Technical Analysis Explained
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market experience, 1998-2013, 37–38
tenets of, 30–36, SG:15, SG:16, SG:17, SG:19
Dow Theory (Rhea), 30, 31n, 32, 46, 49–53
Drawdown, 722, 727, SG:210, SG:213
Dreman, David, 649
Dresser Industries, 109, 110
Drugs, 461
Duplex horizontal pattern, 379
E
Earnings-driven (late-cycle) sectors, 467–469, 470, SG:139, SG:140, SG:143
Echostar Communications, 309, 351, 352
Economic factors, in peak-and-trough progression, 749
Economist Commodity Index, 1969-2000 equilibrium crossovers, 273–275
18-year cycles, 506–507
Elliott, R. N., 755
Elliott wave principle, 755–759
complete cycle with subwaves, 756–757
Fibonacci sequence, 755–756
grand supercycle, 737–738
time spans between market peaks and troughs, 759
Emotional points
bars, 60
gaps, 60–61, 177, 180–181, SG:62, SG:64
Employment Trends Index, 663
Encyclopedia of Technical Market Indicators (Colby and Meyers), 301
End-of-the-month cycles, 521–522
Energy, 468, 469
Engulfing pattern (Tsutsumi), 349–351, SG:107, SG:108, SG:113
Envelopes, 233–238, 293
characteristics, 233–235, SG:77, SG:81
construction, 233–235, SG:78, SG:81
disadvantage, 236–238
technical principle, 235
Equilibrium, defined, 18
Equity market. See Stock markets
Equivolume, 556–558
Euro, 2011–2012 directional indicators, 335, 336
Eurotop Index, 1993-2001 moving average, 215, 216
Evening star, 350, 353
Evening stars, 350, 353
Exchange-traded funds (ETFs), 431, 705
Exchange-traded notes (ETNs), 195, 196, 431, 454, 463
Exhaustion
gaps, 179–180, SG:62, SG:64
high volume on sharp advance, 109–111
one- and two-bar price pattern, 190
parabolic blow-off, 102–104, 105, SG:45, SG:47
trendline, 92–95, SG:36, SG:40
Exhaustion bars, 203–206
Exponential blow-off, 102–104
Exponential moving averages (EMAs), 209, 225–228, 230, 231, 297, 407, 408, 416, 423, 425, 492, 493, SG:71, SG:75
Extended trendlines, 79–80
Extreme swings
contrary opinion, 643–649, SG:188–189, SG:191
price momentum, 260–264, SG:85, SG:89
RSI, 285
stochastic, 305
F
Failure swings, relative strength indicator (RSI), 285, SG:92–95
Fan lines, 89–90
Federal Reserve Board
discount rate, 664–669
margin requirements, 626
Fibonacci, Leonardo, 65
Fibonacci fan lines, 390–391, SG:120–121, SG:125
Fibonacci sequence, 65–66, 755–756
50 percent rule, 62–63, 384–386, SG:120, SG:125
Financial markets, 17–28
business cycle and, 18–23, SG:9–14
discounting mechanism, 17–19
double cycle, 23, SG:10, SG:14
equilibrium, defined, 18
longer cycles, 23
market experience, 1966-2001, 25–28
role of technical analysis, 24–25
See also Bond markets; Commodity markets; Stock markets
Financial sector, 467–468, 688
Flags, 166–168, SG:59, SG:60, SG:63
defined, 166
down market, 167
as reliable pattern, 167–168
up market, 166–167
See also Rectangles
Ford, Gerald, 648
Fosback, Norman, 623
4-year/Kitchin/41-month cycles, 501, 504, 505, 514–517, 696–698, SG:151, SG:152, SG:155, SG:156, SG:203, SG:205, SG:207
Frank Russell Organization, 450–452
FTSE, 2000–2001 comparison of RSI with CMO, 289, 290
Fulcrum patterns, 379
Fundamental indicators
sentiment, 477–478, 486, 633–634, SG:183, SG:186
unrealistic valuations, 648–659
FX Energy, 199, 200
G
Gann, W. D., 391
Gann fans, 391–393
Gaps, 174–184
area, 175, SG:62, SG:64
breakaway, 175–178, SG:62, SG:64
closed/filled, 174–175, SG:61, SG:64
common, 175
continuation/runaway, 178–179, SG:62, SG:64
