STOCKS & COMMODITIES magazine. The Traders' Magazine

Article Archive For JAN1993

  • Commercial Floor Traders Identify Value by Donald L. Jones

    ARTICLE SYNOPSIS ...Commercial Floor Traders Identify Value by Donald L. Jones STOCKS & COMMODITIES contributor Donald Jones presents the use of Liquidity Data Bank (otherwise known as Market Profile) to analyze the futures market by studying commercial activity. A commodity's value is the attribute that all trading methods seek to identify. The fundamentalist is clearest about it: Isolate all the economic factors, weight them and combine them to grab the prize: value. Technical analysts use price (and sometimes volume and open interest) to develop trading models -- implicity equating some type of smoothed pri...

  • Gold And The DJIA by Richard C. Forest

    ARTICLE SYNOPSIS ...Gold And The DJIA by Richard C. Forest Gold has its own cycles. How best to interpret them? STOCKS & COMMODITIES contributor Richard Forest illustrates that gold cycles can be best understood when analyzed and compared to the DOW Jones Industrial Average (DJIA). Here's why. Gold cycles have their own unique rhythm, sometimes not immediately recognizable. They can, however, be understood when analyzed and compared with the Dow Jones Industrial Average (DJIA). Gold can sometimes forewarn of a market rally or correction and gold cycles are influenced by cycles of the DJIA, perhaps because of ...

  • Momentum And The S&P 500 by Michael Oliver and Gary Esayian

    ARTICLE SYNOPSIS ...Momentum And The S&P 500 by Michael Oliver and Gary Esayian As applied to market action, momentum is generally confined to some limited role such as measuring the relationship between moving averages. But momentum can be much more. Michael Oliver and Gary Esayian explain. Momentum, the relative change in price over a specified time, can be used as a methodology of sorts for market analysis. Momentum provides a measure of insight that goes far beyond simple price confirmation. Price can be considered to be the veneer of a market, the side that is clearly visible to the public. Beneath the s...

  • Philip Roth of Dean Witter by Thom Hartle

    ARTICLE SYNOPSIS ...Philip Roth of Dean Witter by Thom Hartle A 27-year veteran of Wall Street, Dean Witter chief technical market analyst Philip Roth has also been a survivor of the merger and acquisitions merry-go-round. After working for Merrill Lynch, Roth worked first for Loeb Rhoades and then E.F. Hutton, both of which were acquired by Shearson over the years, gaining from his experiences a unique perspective of an institutional emphasis compared with a retail emphasis. STOCKS & COMMODITIES Editor Thom Hartle spoke with Phil Roth on October 21, 1992, via telephone, discussing among other topics analyzing t...

  • Point & Figure Charting by Gary Van Powell

    ARTICLE SYNOPSIS ...Point & Figure Charting by Gary Van Powell Point and figure charting, a technique for following stocks and commodities, may be simplistic but still offers the keys to success: trend identification, price objectives and money management, all of which it provides. Using point and figure, also known as the price reversal method, is an excellent way to identify reliable buy or sell signals for trading individual stocks. Point and figure charts are designed to remove market noise, thus allowing the market participant to trade the real moves, leaving the insignificant moves to the short-term tr...

  • Risk Assessment For Security Analysis by Lloyd Silver

    ARTICLE SYNOPSIS ...Risk Assessment For Security Analysis by Lloyd Silver Assessing the risk in a security is an essential part of the investment process. Here, then, are the advantages and disadvantages of two common risk measures: variance and beta. Further, Lloyd Silver introduces a relatively unknown, yet effective, risk measure called lower partial moment and finishes with a method of comparing securities. Before discussing how to measure risk in a security, it is important to explain exactly what risk is and why it is important to the investment process. Three possible conditions are present when foreca...

  • SIDEBAR: Calculating Momentum

    ARTICLE SYNOPSIS ...CALCULATING MOMENTUM Momentum is traditionally calculated as the difference between the price today and the price n days ago. The method presented here substitutes for the price n days ago an average of the previous three period's high, low and closing prices. ......

