STOCKS & COMMODITIES magazine. The Traders' Magazine

Article Archive For JAN1990

  • Elliott Wave dilemma: Bull or bear market? by C. R. MacDowell

    ARTICLE SYNOPSIS ...Elliott Wave dilemma: Bull or bear market? by C. R. MacDowell The Elliott Wave Theory, while complex and subject to individual interpretation, offers a powerful means of putting the overall market developments into reasonable perspective and provides some guidance for what to expect of the future direction of the market as well as the possible extent of its moves. In mid-October 1989, the stock market was at a critical juncture but subject to two contrary wave theory interpretations. Elliott Wave Theory is a pattern-recognition technique published by Ralph Nelson Elliott in 1939 which holds ...

  • Enhancing index stock portfolios with futures by Donald L. Jones and Timothy L. Walsh

    ARTICLE SYNOPSIS ...Enhancing index stock portfolios with futures by Donald L. Jones and Timothy L. Walsh The benefits of diversification are well known: most investment managers diversify by including bonds and cash in a stock portfolio already diversified across many industry groups. Less well known is the fact that managed commodity futures portfolios are an attractive diversification candidate that can lead to a disproportionately large increase in return while simultaneously reducing risk. Thus, stock portfolio managers, regardless of their degree of risk-aversion, should consider futures to improve the ret...

  • Fund managers' performance by Arthur Merrill, C.M.T.

    ARTICLE SYNOPSIS ...Fund managers' performance by Arthur Merrill, C.M.T. Should we monitor the actions of mutual fund managers? They are paid a salary to do a better job of investing than the common man. While some managers may not live up to expectations, on the average, they should be labeled ""smart money."" The Investment Company Institute, which represents more than 90% of the funds, reports monthly. You can subscribe to their detailed report or note the ""Mutual fund monthly indicators"" summary in Barron's Index of Statistics. The indicators I will discuss in this article are derived from seven figures: ...

  • Increasing OBV reliability with stock index futures by Gerald Appel

    ARTICLE SYNOPSIS ...Increasing OBV reliability with stock index futures by Gerald Appel Traders have used volume pattern recognition techniques in an attempt to forecast price movement probably for as long as records regarding trading volume have been maintained. As a general rule, a market is considered bullish when it rises on increasing volume and declines on decreasing volume, and bearish when it advances on lighter volume and declines on heavier volume. Unfortunately, such rules are somewhat simplistic and subject to many exceptions. For example, a situation where volume is diminishing as markets are advan...

Letters To S&C

  • Put-call sentiment indicator by Robert R. Prechter and David A. Allman

    ARTICLE SYNOPSIS ...Put-call sentiment indicator by Robert R. Prechter and David A. Allman Put/call ratios based on volume and dollar value have been widely used by technicians (see ""Option premiums,"" Stocks & Commodities, December 1989). A third approach has been substantially overlooked. Since the Standard & Poor's 100-Stock Index (OEX) was introduced in March 1983 for the purpose of trading options on a market index, we have kept a ratio of the open interest on OEX puts vs. calls. We have found that a 10-day moving average of that ratio appears to be a substantive market indicator. It produces less erratic ...

  • SIDEBAR: Stochastic oscillator by Mike Takano

    ARTICLE SYNOPSIS ...Stochastic oscillator by Mike Takano The stochastic oscillator is used to indicate overbought or oversold conditions on a scale of zero to 100%. The stochastic process is based on the observation that as price decreases, the daily closes tend to accumulate nearer the extreme lows of the daily range Likewise, as price increases, the daily closes tend to accumulate closer to the extreme highs of the daily range. This concept also holds for monthly, weekly or even intraday time frames. Stochastics produces two oscillating lines--%K and %D. The %K line, also referred to as the stochastic ""raw v...

  • Stochastics and long-term trends by Thom Hartle

    ARTICLE SYNOPSIS ...Stochastics and long-term trends by Thom Hartle The price of the bond futures market reacts to changing fundamentals that are global in nature and very complicated--Foreign Central banks' policy on the exchange rate for the dollar, the rate of money supply growth in the United States, the employment situation, our fiscal policy, growth in the import and export sector, the Japanese stock market, the price of oil, international political tensions, just to name a few of the fundamentals ! Day in and day out the marketplace analyzes, discusses, researches and acts on these fundamentals and more. ...

  • Stock timing to the discount rates by Jay Kaeppel

    ARTICLE SYNOPSIS ...Stock timing to the discount rates by Jay Kaeppel The course and direction of interest rates have long had a direct and often profound effect on the course of stock prices. When interest rates are rising, investors tend to turn away from the stock market and lean more towards interest-bearing investments, such as Certificates of Deposits and Treasury bills. However, when interest rates begin to decline, investors look to the stock market as an avenue to increase their returns, as the returns on their interest-bearing investments decline. One of the most useful interest rate measures is the Fe...

  • Successfully trading currency options by Thomas J. Dorsey

    ARTICLE SYNOPSIS ...Successfully trading currency options by Thomas J. Dorsey Many people equate the options market with gambling in a Las Vegas casino. Many investors do experience losses trading options, but their losses are usually due to both an abuse of leverage and little understanding of the role that the underlying currency plays in the equation. To make money trading currency options, you first must be successful trading the underlying currency. Reversing this order will surely lead to financial disaster. Comparing currency trading to gambling in Las Vegas is the same as comparing speculation to gambli...

  • Trading five-wave reversals by Dan Akin Dimock

    ARTICLE SYNOPSIS ...Trading five-wave reversals by Dan Akin Dimock Where is the best place to enter a trading or longer-term investment position within the entire five waves up/three waves down cycle of any market? How is the starting point recognized before the action begins? The Elliott Wave Theory may provide the answers. Let's not kid ourselves. Trading is extremely risky. What method, other than Elliott Wave, provides error recognition by allowing the trader to know in advance what sequential events must follow for the trade to be successful and, by their failure to occur, alerts the trader to exit the tra...

  • Trading volatility by Andrew Sterge

    ARTICLE SYNOPSIS ...Trading volatility by Andrew Sterge In the winter and spring of 1989, I made a series of Eurodollar options trades which show the logic of ""trading volatility."" This sort of trading is the bread and butter of many institutional traders, that is to say, large, well-financed traders. Understanding what such traders do is vital to an independent trader. One of the first things to understand about volatility is that it does not exhibit long trends like some common stocks but is more cyclical (or ""mean reverting"") in nature. Thus, extremes in volatility are more likely opportunities to fade th...

  • Unchanged stocks by Charles A. Jaffe

    ARTICLE SYNOPSIS ...Unchanged stocks by Charles A. Jaffe Investors and the media focus on the winners and losers in the stock market. Issues that stand still are not only boring, but their inactivity is seldom a signal for anything. Or is it? Last summer, Anthony W. Tabell of the Princeton, New Jersey-based Delafield, Harvey, Tabell Inc. was struck by the fact that, on many days, more than 500 issues on the New York Stock Exchange (NYSE) were closing unchanged. Intrigued by the round number 500 and the fact that he couldn't remember, even from his younger days, such a high percentage of stocks not moving, Tabell...







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