Technical Analysis Explained
Page 55
Average/mean average, 209–210. See also Moving averages (MAs)
B
Bar charts
candlestick charts versus, 340, 341
gaps on, 174
versus line or close-only charts, 73–74
point and figure charts versus, 373, SG:115, SG:117
Barclay’s 20+ Government Bond ETF, 464
Barclay’s 20+-year Treasury bond ETF, 453
Barclay’s 20-Year Trust ETF (TLT), 600–601, 619–620, 621
Barclay’s Aggregate Bond ETF, 453
Barclay’s Capital Global Treasury Ex-U.S. Capped Index, 453
Barclay’s iPath India ETF, 273, 274
Barrick Gold, 203
Bars, as emotional points, 60
Bartels test of probability, 507
Batra, Ravi, 648
Bear markets
broadening formations, 155, 156
exhaustion bars, 203
50 percent rule, 384, 385
flags, 167
inside bars, 194
interest rate trends, 658–660
international, 699
key reversal bars, 201
outside bars, 188
Pinocchio bars, 206
primary, 31
rallies, 51–53
reversal from bear to bull market, 48–49
reversal from bull to bear market, 47–48
rounding tops, 111, 173–174
seasonal (diffusion) momentum, 586–588
sector rotation, 460, SG:140, SG:143
secular trends, 476–481, 486, SG:146, SG:149
speed resistance lines, 388
stock selection in bear market lows, 682–687
two-bar reversal, 197–198
Belt-hold lines (Yorikiri), 344–346, SG:110–111, SG:114
Bestselling books, contrary opinion, 648
Boeing, 63, 382
Boesky, Ivan, 634
Bollinger, John, 238n, 238–244, 240
Bollinger bands, 238–244
characteristics, 238–240, SG:78–79, SG:81
Know Sure Thing (KST), 243–244
rules for interpretation, 240–244
Bolton, Hamilton, 562
Bombay Stock Exchange FMG Index, 2001–2009 Special K interpretation, 329–330
Bond markets
bond yields versus bond prices, 655–656
in business cycle, 20–23, SG:9, SG:10, SG:13
combining oscillator with moving average, 724–728
confidence measures, 607–609, SG:177, SG:178, SG:180
contrary opinion, 642–643, 649–651
15-minute bar, 181, 182
high-yield versus government bonds, 600–604
historical perspective, 492–495
long-term interest rates, 670–672, SG:194, SG:195
market experience, 1966-2001, 25–28
market indexes, 453
sectors, 656–657, SG:194, SG:196
secular trends, 472–474, 483–484, 492–495, 496–498
sentiment indicators, 617–620
structure of debt markets, 656–657
technical analysis of long-term interest rates, 670–672
yield reversals, 492–495
Bottoms
bear market, 586–588
characteristics of primary market bottoms, 747–751
double, 149–152, SG:50, SG:54, SG:56, SG:58
head and shoulders (H&S), 142–143, SG:54, SG:58
point and figure price patterns, 279, 378–380
saucers, 172–174, 379, SG:61, SG:64
stock selection in bear market lows, 682–687
top/bottom reversals, 115, 116
triple, 149, 151
volume indicators, 109, 111, 112
Brazilian Bovespa
1995–2009 and envelopes, 237–238
1999–2000 A/D line, 708–708
2006–2008, price versus volume indicator, 542
2008–2009 breadth indicator, 709
Breadth momentum
price momentum versus, 247, SG:84, SG:86, SG:89
See also Market breadth
Breadth oscillators, 247, 571–575
McClellan Oscillator, 573–575, SG:170, SG:173
ten- and thirty-day A/D oscillators, 572–573
ten-week A/D oscillator, 571–572
Breakaway gaps, 175–178, SG:62, SG:64
Breakouts
breakaway gaps, 175–178, SG:62, SG:64
flag, 167–168
rectangle, 119–121, 123, SG:53, SG:58
triangle, 159
unknown direction, SG:52, SG:54, SG:57, SG:58
valid, 129–138, SG:53, SG:58
British Pound System, 729–733
Broadening formations, 152–158, SG:52, SG:57
failure, 154, 155