as emotional points, 60–61, 177, 180–181, SG:62, SG:64
exhaustion, 179–180, SG:62, SG:64
on intraday charts, 174, 181–184, SG:61, SG:62, SG:64
three-step rule, 176, 177
trading period, 174, 181–184
Gartley, H. M., 45–46, 219–220, SG:22, SG:25
Gasoline prices, 645–647
General Electric, 298, 299
General Motors, 407, 408
Geographic factors, in spreads, 421
Global equity indexes, 452–453
Global equity markets, sector rotation, 462–464
Global X, 463
Global X FTSE Columbia ETF, 319–321
Global X Silver Miners, 349–351
Gold, 58, 68, 230, 231, 292, 293, 337, 338, 377, 468, 469, 499–500, 580, 642, 737
Gold Miners ETF, 580
Gold Trust ETF, 337, 338
Goldman Sachs Natural Resources, 465
Google Search, 645–647
Gordon, William, 437, SG:134, SG:137
Gould, Edson, 386, 510, 511n, 520, SG:120, SG:125
Granville, Joe, 555
Granville’s New Key to Stock Market Profits (Granville), 555
Greece, 696
Gross domestic product (GDP), sector rotations, 460–461
Guggenheim, 463
H
Half-signal reversals, peak-and-trough progression, 12–13
Hamilton, William Peter, 29–30, SG:16, SG:19
Hammers (Takuri), 346–347, SG:108, SG:111, SG:113, SG:114
Hang Seng Index
1981–2012 British Pound System applied, 733
1987–1988 perpetual 30/40 oscillator performance, 723
1998–2000 smoothed CMO, 289–291
1999–2010 RSI, 281, 282
Hanging men (Kubitsuri), 346–347
Harami lines (Yose), 362–364, SG:110–111, SG:114
Harris, L., 523n
Head-and-shoulders (H&S) pattern, 138–148, 379, SG:50, SG:56
at bottoms, 142–143, SG:54, SG:58
as continuation patterns, 143
failures, 143–148, SG:51, SG:52, SG:56, SG:57
inverse failures, 145, 146, 147, SG:51, SG:57
island reversals, 180, 184
relative strength (RS), SG:128, SG:130, SG:131, SG:132
as reversals, 138–143
at tops, 138–142, 368–369, SG:53, SG:58, SG:99, SG:105
variations, 141
Health care, 521, SG:153, SG:156
Hewlett-Packard, 59, 60, 414–415
High-low data, 575–580
Hinges, stochastic, 307, 308
Hirsch, Jeffrey, 518, 520, 521
Hirsch, Yale, 521, SG:153, SG:156
Holiday effect, 523, 524, SG:153, SG:156
Homestake Mining, 298–300
Honeywell, 380
Hong Kong, 696
Hopkins, Sheila, 471
Hosoda Goichi, 393
Housing, 457–459
How to Make Money in Stocks (O’Neil), 161
Hoyle, Thomas Templeton, 635
Hulbert, Mark, 635
Humana, 538, 539
Huntington, Elsworth, 510
I
>
IBM, 84, 85, 689, 692
IBOXX Corporate High Yield Bond Fund (HYG), 600–601
Ichimoku cloud charts, 126, 393–400, SG:121–123, SG:126
components, 393–396
major trend, 396–399
shorter-term signals, 399–400
time frames, 396
ICIC Bank, 113, 114
IGE, 465, 466
Indian Hotels, 321, 322
Indian Nifty
2004–2009 and envelopes, 235–236
2004–2009 momentum indicator, 711–712
2005–2006 breadth indicators, 710–712
moving average types, 228, 229
Inflation
inflation-protected versus regular bonds as confidence measure, 607–609, SG:178, SG:180
secular trends, 488–489, SG:146, SG:149
Inflation Group Index, 464–467, SG:141, SG:143
Inflation-Adjusted S&P Composite, 480–481
Inside bars, 193–197, SG:66, SG:67, SG:69, SG:70
formation, 193
significance, 193–194
Insider trading, 613, 614, 634, SG:181, SG:185
Intel, 83–84, 286–288
Interest rates, 653–672, SG:193–196
bond yields versus bond prices, 655–656
competing financial assets and, 654–655
contrary opinion, 649–651
corporate profits and, 654
debt and equity market prices, 657–662
debt market structure, 656–657
stock market turning points, 660–662
technical analysis of long-term rates, 670–672
