Technical Analysis Explained
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characteristics, 212–213
crossovers, 213–216, 217, 230, 275, 276, 405–407, 408, SG:72, SG:75, SG:147, SG:150
in detecting cycles, 527
envelopes, 233–238, 293, SG:77, SG:81
exponential MA (EMAs), 209, 225–228, 230, 231, 297, 407, 408, 416, 423, 425, 492, 493, SG:71, SG:75
Know Sure Thing, 315–316, 324–325, SG:102, SG:106
market indexes, 436–438
oscillators and, 486–488, 489
price momentum and, 275, 276
rate of change, 277–278, SG:87, SG:90
simple MAs (SMAs), 209–225, SG:71, SG:75
support and resistance, 59–60
technical principles, 209, 211, 214, 218
time spans, 216–219, 228–232, SG:72, SG:73, SG:75
trend-deviation indicators, 293, 295–296, SG:94, SG:95
types, compared, 209, 228, 229
weighted MA (WMAs), 209, 225, SG:73, SG:75
Moving-average convergence divergence (MACD), 247, SG:83, SG:89
relative strength (RS), 416–417, 418–419
as substitute for KST, 324, SG:100, SG:105
trend-deviation indicators versus, 296–300, SG:94, SG:95
MSCI All Country World Index, 452
MSCI Emerging Market ETF (EEM), 702–704
MSCI World ETF (ACWI), 697–702
MSCI World Stock Index, 229, 230, 452, 694–697, 698, 705–706, SG:204, SG:207
Mutual funds
cash/assets ratio, 621–623, SG:182, SG:185
sentiment indicators, 620–623
N
NASDAQ 100 ETF, 434
2011–2012 and Bollinger bands, 238–240
2011–2012 centering a moving average, 211
outside bars, 191–193
NASDAQ Composite Index, 434, 449–450, SG:135, SG:138
2007-2012 speed resistance lines, 389–390
advance/decline lines, 562, 573, 574
market bubbles, 638–639
National Semiconductor, 545
Ned Davis Research, 520–521, 623
Negative divergences
in price momentum, 264–266, SG:84, SG:85, SG:89
in relative strength, 404–405
in stochastics, 303, 304
volume, 99, SG:44, SG:46
Neil, Humphrey, 635–636, 638, SG:188, SG:191
New Commodity Trading Systems and Methods (Kaufman), 283
New Concepts in Technical Trading Systems (Wilder), 335
New York Stock Exchange (NYSE), 98, 109, 432
advance/decline lines, 561–562, 564, 565, 568–570
price versus volume momentum, 536, 537
New York Stock Exchange (NYSE) Common Stock Index, 433
New York Stock Exchange (NYSE) Composite, 435
intraday chart and Bollinger bands, 242–243
upside/downside volume oscillator, 551–552
New York Times average, 140
Newmont Mining, 104, 105
News events, 634, SG:183, SG:185
Nikkei
1966–2012 dollar adjusted relative strength, 706–707
1975–1992 KST, 316–317
1995–1990 negative divergences, 265–266
short-term interest rates, 649–650
Nison, Steve, 340n
Northern Trust, 531, 532
Notley, Ian S., 584
O
Obama, Barack, 517
Observation, in detecting cycles, 528–529
On Balance Volume (OBV), 555–556, SG:163, SG:167
One- and two-bar price patterns, 190–199, SG:65–70
exhaustion bars, 203–206
inside bars, 193–197, SG:66, SG:67, SG:69, SG:70
key reversal bars, 201–204, SG:68, SG:70
outside bars, 188–193, SG:65, SG:69
Pinocchio bars, 206–208
preconditions, 187
technical principles, 186, 187, 193
two-bar reversal, 197–201, SG:66, SG:69
One-bar islands, 204–206, SG:66, SG:69
Oneok, Inc., 241
Opening gaps, 182, 183–184
Options
Market Volatility Indicator (VIX), 629–632, SG:183, SG:186
put/call ratio, 628–631, SG:183, SG:186
sentiment indicators, 628–632
Oracle Corp., 356
Organization for Economic Cooperation and Development (OECD), 697
Orthodox broadening tops, 155, 157
Oscillators
automated trading systems, 724–728
breadth, 247
Chande Momentum Oscillator (CMO), 289–291, SG:163, SG:167
diffusion indicators, 247, 580–583
market indexes versus, 438–438
McClellan Oscillator, SG:170
moving averages (MAs) and, 486–488, 489
