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• Chi Squared by Arthur A. Merrill, C.M.T

  ARTICLE SYNOPSIS ...Chi Squared by Arthur A. Merrill, C.M.T. Just how meaningful are statistics? Arthur Merrill explains how to find out. If records show that market behavior exhibited more rises than declines at a certain time in the past, could it have been by chance? Yes. If a medicine produced cures more often than average, could it have been luck? If so, how meaningful is the record? To determine how meaningful a particular statistic is, statisticians set up ""confidence levels."" If the result in question could have occurred by chance once in 20 repetitions, you can have 95% confidence that the result is...

AUTHOR: Arthur A. Merrill, C.M.T.DATE: JAN1992SUBJECT: Indicators

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• Combining Sentiment Indicators For Timing Mutual Funds by Joe Duarte

  ARTICLE SYNOPSIS ...Combining Sentiment Indicators For Timing Mutual Funds by Joe Duarte Market sentiment can be useful in market timing, and mutual funds in particular. Here's a method in which a careful perusal of Investor's Intelligence, Market Vane and Barron's can help you predict the best times to buy. Market timing mutual fund purchases can be simplified by close observation of market sentiment. In his book Winning on Wall Street , technician Martin Zweig describes his use of sentiment indicators as predictors of future stock market direction. He describes two in detail: the 13-week moving average of the...

AUTHOR: Joe Duarte, M.D.DATE: JAN1992SUBJECT: Indicators

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• Equivolume Using A Spreadsheet Program by James Leahy

  ARTICLE SYNOPSIS ...Equivolume Using A Spreadsheet Program by James Leahy Equivolume charting, which permits plotting price movements vs. volume instead of time, can be plotted by hand or with one of several charting programs, but a plain spreadsheet program on your personal computer can do the job and lets you add your own indicators. This author shows you how. Equivolume charts, which were pioneered by Richard Arms, allow plotting price movements vs. volume instead of time as is usually done. The result of this graph is a rectangular box for each ""point"" plotted. The width of the box is represented relative...

AUTHOR: James LeahyDATE: JAN1992SUBJECT: Programming

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• Exponentially Smoothing The Daily Number of Declines

  ARTICLE SYNOPSIS ...Exponentially Smoothing The Daily Number of Declines This article presents an indicator that is the one-day rate of change of a triple exponential smoothing of the daily number of declines, an oscillator similar to TRIX (covered by Jack Hutson in the early years of STOCKS & COMMODITIES). Raff explains how the decline line, the number of stocks that have dropped in a given period (most often seen as a day), as the basis of this oscillator, could have warned of the impending stock market tumble in 1987. The method looks good -- but not good enough. It's deceptive: it works well enough, but in t...

AUTHOR: Technical Analysis, Inc.DATE: JAN1992SUBJECT: New Techniques

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• Futures According To Trend Tendency by E. Michael Poulos

  ARTICLE SYNOPSIS ...Futures According To Trend Tendency by E. Michael Poulos Not all markets have the same tendency to trend. E. Michael Poulos uses his February 1991 STOCK & COMMODITIES article, ""Of trends and random walks,"" on the random walk index, which separates trends from random drifts by allowing for trend, as the basis of this article. He explains that the commodity futures you may for one reason or another assume trend strongly may not in fact. By using similar methods as previously, he produces a table of 28 commodities futures and debunks some futures assumptions -- for instance, there is a school o...

AUTHOR: E. Michael PoulosDATE: JAN1992SUBJECT: Theory

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• SIDEBAR: MODIFYING RISK AND RETURN WITH S&P 500 FUTURES

  ARTICLE SYNOPSIS ...MODIFYING RISK AND RETURN WITH S&P 500 FUTURES Stock index futures modify risk by altering the portfolio beta and portfolio return by affecting cash balances. Take an example. A $10 million portfolio currently has a beta of 1.2. The manager wants to increase the beta to 1.4. How many S&P 500 contracts should he buy?...

AUTHOR: Technical Analysis, Inc.DATE: JAN1992

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• SIDEBAR: THE RANDOM WALK INDEX

  ARTICLE SYNOPSIS ...THE RANDOM WALK INDEX The channel height ratio to one day figures given show a consistent excess beyond the square root column. This excess indicates the presence of trends and hints how to create a trend ""yardstick."" If no trends were present, the ratios would be expected to all fall exactly on the square roots, and thus an ""expected random walk"" over n days would be the square root of n multiplied by the average daily range (same as average one-day channel height)....

AUTHOR: Technical Analysis, Inc.DATE: JAN1992

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• SIDEBAR: TRIPLE EXPONENTIALLY SMOOTHING A DATA SERIES

  ARTICLE SYNOPSIS ...TRIPLE EXPONENTIALLY SMOOTHING A DATA SERIES One purpose of triple exponentially smoothing a data series is to remove meaningless fluctuations from the data while maintaining the correct appraisal of the direction of the trend. This is accomplished by smoothing the data three times with an exponentially smoothed moving average (EMA) using the same constant for the smoothing factor each time. The definition of an EMA is: ......

