Contents For
MAY1992

Calculating Relative Strength Of Stocks by Robert L. Hand Jr.
ARTICLE SYNOPSIS ...Calculating Relative Strength Of Stocks
by Robert L. Hand Jr.
Heavy on consumer stocks? You may want to rethink your strategy and make some adjustments to your
portfolio. Robert Hand addresses the shift of leadership early this year from consumer stocks to
technology stocks, and how relative strength can identify emerging trends.
Bear markets come in two forms, the more visible form when all stocks decline below previous lows
several times for a total drop from the highs of more than l5%. The less visible form of bear market is
often referred to as a sector rotation and is less visible becau...
BY: Robert L. Hand Jr.

Computer Data Conversion by Hans Hannula, Ph.D., C.T.A.
ARTICLE SYNOPSIS ...Computer Data Conversion
by Hans Hannula, Ph.D., C.T.A.
Computers talk to each other all the time  except when you get involved. A familiar feeling? Ever have
data you'd love to have on your system, except the data aren't compatible with your setup and you end up
having to input everything all by hand? Well, you're not alone. Fear not, for Hans Hannula explains the
whys and wherefores and how to convert that data to your needs.
Not long ago, one of the major problems a technical analyst had was getting data. This usually meant
hours at the library, scrolling through microfiche of back newsp...
BY: Hans Hannula, Ph.D., RSA, CTA

Forecasting Tomorrow's Trading Day by Tushar S. Chande, Ph.D.
ARTICLE SYNOPSIS ...Forecasting Tomorrow's Trading Day
by Tushar S. Chande, Ph.D.
Using linear regression as a crystal ball for forecasting the market? After all, if you were to be able to
determine tomorrow's high, low and close for trend changes and placement of stop points, it would
simplify your life immeasurably. Can it work? Tushar Chande explains how it can be done.
Wouldn't you trade better It you could ""see"" the future? A simple linear regression can provide an
objective forecast for the next day's high, low and close. These ingredients are essential for a trading
game plan, which can help you trade ...
BY: Tushar S. Chande, Ph.D.

Optimum Detrending by John F. Ehlers
ARTICLE SYNOPSIS ...Optimum Detrending
by John F. Ehlers
Look at any price chart, and you'll find that markets move up and down even while in a trend . Removing
the trend can help identify shortterm turning points. Frequent STOCKS & COMMODITIES contributor John
Ehlers presents different techniques for detrending prices and his optimized detrending method as well.
We want to detrend data because we want to remove the longerterm variations so short term turning
points are easier to discern, enabling us to better pinpoint the best entry and exit points for shortterm
trades. Since the goal of detrending is separ...
BY: John F. Ehlers

Ranking The Currency Markets by Tim Hayes
ARTICLE SYNOPSIS ...Ranking The Currency Markets
by Tim Hayes
The very idea of trading the currency markets can make the most seasoned traders shudder a little, but in
truth, doing so could be lucrative when combined with a solid technical system. You can rank currencies
by averaging the percentage rate of change over various periods. Combining the ranking table with your
timing models will help with market timing, too. Tim Hayes, of Ned Davis Research, can fill you in on
ranking the currency markets.
When currency markets come to mind, the riskaverse investor might cringe at the thought of wild
shortterm swi...
BY: Tim Hayes

SIDEBAR: CALCULATING RELATIVE STRENGTH
ARTICLE SYNOPSIS ...CALCULATING RELATIVE STRENGTH
Calculating relative strength performance in a spreadsheet is easy. Ours example, sidebar Figure 1, uses
the closing price of Pepsico (column A) versus the closing price for the S&P 500 (column B). Any two
items can be compared. ......
BY: Technical Analysis, Inc.

SIDEBAR: Calculating TrSI
ARTICLE SYNOPSIS ...CALCULATING TrSI
Calculating the true strength index requires an introduction
to exponentially smoothed moving averages (EMA):
Exponential Moving AverageThe EMA for day D is calculated
as: EMAD = aPRD + (1a)EMAD1 where PR is the price
on day D and a (alpha) is a smoothing constant (0<a<1). Alpha
may be estimated as 2/(n+1), where n is the simple moving
average length....
BY: Technical Analysis, Inc.
BY: Technical Analysis, Inc.
BY: Technical Analysis, Inc.