orthodox broadening top, 155, 157
right-angled, 152–155
wedge, 155, 156, 157
Broadvision, 371–372
Brokers
brokerage industry at bear market lows, 682–687
as market leaders, 604–607, SG:177–178, SG:180
sector rotation, 459
Brookline Bancorp, 293, 294
Brown, E. H. Phelps, 471
Bull markets
broadening formations, 155, 157
debt and equity markets, 657–658
exhaustion bars, 203
50 percent rule, 384, 385–386
flags, 166–167
gaps, 177
inside bars, 194
interest rate trends, 657–658
key reversal bar, 202
outside bars, 188
Pinocchio bars, 206
primary. See Primary bull markets
reversal from bear to bull market, 48–49
reversal from bull to bear market, 47–48
seasonal (diffusion) momentum, 588–589, SG:169–174
secondary reactions, 51
sector rotation, 460, SG:140, SG:143
secular trends, 485–489, SG:146–147, SG:149–150
speed resistance lines, 386–388
two-bar reversal, 197
Business cycle, SG:9–14
change in cycle to select stocks, 687–690
defined, 18
duration, 19, 315
idealized, 18, 20
inflation/deflation and, 464–467, SG:141, SG:143
market movements and, 18–23, SG:9, SG:13
sector rotations, 460–461, 464–467, SG:140, SG:143
secular equity bear market, 479
stages, 22–23, SG:11, SG:14
Business Cycles (Schumpeter), 504–505
Buy signals, Special K in generating, 333–334
Buy-hold approach, 674, SG:197, SG:201
Buying climax, 540, SG:44, SG:46, SG:164, SG:168
C
Canada, 696
Canadian dollar/U.S. dollar cross, 230, 231
Cancellations, valid breakouts, 131–132
Candlestick charts, 340–372, SG:107–114
bar charts versus, 340, 341
belt-hold lines (Yorikiri), 344–346, SG:110–111, SG:114
construction, 113, 340–343, SG:107, SG:113
counterattack/meeting lines (Deai Sen/Gyakushu Sen), 360–361, SG:107, SG:110, SG:113, SG:114
dark cloud cover (Kabuse), 347–349, SG:109, SG:111, SG:113, SG:114
doji, 343, 344, SG:107, SG:113
engulfing pattern (Tsutsumi), 349–351, SG:107, SG:108, SG:113
formats, 343
hammers (Takuri), 346–347, SG:108, SG:111, SG:113, SG:114
hanging men (Kubitsuri), 346–347
harami lines (Yose), 362–364, SG:110–111, SG:114
piercing line (Kirikorni), 349, SG:110–111, SG:114
real bodies, 341, 342–343
rising and falling three methods, 364–365, 366
shadows/wicks, 342–343
spinning top, 343–344
stars (Hoshi), 351�
��356, SG:109, SG:113
technical principle, 342
three black crows (Sanba Garasu), 357
tower tops and bottoms, 361–362, 363
tweezer tops and bottoms (Kenuki), 357–360, SG:110, SG:114
umbrella line, 344
upside and downside gaps (Tasuki), 365–367
upside gap two crows (Narabi Kuro), 357
volume charts, 369–372, SG:109, SG:113
Western techniques and, 368–372, SG:110, SG:113
windows (Ku), 365, 366, 367, SG:110–111, SG:114
Carrying cost, of spreads, 422
Cash Euroyen, 1999-2000 moving averages, 221
Caterpillar, 286, 287
Chaikin Money Flow (CMF) indicator, 544–547, SG:163, SG:167
Chande, Tushar, 289
Chande Momentum Oscillator (CMO), 289–291, SG:92, SG:93, SG:95
1989–2001 Dow Jones Transportation Average, 423, 426
characteristics, 289
interpretation, 289–291
origins, 289
Chemed, 680
Chicago Board Options Exchange (CBOE), 629
China ETF (FXI), 79, 80
Chronological factors
in peak-and-trough progression, 747, 751
See also Time frames/spans
Churning action, 109
Ciena, 346, 347
Citrix Systeme, 543–544
Close-only charts
versus bar or line charts, 73–74
line charts, 375
simple moving average (SMA), 215–216
CMO. See Chande Momentum Oscillator (CMO)
Coal, 61, 62
Coca-Cola, 674–676
Cocoa, 191, 192