AUTHOR: Technical Analysis, Inc.DATE: JAN1992

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• SIDEBAR: WRITING AND EXECUTING A SPREADSHEET MACRO

  ARTICLE SYNOPSIS ...WRITING AND EXECUTING A SPREADSHEET MACRO A macro is a series of commands or keystrokes that can be stored for use for repeated operations. For all popular spreadsheets, macros can take on two different forms. One is a series of keystrokes that can be recorded as you enter them. This set of keystrokes can be saved in the spreadsheet and assigned a name for later reference. This kind of macro is useful for keystroke actions that are frequently performed, such as setting up a page layout for printing or entering repeated formulas or data. The second kind of macro is a series of commands that al...

AUTHOR: Technical Analysis, Inc.DATE: JAN1992

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• Slippage Cost Of A Large Technical Trader by Thomas V. Greer, B. Wade Brorsen and Shi-Miin Liu

  ARTICLE SYNOPSIS ...Slippage Cost Of A Large Technical Trader by Thomas V. Greer, B. Wade Brorsen and Shi-Miin Liu If traders rely on technical trading systems, they need to know the size of slippage, which is the difference between estimated transaction costs and actual transaction costs. Authors Greer, Brorsen and Liu decided to use the trading record of a technically oriented money manager to determine slippage for the fund's transactions using 11 commodities and stop orders. Slippage, which is the difference between estimated transaction costs and actual transaction costs with the difference usually compose...

AUTHOR: Thomas V. Greer, B. Wade Brorsen and Shi-Miin LiuDATE: JAN1992

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• Testing Trading Rules Over Different Time Periods by John Sweeney

  ARTICLE SYNOPSIS ...Testing Trading Rules Over Different Time Periods by John Sweeney After two Sundays of dinking around (Settlement, STOCKS & COMMODITIES November and December 1991), I'd finally converted a chance idea to something with remotely promising prospects something on the order of a three-to-one return on margin. I'd done that by emulating the basic ideas in four trading rules (Figure 1) plus two stops. As has been my experience, the stops were the most effective in improving the results and the stops were selected by the maximum adverse excursion (MAE) analysis (Figure 2) to cut off the big losers w...

AUTHOR: John SweeneyDATE: JAN1992

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• The Gann Quarterly Chart by Jerry Favors

  ARTICLE SYNOPSIS ...The Gann Quarterly Chart by Jerry Favors Longtime newsletter publisher Jerry Favors introduces a long-term indicator called the Gann quarterly chart, which will signal a turn up from bear market lows when the Dow Jones Industrial Average (DJIA) rallies above the high reached in the previous quarter during the trading day and not the high reached at the close of the trading day, which is more customary. Bear markets occur when the previous quarter's intraday low is breached. This technique requires careful monitoring of the intraday highs and lows of the previous quarter. Favors points out tha...

AUTHOR: Jerry FavorsDATE: JAN1992

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• The Internal Dynamics of TRIN by Jack Rusin

  ARTICLE SYNOPSIS ...The Internal Dynamics of TRIN by Jack Rusin Consider four simplified trading days on the New York Stock Exchange: Day 1: 1000 issues advance, 100 decline, with 1,000,000 shares up volume and 100,000 shares down volume. TRIN = (1000/100)/(1,000,000 /100,000) = 10/10 =1.00. Day 2: 100 issues advance, 1000 issues decline, with 100,000 shares up volume and 1,000,000 shares down volume. TRIN = (100/1000)/(100,000/1,000,000) = 0.1/0.1 = 1.00. Day 3: 1000 issues advance, 100 decline, with 1,000,000 shares up volume and 200,000 shares down volume. TRIN = (1000/100)/(1,000,000/200,000) = 10/5 = 2.0...

AUTHOR: Jack RusinDATE: JAN1992

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• Using Futures And Options to Reshape Portfolio Risk by Jean-Olivier Fraisse, C.F.A.

  ARTICLE SYNOPSIS ...Using Futures And Options to Reshape Portfolio Risk by Jean-Olivier Fraisse, C.F.A. Portfolio management at its simplest is finding the highest possible return while limiting the risk involved. Because economic conditions constantly change, keeping to this goal requires moving assets in and out of the portfolio -- a time consuming and (worse) costly procedure. The goal can be reached without the tedious reshuffling, this writer says, if stock index futures and options are used. Fraisse uses Standard & Poor's 500 index futures contracts as a tool with which to quickly increase a portfolio's exp...

AUTHOR: Jean-Olivier Fraisse, C.F.A.DATE: JAN1992