan
Sometimes, a takeover situation can be as absorbing as watching a professional tennis match or reading an exciting thriller. Can you take advantage of the situation as an observer? Wellknown options expert Lawrence McMillan explains how you can use stock options to participate in the activity of the stocks that have become takeover candidates.
When Viacom (VIA) recently made a friendly takeover bid for Paramount Communications (PCI),
Paramount stock soared (Figure 1) and Viacom stock took a beating (Figure 2), as the deal was prop...
BY: Lawrence G. McMillan

Using The Tick In A ShortTerm Indicator by Daniel E. Downing
ARTICLE SYNOPSIS ...Using The Tick In A ShortTerm Indicator by Daniel E. Downing
The tick index, the net difference of the number of stocks last traded on an uptick from those last traded on a downtick, is a wellknown indicator, but it's got a problem. The raw number result is volatile, perhaps too volatile for some. What to do? Here, then, is a way to smooth out the noise to identify shortterm trading opportunities.
The tick is a basic unit for the markets, watched with fascination during periods of turmoil and periods
of enthusiasm. It is quoted throughout the day on most quote services. In addition, the ...
BY: Daniel E. Downing