Coeur D’Alene Mines, 678, 679
Colby, Robert W., 301, 436n
Columbia Energy, 540, 541
Cominco, 674, 675
Commerce Department Capacity Utilization Index, 663
Commercial paper, 734–735
Commodity markets
bond yields versus commodity prices, 484, 607–609, SG:178, SG:180
in business cycle, 20–23, SG:9, SG:10, SG:13
confidence measures, 607–609, SG:178, SG:180
consumer staple/food confidence models, 594–600
contrary opinion, 642–643
historical perspective, 482–483, 489–490
market experience, 1966-2001, 25–28
market indexes, 453–454
relative strength (RS), 402, 403
secular trends, 472–474, 480–483, 484, 489–492
spreads, 402
trend reversals, 489–492
Common gaps, 175
Common sense, 14
Commonality, principle of, SG:101, SG:106
Complex divergences, 267–269, 270
Composite market indexes, 432–443, 448–452
Computer hardware, 467, 688–690
Conference Board Leading Indicators, 663
Confidence, 593–609, SG:175–180
brokers as market leaders, 604–607, SG:177–178, SG:180
consumer staple/food models, 594–600, SG:175–177, SG:179
group rotation cycle, 461
high-yield versus government bonds, 600–604, SG:177, SG:180
inflation-protected versus regular bonds as commodity barometer, 607–609
technical principle, 593
Confirmation, of change in trend, 223
Consolidation patterns
broadening formations, 154, 155
defined, 120
rectangle, 120–122, SG:53, SG:57
trendline, 74–78
Consumer Price Index (CPI), 438, 440, 476
Consumer staples, 521, 594–600, SG:153, SG:156, SG:175–177, SG:179
Continuation gaps, 178–179, SG:62, SG:64
Continuation patterns
candlestick chart, 364–367
defined, 120
head-and-shoulders formation, 143, 144
rectangle, 120–122
trendline, 74–78
Contrary opinion, 635–652, SG:187–192
applying technical analysis, 649–651
crowd irrationality, 637–639
defined, 635–637
determining crowd position, 641
difficulty of going contrary, 640–641, SG:188, SG:191
extremes, 643–649, SG:188–189, SG:191
forming alternative scenarios, 641–643
short-term versus long-term turning points, 651–652
technical principles, 637, 639
Convergence
moving average, 221–222, SG:73, SG:75
symmetrical triangle, 158
Coors, 102, 103
Copper, 120, 121, 153, 154, 318–319, SG:29, SG:31
Coppock, E. S. C., 277, 278
Coppock Indicator, 277, 278
Corporate profits, interest rate impact on, 654–655
Corrective fan principle, 89–90, SG:36, SG:40
Count method, 378–380
Counterattack lines (Deai Sen), 114, 360–361, SG:110
Cowles Commission Index, 480–481
Crash of 1929–1932, 499, 522, 660
Crash of 1987, 522, 660, 695, 722, SG:204, SG:207
CRB Composite, 124, 125
1983–2012, Special K versus, 327, 328, 329
1999–2012, Special K versus, 329–331
2000–2003, KST Special K relationship, 331, 332
CRB Spot Raw Industrial Commodity Index, 25–28, 298, 299, 453, 464, 466, 480–481, 582, 607–609, 647, 663
CRB Spot Raw Industrial Materials Index, 718, 719
Crossovers
defined, 213
directional movement system, 336–337, SG:99, SG:105
moving average, 213–216, 217, 230, 275, 276, 405–407, 408, SG:72, SG:75, SG:147, SG:150
price momentum, SG:87, SG:90
price momentum equilibrium crossovers, 273–275
price momentum overbought/oversold re-crossovers, 257
stochastic, 303, 304, 309
Crowds. See Contrary opinion
Crude oil, 294–295
Cumulative Net New High, 174, 576–577, SG:171
Cup with handle, 161–164
Currency market, relative strength (RS), 402
Cycle factors, in peak-and-trough progression, 747, 751
Cycles, 499–519, SG:151–159
cycle highs, 525, 529–530, SG:157–158, SG:159