technical analysis of short-term rates, 663–669
technical principles, 655, 657
See also Bond markets; Stock markets
Intermarket trading systems, 733–736
Intermediate cycles. See Primary intermediate price movement; Secondary movement/reaction
Intermediate trends, 41–54, SG:21–26
advantages of, 41
defined, 5
duration, 5, SG:3, SG:7
to identify primary reversals, 46–49, SG:21, SG:25
Know Sure Thing (KST), 317–322, 323–324, SG:100–102, SG:106
in market cycle model, 5–6
market experience, 1897-1982, 49–53
primary intermediate price movement, 42–43, 46, 49–53, SG:21, SG:22, SG:25
secondary movement/reaction, 42, 43, 44–46
Intermediate-term bonds, 656
International Investing Made Easy (Pring), 731
International stock markets, 694–712, SG:203–208
diffusion indicators, 701–702, 710–712, SG:204, SG:207
global A/D line, 702–704, 708–709, SG:206, SG:208
identifying primary global trends, 694–704
indexes, 229, 230, 452, 694–702
relative strength, 704–707
Intraday trends
Bollinger bands, 242–243
defined, 7–8
gaps, 174, 181–184, SG:61, SG:62, SG:64
opening gaps, 182, 183–184
Inverse fulcrum patterns, 379
Inverse head and shoulders, 142, 379
Inverse saucer pattern, 379
Inverted cycles, 526, 528, SG:158, SG:159
Inverted V patterns, 379
Invesco Energy Fund, 77, 78
Investment Company Institute, 620–623
Investor’s Guide to Active Asset Allocation, The (Pring), 431, 444, 467
Investors Intelligence, 611, 613
iShares Biotech ETF, 2007–2012 and envelopes, 236–237
iShares FTSE China 25 ETF, 263
iShares Germany ETF, 399–400
iShares MSC World Stock ETF, 252
iShares MSCI Brazil ETF, 213, 214
iShares MSCI Emerging Markets ETF, 214, 215
iShares MSCI Hong Kong ETF, 220
iShares MSCI Italian ETF, 222, 223
Island reversals, 180, 184, 204–206, SG:66, SG:68, SG:69, SG:70
J
Jacobs, Bruce, 521–522
Jevons, Stanley, 510
Juglar cycles, 505, SG:151, SG:155
K
Kaufman, Perry, 283
Key reversal bars, 201–203, SG:68, SG:70
Kitchin, Joseph, 514
Kitchin cycles, 501, 504, 505, 514–517, 696–698, SG:151, SG:152, SG:155, SG:156, SG:203, SG:205, SG:207
Kleinard, D., 523n
Know Sure Thing (KST), 311–325
1989-2001 Dow Jones Transportation Average, 423–428
automated trading systems, 724
Bollinger bands, 243–244
commercial paper yields, 663–664, 665
confidence measures, 596–599, 602, 604
formulas, 314, 317–318
intermediate-term, 317–322, 323–324, SG:100–102, SG:106
international stock market, 705–706
long-term, 311–317, 321–322, 323–324, SG:100, SG:105
margin debt, 628
in market cycle model, 321–324
market indexes and, 451–452
moving average (MA) and, 315–316, 324–325, SG:102, SG:106
rate of change (ROC), 311–315, SG:102–103, SG:106
relative strength (RS), 415
relative strength indicator (RSI), 324
seasonal (diffusion) momentum, 587–588
sector rotation, 457–459, 464–465, 468
short-term, 317, 321–322, 323–324, 329–333
signals go with trend, 724
smoothed rate of change versus, 314–315
Special K (SPK) versus, 329–333, SG:104, SG:106
in stock selection, 682–692, SG:198
substitutes, 324–325, SG:99–100, SG:105
technical principles, 311, 317, 320
Kondratieff, Nikolai, 471–474
Kondratieff wave, 471–474, 505, SG:145–146, SG:149, SG:151, SG:155
L
Lagging sectors, 467–469, 470, SG:139, SG:143
Lakonishok, J., 522n
Lane, George, 300
Late-cycle (earnings-driven) sectors, 467–469, 470, SG:139, SG:140, SG:143
Law of motion, 62
support/resistance zone, 62–66
Le Bon, Gustav, 635
