ARTICLE SYNOPSIS ...1989 cycles by John F. Ehlers Cycle activity in 1989 was substantially higher than in 1988, and some role reversals in cycle personalities appear to have occurred relative to the previous year. To measure and examine 1989 cycle activity, I used 12 perpetual futures contracts as data for the cycle measurements. These 12 contracts were continuations of the same perpetual contracts used for comparisons to 1988 cycle performance. The short-term cycles were measured using the MESA computer program. Valid cycles are reported when the ""cycle content"" (signal-to-noise ratio) exceeds a 6 deciBel (dB...
BY: John F. Ehlers
ARTICLE SYNOPSIS ...Are there gaps in your thinking? by Richard W. Arms Jr. Usually in the use of technical analysis we are concerned with what happened and how it happened in order to predict what will happen. But there are times when what didn't happen can be as important as what did happen. Consider the stock that looked ready to break out into new high ground: It approached the old highs and then died. The fact that it refused to go above the old resistance was a very important non-message. Then there was the stock that was expected to find support at the same level that it had held three times before, but i...
BY: Richard W. Arms, Jr.
ARTICLE SYNOPSIS ...Avoid the call-writing hazard by Jerry Kopf An option may sometimes be a good buy. Other times it may be a good sale. Sometimes you should buy long term, sell near term. Sometimes the opposite should be done. To participate in the market without the ability or flexibility to use different option strategies that address different market conditions is bound to cost money in the long run. -- Jim Piper A gentleman from Detroit called recently to find out the feasibility of squeezing a bit more income from a $600,000 portfolio of long-held common stocks. As its trustee he was pleased with each sto...
BY: Jerry Kopf
ARTICLE SYNOPSIS ...BASIC programming for technical analysis by Steve Notis I decided recently to start to program some of my own software after writing for so long about everyone else's. Once I got going, I discovered that programming is not as difficult as I'd anticipated. Anyone comfortable getting around his or her hard disk with DOS and perhaps writing ""batch"" and ""config.sys"" files can learn to do a surprising amount of programming in a very short time. For readers who want to gain new skills but hesitate to take the plunge, this article, the first of a series, will be a chronicle of my adventures as ...
BY: Steve Notis
ARTICLE SYNOPSIS ...Confessions of a technical heretic by Grant Noble Recently, I chatted with someone who runs a fairly well-known advisory service. He mentioned that one client tested more than 700 computerized systems and came to the conclusion that some worked well in certain markets, but none worked in all markets. In this day of megabytes and optimization, few want to go to the trouble of testing that many systems. But the overwhelming majority of technicians would agree that no single method exists to unlock the door to trading heaven. However, these same technicians also devoutly believe a combination of...
BY: Grant Noble
ARTICLE SYNOPSIS ...Implied economic forecasts by Dan DiBartolomeo Investors rely on a variety of methodologies in constructing their portfolios. Some investors would classify themselves as fundamentally oriented, while others use technical analysis. Relatively few would claim to select securities or construct portfolios on the basis of economic forecasts. Most market participants have the attitude that even top economists have little ability to forecast future macroeconomic developments with any consistency. Further, they are of the opinion their own ability to forecast economic events accurately is even less t...
BY: Dan DiBartolomeo
ARTICLE SYNOPSIS ...New highs/new lows by Arthur A. Merrill, C. M. T. Each day the number of stocks making new highs and the number making new lows are reported in the financial press. Are these statistics useful? To find out whether they were, I constructed an index of new highs/new lows by calculating the percentage of new highs made over the preceding 10 days to the sum of new highs and new lows in the same 10 days: 100(10- day total highs) / 10- day total new highs and lows I tested the index with two sets of benchmarks: two-thirds of a standard deviation above and below the mean, and a full standard devia...
BY: Arthur A. Merrill, C.M.T.
ARTICLE SYNOPSIS ...Options ratios for sentiment by James P. Martin As options activity on equity indices and commodity futures has soared in the past few years, more and more market analysts have relied on options ratios as indicators of market sentiment and contrary opinion. Until recently most analysts looked only at the volume of calls and puts. Here we go a step further, examining the simultaneous changes in options volume and open interest. By studying these changes, we may look deeper into options players' true directional biases. Before discussing the significance of analyzing option open interest with ...
BY: James P. Martin
ARTICLE SYNOPSIS ...Price patterns in soybeans by Toby Crabel In my search to determine whether price patterns signal the next day's market direction, I have tested all combinations of four closing prices followed by either a higher or lower open the day after the last close. I used the soybean market between 1970 and 1988 and studied 32 patterns based on open, high, low and close. The only criterion to determine the direction of the next day's trade was gross profits. The five-day patterns in Figure 1 are symbolized by a + for an up closing relative to the previous day and a - for a down closing, with the exce...
BY: Toby Crabel
ARTICLE SYNOPSIS ...Speculating in vertical spreads by Bradley J. Horn Many gasoline traders are familiar with the fundamentals of spread trading with New York Mercantile Exchange (NYMEX) energy futures. Far fewer, however, are able to recognize opportunities in option spreads, for good reason: The trader entering an options market for the first time may find himself subject to ""contract shock,"" for unlike the futures trader, whose spread choices are limited to 15 contracts, the options trader must deal with a bewildering assortment of contracts, each with its own price dynamics. Spread traders will find that...
BY: Bradley J. Horn
ARTICLE SYNOPSIS ...The overlay profile for current market analysis by Donald L. Jones and Christopher J. Young Market analysis seeks to determine the condition of the market because the trader who knows whether a market is trending, bracketing or in transition is better able to make an intelligent trading decision. Historically, technicians have studied market conditions using a combination of fundamentals, chart analysis and numerical formulas such as moving averages. The problem with the latter, though, has been that while seeking to average a number of trading days to smooth out the random market fluctuation...
BY: Donald L. Jones and Christopher J. Young