SIDEBAR: SETTING UP AN EXCEL SPREADSHEET
ARTICLE SYNOPSIS ...SETTING UP AN EXCEL SPREADSHEET
Following is an example of setting up an Excel spreadsheet for creating a forecast using a fiveday linear
regression for tomorrow's close. Sidebar Figure 1, Column A, lists the dates and Column D lists the
closing prices (the Y variables) used for the forecasted close. ......
BY: Technical Analysis, Inc.

SIDEBAR: UNDERSTANDING STANDARD MATHEMATICAL SYMBOLS
ARTICLE SYNOPSIS ...UNDERSTANDING STANDARD
MATHEMATICAL SYMBOLS
It is inevitable that today's technician will encounter steps to calculating an indicator that uses standard
mathematical symbols that appear to be beyond simple arithmetic. In reality, these symbols are simply
shorthand notation for no more than basic arithmetic. The following is a guide and interpretation to
mathematical symbols commonly seen in STOCKS & COMMODITIES....
BY: Technical Analysis, Inc.

The Elapsed Time Calculator by Arthur A. Merrill, C.M.T.
ARTICLE SYNOPSIS ...The Elapsed Time Calculator
by Arthur A. Merrill, C.M.T.
Veteran technician Arthur Merrill explains how to derive the number of days, actual or calendar,
between two dates using a simple table and some elementary steps.
Do you need to know the number of calendar days between two dates? Do you need to know the
number of days to the expiration of a futures contract to calculate fair value? Do you need to know the
number of calendar days between two peaks or two troughs to estimate cycle length? Do you need to
know the number of days between two dates to calculate interest due?
If so, this tab...
BY: Arthur A. Merrill, C.M.T.

The Link Between Bonds And Commodities by John J. Murphy
ARTICLE SYNOPSIS ...The Link Between Bonds And Commodities
by John J. Murphy
Like a set of tumbling dominoes, intermarket analysis is based on the theory that one instrument affected
will in turn affect another. Technical pioneer John Murphy, best known for his trailblazing work in
technical analysis and intermarket analysis, explains how that interrelationship between bonds and
commodities works.
Intermarket analysis adds another layer to the work of the technician by considering activity in related
markets. Whereas traditional technical analysis treats each market separately, intermarket technical
analysis su...
BY: John J. Murphy

The Technical Song of Bernadette Murphy by Thom Hartle
ARTICLE SYNOPSIS ...The Technical Song of Bernadette Murphy by Thom Hartle
""The investor is in conflit, right now, because we've had the tremendous advance of consumer stocks
throughout the 1980s. What we have is this battle: Should you be following capital goods? Or should you
stay with growth stocks?""  Brernadette Murphy
Bernadette Murphy, C.M.T., of M. Kimelman & Co., who, like so many others, came to Wall Street out of
curiosity but never intended to stay, is a longtime veteran of the markets. She has seen fads take the
Street by storm and then promptly fade, and she's witnessed market peaks and crashes ...
BY: Thom HartleSUBJECT: Interview

Trading With The True Strength Index by William Blau
ARTICLE SYNOPSIS ...Trading With The True Strength Index
by William Blau
The true strength index, which was introduced late last year in these pages, may be considered to be a
cross between a relative strength indicator and a moving average convergence/divergence indicator with
many of the desirable properties from each. Creator William Blau, who introduced the indicator to S&C
readers last year, explains how to trade with the index.
The true strength index introduced in STOCKS & COMMODITIES November 1991 was discussed as a
smooth momentum indicator stripped of highfrequency noise useful for expressing the dir...
BY: William Blau

Using Probability Stops In Trading by Nauzer Balsara, Ph.D.
ARTICLE SYNOPSIS ...Using Probability Stops In Trading
by Nauzer Balsara, Ph.D.
Does controlling losses by using predetermined stoploss points help? To find out, Nauzer Balsara
selected randomly moving average crossover systems and ascertained the best stoploss points to use.
Then he tested the system over different data. We present his results.
The goal of risk management is conserving capital  getting out of a trade without incurring too much
of an unrealized loss. The question here is how much is too much? An unrealized loss arises during the
life of a trade, representing the difference between the curren...
BY: Nauzer J. Balsara, Ph.D.