price momentum changes, 255–257, 289–291
trend-deviation indicators, 292–300, SG:94, SG:95
volume, 538–543, SG:162, SG:167
Outside bars, 188–193, SG:65, SG:69
formation, 187
significance, 189–190
strong and weak, 190
Overbought/oversold levels
Demand Index, 543
Know Sure Thing (KST), 321, 322
market index, 442–444
mega, 257–260, 263, SG:84, SG:87, SG:89, SG:90
price momentum, 253–255, 256, 276, 277
price oscillator, 293–294
re-crossovers, 257
relative strength indicator (RSI), 281–283, SG:92, SG:94, SG:95
stochastics, 301
Overowned/underowned stocks, 674, SG:197, SG:199, SG:201, SG:202
P
Palladium, 66, 67
Parabolic blow-off, 102–104, 105, SG:45, SG:47
Patni Computers, 154, 156
Peak-and-trough progression, 3, 9–15, 739–752, SG:4, SG:7
approximate one-third retracement requirement, 14
bond market, 494–495
characteristics of primary market peaks, 743–747
chronological factors, 747, 751
cycle factors, 747, 751
dilemma of, 12–13
in double cycle, 23
Dow theory, 34–35
economic factors, 749
half-signal reversals, 12–13
identifying, 13–14, SG:5, SG:8
mechanics of peak, 740–741
monetary factors, 743, 748
Moody’s AAA bond yields, 9–10
nature of peaks, 741–743
psychological factors, 745–747, 751
relative strength indicator (RSI), 288, SG:93, SG:95
reversal of falling, 11
reversal of rising, 10–11, SG:5, SG:10
sector rotation factors, 743, 748
sector rotation in cycle, 740
sequence of, SG:9, SG:13
Special K (SPK) and, 327–329
technical factors, 743–745, 749
time spans between stock market peaks and troughs, 759
Pennants, 168–169, SG:59, SG:63. See also Triangles
Pfizer, 307, 308
Philadelphia Gold and Silver Share Index, 280–281, 528–529
Piercing line (Kirikorni), 349, SG:110–111, SG:114
Pinocchio bars, 206–208
Plateau period, 472–474
Point and figure charts, 373–382, SG:115–117
bar charts versus, 373, SG:115, SG:117
construction, 373–377
reversal, 374–375, SG:116, SG:117
rules, 376
technical principle, 381
Politicians, contrary opinion, 648, SG:188, SG:192
Positive divergences
in price momentum, 264, 266–267, SG:84, SG:89
in relative strength, 404–405, 406, SG:128, SG:132
in stochastics, 303, 304
PowerShares Dynamic Insurance ETF (PIC), 64
Presidential c
ycle, 517–519
Previous highs and lows, support and resistance zones, 58
Price discrepancy divergences, 267, 268
Price/earnings (P/E) ratio, 477–478, 486, 633–534, 648–649
Price momentum
1989-2001 Dow Jones Transportation Average, 423, 424, 426, 427
breadth momentum versus, 247, SG:84, SG:86, SG:89
characteristics, 252–269, SG:84, SG:89
crossovers, 257, 273–275, SG:87, SG:90
defined, 247, SG:84, SG:89
in detecting cycles, 527–528
diffusion indexes, 247
direction, 247
directional movement system, 335–339, SG:97, SG:105
divergences, 264–269, 270, SG:84, SG:85, SG:86, SG:89
downward, 247
indicators, 247
international stock market, 711–712
Know Sure Thing (KST). See Know Sure Thing (KST)
market indexes. See Market indexes
moving-average convergence divergence (MACD). See Moving-average convergence divergence (MACD)
price oscillators, 292–300
rate of change (ROC). See Rate of change (ROC)
relative strength (RS), 415–421
relative strength indicator (RSI). See Relative strength indicator (RSI)
sentiment and, 611–613, 619–620, SG:182, SG:185
smoothed momentum indicators, 276–278
Special K (SPK). See Special K (SPK)
stochastics, SG:83, SG:89
technical principles, 247, 248, 251, 255, 263, 264, 265, 266, 271
time span selection, 251–252
trend reversal techniques, 253, 269–275, 292–300, SG:84, SG:89
trendline violations, 269–272, SG:86, SG:90
upward, 246
Price objectives
corrective fan principle, 89–90