cycle lows, 525–526, 529–530, SG:157, SG:159
decennial pattern, 509–514
defined, 525–526, SG:157, SG:159
18-year, 506–507
Elliott wave principle, 755–759
4-year/Kitchin/41-month, 501, 504, 505, 514–517, 696–698, SG:151, SG:152, SG:155, SG:156, SG:203, SG:205, SG:207
importance, 499
Kondratieff wave, 471–474, 505, SG:145–146, SG:149, SG:151, SG:155
magnitude failure, 503–504, SG:152, SG:155
methods of detection, 527–529
9.2-year, 505, 507–509
presidential, 517–519
principal of commonality, 502–503
principles, 526
17.5-year, 507, 508
summation, 504, SG:152, SG:155
technical principles, 500, 501, 502
See also Bear markets; Bull markets; Business cycle; Market cycle model
D
Dark cloud cover (Kabuse), 347–349, SG:109, SG:111, SG:113, SG:114
DAX Index, 707
Days-of-the-week cycles, 522–523
DB Commodity Fund, 453–454
Decennial pattern, 509–514
Definitive Guide to Momentum Indicators (Pring), 248, 279, 335
Deflation Index, 464–467, SG:141, SG:143
Delayed ending patterns, 379
Demand Index, 543–544, SG:162–163, SG:167
Dewey, Edward E., 515n, 516, SG:151, SG:155
Diffusion indicators, 247, 580–583, SG:171,
SG:173–174
international stock market, 701–702, 710–712, SG:204, SG:207
interpretation, 582–583
number of items, 581
positive trend, 581
seasonal (diffusion) momentum, 585–589
Directional movement system, 335–339, SG:104
average directional movement (ADX), 335–336, 338–339, SG:98–99, SG:105
calculation, 335–336
crossovers, 336–337, SG:99, SG:105
technical indicator, 336
Discount rate, 664–669, SG:194, SG:196
Distribution areas
defined, 120
rectangle, 120
Divergence failure, stochastic, 303, 305, 306
Divergences
advance/decline line and major market averages, 565–571
Demand Index, 543
KST in signaling, 320–321, 333–333
price momentum, 264–269, 320–321, SG:84, SG:85, SG:86, SG:89
relative strength, 404–405, 406, 410–412
stochastic, 303, 304, 309
symmetrical triangle, 158
Doji, 343, 344, 353–355, SG:107, SG:113
Double cycle, 23, SG:10, SG:14
Double tops and bottoms, 149–152, SG:50, SG:54, SG:56, SG:58
Dow, Charles H., 10, 29–30, 43
Dow Jones Broker Dealer ETF, 606–607
Dow Jones Industrial Average (DJIA), 433, 434, SG:133–134, SG:137
1898 inverse H&S pattern, 142
1936–1937 double top, 150
1938 right-angled triangle, 162
1962 double bottom, 151, 152
advance/decline lines, 564, 565, 567
Dow Jones Transportation Average and, 30–40, 432
monthly performance, 520–521
presidential cycle, 518
ROC and, 440–443
Dow Jones Oil and Gas Sector ETF, 415–418
Dow Jones Pring U.S. Business Cycle Index (DJPRING), 24–25
Dow Jones Rail Average, 444, SG:134, SG:137. See also Dow Jones Transportation Average
Dow Jones Transportation Average, 423–438, 444–445
1946, 120, 122
1989–2001 long-term momentum, 423, 424, 426, 427
1989–2001 relative strength, 423, 425–428
1989–2001 three weekly CMOs, 423, 426
1989–2001 turning points, 423, 424
Dow Jones Industrial Average and, 30–40, 432
long-term KSTs, 423–428
Dow Jones UBS Commodity ETN, 195, 196, 454, 579
Dow Jones UBS Commodity Index, 2009–2012 short-term buy and sell signals, 333–334
Dow Jones Utility Average, 280–281, 432, 446–447, SG:133, SG:134, SG:137
Dow Jones Utility ETF, outside bars, 190, 191
Dow theory, 29–40, 444, SG:15–19
buy-hold approach versus, 674, SG:197, SG:201
buy/sell signals, 37, 39
criticisms, 38–40, SG:16, SG:17, SG:19
introduction, 29–30, SG:15–16, SG:19
market experience, 1929-1932, 36, 38