ARTICLE SYNOPSIS ...Advance-decline divergence as an oscillator by Arthur A. Merrill Which indicators signaled the crash last October? One that had been shouting a warning was A-D Divergence. This is one of our most venerable indicators. The Advance-Decline Divergence Oscillator (ADDO) is a recent refinement. A-D, advance minus decline, was first suggested by Col. Leonard Ayers of the Cleveland Trust Company in 1926. He was searching for a way to locate buying and selling climaxes. The indicator is a simple cumulation of the difference between the number of stocks advancing or declining in a day. This indicato...
BY: Arthur A. Merrill, C.M.T.
ARTICLE SYNOPSIS ...Behavior of the Standard & Poor's 500 Stock Index by Cliff Sherry, Ph.D. Is it stationary, random or independent? Editor's note: In preparing for magazine publication, this article has been heavily condensed. Some insights that were peripheral to the S&P's characteristics were deleted as were most comments on statistical technique. Readers can find many technical details in previous S&C articles by Dr. Sherry. Details of Dr. Sherry's calculations are available from him at (409) 823-0618 Standard & Poor's 500 Stock Index is important for a number of reasons. First it is used as a gauge of ge...
BY: Clifford J. Sherry, Ph.D.
ARTICLE SYNOPSIS ...Day trading and short-term trading techniques Part 2 by Kent Calhoun In my three years of day trading markets in Chicago, not one person who opened an account strictly for day trading purposes lasted more than six months. Yet, the most successful traders held positions for a short-term period. Many people were good day traders but commissions and market slippage eventually took their toll. Consider the type of trading you will pursue to achieve commodity profits. The day trader and short-term trader, especially, must contend with significant physical and psychological adjustments. To me, th...
BY: Kent Calhoun
ARTICLE SYNOPSIS ...Finishing DMI calculations Part 9 by Jim Summers, Ph.D. Having completed the lengthiest formulas that J. Welles Wilder developed in his Directional Movement Index (DMI) system, in this issue we'll complete the calculations for the basic DMI system. Future enhancements to the system will illustrate the customization power of Lotus 1-2-3. The formulas we've already developed calculate the daily true range and the amount of daily +/- directional movement. Wilder calculates a 14-day moving average for each--the choice of 14 represents his sense of an average half-cycle period for the contracts he...
BY: Jim Summers, Ph.D.
ARTICLE SYNOPSIS ...Intraday trading techniques by John W. Labuszewski and John E. Nyhoff Many analysts find that the charting techniques that they rely on for inter-day trading are somewhat less useful on an intraday basis. As a result, these analysts often rely on other charting methods, including point and figure charting and ""pivot point analysis."" Point and figure charting Point and figure charting is a frequently referenced charting technique which may be used to plot price fluctuations on an interday or an intraday basis. For our purposes, however, we will restrict our consideration to intraday data. ...
BY: John W. Labuszewski and John E. Nyhoff
ARTICLE SYNOPSIS ...Letters To S&C Technical analysis software Editor, I have an Apple II/e with dual disk drive and an Epson printer, and am very interested in your software for charting markets. However, I am very unfamiliar with the graphics tool kit and 5-inch disk format that you mentioned in your current issue. I have Appleworks and would like to know how, if possible, I could create a graph with data from the spreadsheet. If you can help me with my obvious dilemma, I would indeed be highly grateful. GLENN ZACHER Dublin, CA Technical Analysis Charts? is for the Apple 11 series of computers with a min...
BY: Technical Analysis, Inc.
ARTICLE SYNOPSIS ...MACD momentum Part 2 by Thomas Aspray Last month I looked at how the MACD Momentum (MACD-Mo) and MACD Histogram (MACD-H) were excellent intermediate indicators for stocks as well as commodities. I also use the MACD-Mo and MACD-H on daily data, but the rules of interpretation and timing with the daily studies are somewhat different. In this article I will concentrate on daily activity in many of the major markets to help you utilize MACD studies in your own analysis. To utilize the MACD studies on daily data, it is imperative that you study the intermediate trend as determined by weekly indic...
BY: Thomas Aspray
ARTICLE SYNOPSIS ...Peak performance in volatile markets Part 2 by Susan Arenson and Neal Weintraub In any area of pursuit, setting goals can give you a greater sense of direction, help you feel more productive, better mobilize your efforts and direct your attention to the task at hand. When you set trading goals you not only reinforce your persistence in developing trading skills, but you may decrease your trading anxiety because you are focusing on learning to become a more disciplined trader rather than on a mega-bucks outcome. You can use the following guidelines to set your trading goals: - Set performanc...
BY: Susan Arenson and Neal Weintraub
ARTICLE SYNOPSIS ...Planetary analysis by Bill Meridian Little do managers of the nation's financial institutions and brokerage houses know but there is a strong underground of astrological and astrophysical analysts in their companies. Since publishing our first article in this area (see March and October 1987, Stocks & Commodities), a number of them have written to tell what they really use to come up with their recommendations. One who was with a brokerage at the time volunteered to write this instructional article under a pseudonym -- Editor Many technicians have followed the market's trail of bread crumbs t...
BY: Bill Meridian
ARTICLE SYNOPSIS ...Playing the opening range breakout Part 1 by Toby Crabel Opening range breakout is one of the most important indicators of daily market direction that a trader can utilize. An opening range breakout (ORB) is a trade taken at a predetermined amount above or below the opening range. When the predetermined amount (the ""stretch"") is computed, a buy stop is placed that amount above the high of the opening range and a sell stop is placed the same amount below the low of the opening range. The first stop that is traded is the position and the other stop is a protective stop. The stretch is deter...
BY: Toby Crabel
ARTICLE SYNOPSIS ...Money supply and the S&P 500 I suspect most economists would say that M2 money supply and the S&P 500 are independent of each other. Here is evidence that there are significant serial dependencies between these two important time series. For illustration, trigger the collection of data in the histogram on a large increase (a '3') in money supply. Collect in the histogram, the first sequential large decrease (a '1') to occur in S&P 500 after the trigger (Article Figure 9). If these two time series were independent of each other, the distribution of 1s in this histogram should be evenly distri...
BY: Technical Analysis, Inc.
ARTICLE SYNOPSIS ...Other Research There are at least two reasons why other researchers have not found the significant dependencies described here and in the October 1987 S&C article on money supply. First, most of the other workers in this area have used either serial or auto correlation or runs tests (see for example, P. Cottner, Random Character of Stock Market Prices, MIT Press, 1964). As I pointed out in the April 1988 S&C issue, there are some significant problems associated with using correlation techniques on this data. Further, correlation only tests for one form of serial dependency -- there are other ...
BY: Technical Analysis, Inc.
ARTICLE SYNOPSIS ...The trade facilitation factor by Donald L. Jones A cardinal rule for traders using the Chicago Board of Trade's daily Liquidity Data Bank report is to avoid markets that are not ""facilitating"" trade. Over a period of days, such markets are characterized by decreasing volume, a narrowing of the trading range and an increasing number of Time-Price Opportunities (TPOs) per tick. Sometimes market changes are gradual; so gradual, in fact, that even an expert might have trouble recognizing the shift from trade facilitation to non-facilitation. For the average trader who must distill a market ove...
BY: Donald L. Jones