Leading (liquidity-driven) sectors, 467–468, 469–470, SG:139, SG:140, SG:143
Legg Mason, 683, 684
Leverage. See Margin debt
Levine, Dennis, 634
Levy, Kenneth, 521–522
Line charts, versus bar or close-only charts, 73–74
Lines
defined, 32
Dow theory, 32, 43
Liquidity-driven (leading) sectors, 467–468, 469–470, SG:139, SG:140, SG:143
Logarithmic/ratio scales
arithmetic scales versus, 81–85, 126–127, SG:51–52, SG:57
support/resistance zone, 63
Long-term interest rates, 670–672, SG:194, SG:195
Long-term investors
defined, 6
in market cycle, 6–7
Long-term trends
contrary opinion, 651–652
duration, SG:101, SG:106
Know Sure Thing (KST), 311–317, 321–322, 323–324, SG:100–102, SG:105, SG:106
Kondratieff wave, 471–474, 505, SG:145–146, SG:149, SG:151, SG:155
relative strength (RS), 412–414, 415–417
Special K (SPK) and, 326–327
Lumber, 716, 718
M
MACD. See Moving-average convergence divergence (MACD)
Mackay, Charles, 635, SG:188, SG:191
Magnitude failure, 503–504, SG:152, SG:155
Margin debt
in automated trading systems, 736–737
defined, 623, 653
interest rates and, 655
sentiment indicators, 623–628, SG:182, SG:185
Market breadth, 560–589
advance/decline line, 561–57
1
breadth momentum, 247, SG:84, SG:86, SG:89
breadth oscillators, 247, 571–575
concept of breadth, 560–561
diffusion indicators, 247, 580–583, 585–589
high-low data, 575–580
individual country, 707–712
seasonal breadth momentum, 583–585
seasonal (diffusion) momentum for stock market, 585–589
technical principles, 565, 575, 582
Market bubbles, 638–639, 649
Market cycle model, 6–7
Know Sure Thing (KST) in, 321–324
long-term investors in, 6–7
overview, 5
short-term traders in, 7
See also Financial markets
Market indexes, 431–454, SG:133–138
advance/decline (A/D) line, 562–564, 565–566, 682, SG:170, SG:173
commodity indexes, 453–454
composite, 432–443, 448–452
global indexes, 452–453
moving averages (MAs) and, 436–438
rate of change (ROC), 438–444
technical principles, 436, 438, 440, 446, 451
weighted/unweighted, 432, 447–449, SG:133, SG:137, SG:138
See also names of specific market indexes
Market Logic, 623
Market sentiment. See Sentiment indicators
Market Vane, 617–619, SG:182, SG:185
Market Vectors Coal exchange-traded fund (ETF), 61, 62
Market Volatility Indicator (VIX), 629–632, SG:183, SG:186
Martin Pring on Price Patterns (Pring), 115, 186
Master Economic Indicator, 456–457
McClellan Oscillator, 573–575, SG:170, SG:173
McClellan Summation Index, 574–575
McKesson, 690, 691
Media, contrary opinion, 644–648
Meeting lines (Gyakushu Sen), 360–361, SG:107, SG:113
Mega overbought/oversold levels, 257–260, 263, SG:84, SG:87, SG:89, SG:90
Merrill Lynch, 183, 683, 684, 685, 687
Metals, 463, 468, 469
MetaStock program, 297, 698
Meyers, Thomas A., 301, 436n
Microsoft, 95, 111, 112, 297, 298, 305, 306, 368–369, 394, 397
Middle sectors, 469–470
Mining, 464, 468, 469
Minor movements, Dow theory, 31
MKDS. See Arms Index
MMM Company, 557
Molex, 286, 288
Momentum. See Breadth momentum; Price momentum
Monetary factors, in peak-and-trough progression, 743, 748
Money-market instruments, 656, 662, 663–664, 665, 734–735
Moody’s AAA bond yields, 9–10, 496–498, 670
Morgan Stanley Capital International (MSCI), 452, 694
Morning star, 351, 352
Moser Baer, 137, 138
Moving averages (MAs), 209–232, SG:71–75
Arms Index, 554
automated trading systems, 720–722, 724–733
Bollinger bands, 238–244
centered, 211, SG:71, SG:75