  • SIDEBAR: SOURCES OF RISK IN A SECURITY

    ARTICLE SYNOPSIS ...SOURCES OF RISK IN A SECURITY Sources such as: Business risk: The degree of uncertainty associated with an investment's earnings and the investment's ability to pay investors the returns owed them....

  • SIDEBAR: STOCHASTICS MOMENTUM INDEX

    ARTICLE SYNOPSIS ...STOCHASTICS MOMENTUM INDEX The spreadsheet features in sidebar Figure 1 an example of calculating the stochastics momentum index (SMI) for a lookback period of two days (q = 2) and a double smoothing of 20 days (r = 20, s = 20) using an exponential smoothed moving average (EMA). The first step is determine the highest high for the last two days, which is column E. The formula for cell E21 is: =MAX(B20:B21) Then determine the lowest low for the last two days. This is performed in column F. The formula for F21 is: =MIN (C20:C21) ......

  • SIDEBAR: TRUE STRENGTH INDEX

    ARTICLE SYNOPSIS ...TRUE STRENGTH INDEX The formula for the true strength index is ... where: Mtm= one-day change in closing price Mtm| = absolute value of Mtm Er = exponential smoothed moving average of r days Es = exponential smoothed moving average of s days .......

  • Spectral Forecasting And The Financial Markets by Denis Ridley, Ph.D..

    ARTICLE SYNOPSIS ...Spectral Forecasting And The Financial Markets by Denis Ridley, PhD. Ever considered spectral wave analysis to determine cycles in the stock market? Denis Ridley tells you how. As a rule, the financial markets are not easy to forecast. While forecasting every future value of the index is not a reasonable objective, predicting sharp changes in very short-term trends is useful for trading, and that is really all that should matter to the trader. While we cannot and will not prove or disprove the random walk theory, we will look at some predictable elements that do exist in the DJIA and are o...

  • Stochastic Momentum by William Blau

    ARTICLE SYNOPSIS ...Stochastic Momentum by William Blau A new twist on the venerable stochastic formula was presented in a January 1991 article, ""Double-smoothed stochastics,"" written by William Blau. Here, Blau expounds on stochastic double smoothing in a somewhat different form that emphasizes momentum characteristics. Double smoothing of both numerator and denominator of the original formula for %K of the stochastic indicator aids in obtaining low-lag smooth-contoured indicator curves. In lieu of a single parameter to specify the stochastic, the Ds-stochastic formulation provides an additional two parame...

  • The Stock/Bond Yield Gap by Jay Kaeppel

    ARTICLE SYNOPSIS ...The Stock/Bond Yield Gap by Jay Kaeppel STOCKS & COMMODITIES contributor Jay Kaeppel presents an indicator using the yield for high-grade corporate bonds and the yield for the DJIA to predict the stock market. Investors have often wondered if some significant information could be gleaned from comparing yields on stocks to yields on bonds. In theory, at least, it would seem to make sense that if bond yields were much higher than stock yields, then investment dollars would be drawn to bonds and away from stocks, thus having a negative effect on stock prices. Likewise, if the difference betwe...

  • The Volume Oscillator by Martin Pring

    ARTICLE SYNOPSIS ...The Volume Oscillator by Martin Pring Price and volume is important for technical analysis of markets. Here's how noted author and technician Martin Pring presents two of his favorite ways of looking at volume. Most technical indicators we deal with are derived from price data. After all, moving averages, relative strength index (RSI) and moving average convergence/divergence (MACD) as well as all the others are really techniques for manipulating the same data but in different forms. That is why it is often a good idea to also monitor some measure of volume, as volume is a variable that is...

  • Traders' Tips

    ARTICLE SYNOPSIS ...TRADERS' TIPS METASTOCK To recreate the stochastic momentum index, explained this month by William Blau, in MetaStock Professional, plot the custom formula (remember, this should all be on one line): SMI(13,25,2) 100*(mov(mov(C-(0.5*(hhv(H,13)+llv(L,13))),25,E),2,E)/(0.5*mov(mov(hhv(H,13)-llv(L,13),25,E),2,E))) The parameters can be changed to any values desired. The moving average menu may be used to plot a signal line as mentioned in Blau's article. After plotting the SMI, press [M] to access the moving average menu. Select an exponential moving average of the indicator. Choose whatever...







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