as support and resistance zones, 126
trendline, 87–89
Price oscillators, 292–300
Price patterns
broadening formations, 152–158
double tops and bottoms, 149–152, SG:50, SG:56
flags, 166–168, SG:59, SG:60, SG:63
gaps, 60–61, 174–184, SG:61, SG:62, SG:64
head and shoulders, 138–148, SG:50, SG:56
high-low data, 575–580
island reversals, 180, 184, 204–206, SG:66, SG:68, SG:69, SG:70
measuring implications, 125–129
momentum price pattern completion, 272–273
one- and two-bar. See One- and two-bar price patterns
pennants, 168–169, SG:59, SG:63
point and figure chart, 378–380
psychological attitudes and, 128
rectangles, 119–123, SG:49, SG:55
relative strength (RS), 403–404, 409–410, 411, SG:129, SG:132
reversal area, 117–118
rounding tops, 111, 173–174, SG:61, SG:64
RSI price pattern completion, 285–288
saucers, 172–174, SG:61, SG:64
size and depth, 123–125, SG:52, SG:57
in stock selection, 677–680
support level, 118
technical principles, 117, 123, 124, 128, 133, 138, 148, 151, 159, 174, 181
transitional phase, 115–119, SG:49, SG:55
triangles, 158–164, SG:54, SG:58
valid breakout, 129–138
wedges, 155–157, 169–172, SG:61, SG:63
Price/volume relationships
Dow theory, 32–33
See also Price patterns; Volume
Primary bear markets, 31
extreme swings, 260–264
Know Sure Thing (KST) in, 321, 322
mega overboughts and oversolds, 257–260, 263, SG:84, SG:89
price momentum changes, 253–269
price momentum oscillator changes, 255–257
primary market bottoms, 747–751. See also Peak-and-trough progression
Primary bull markets, 31, SG:16, SG:19
characteristics of primary market peaks, 743–747
extreme swings, 260–264
mega overboughts and oversolds, 257–260, 263, SG:84, SG:89
price momentum changes, 253–269
price momentum oscillator changes, 255–257
primary market peaks, 743–747. See also Peak-and-trough progression
stock selection during, 681–682
Primary intermediate price movement, 46–53
described, 42–43, SG:23, SG:26
downmove amplitude and duration, 50
to identify primary trend reversals, 46–49
relationship with subsequent reactions, 46
upmove amplitude and duration, 49–50
Primary trendline, 72–73
Primary trends, 4–5
defined, 4
in Dow theory, 31, 33–35
duration, 4, SG:3, SG:7
intermediate cycles to identify primary reversals, 46–49
in market cycle model, 4–5
reversals, 33–34, 35, 46–49
secular trends versus, 8–9, 475–476, 495–498, SG:147, SG:150
Primary-trend volume ROC, 536–537
Principle of commonality, SG:101, SG:106
Principle of proportionality, 501, SG:153, SG:156
Principle of summation, 504, SG:152, SG:155
Principle of variation, 502, SG:152, SG:155
Pring Turner Business Cycle ETF (DBIZ), 24–25, 431
Pring Turner Capital, 736
Procter & Gamble, 281–283
Product relationships, in spreads, 421
Profits in the Stock Market (Gartley), 45–46, 219–220
Property and casualty insurers, 687–690
Proportion
50 percent rule, 384, SG:120, SG:125
support/resistance zone, 62–64, SG:28, SG:31
trends, 383–386, SG:120, SG:125
Proportionality, principle of, 501, SG:153, SG:156
Psychological factors, in peak-and-trough progression, 745–747, 751
Put/call ratio, 628–631, SG:183, SG:186
Q
Quality spreads, 422
R
Radio Shack, 102, 104
Rate of change (ROC), 247, 248–251, SG:83, SG:89
automated trading systems, 728–733
calculation, 249, SG:87, SG:90
commodity trend reversal, 490–491
in detecting cycles, 528, 529
Know Sure Thing, 311–315, SG:102–103, SG:106
market indexes and, 438–444
of moving average, 277–278, SG:87, SG:90
percentage scaling, 250
plus and minus scaling, 250, 251
RSI versus, 280–281, SG:91, SG:95
summed. See Know Sure Thing (KST)
variability, 254
volume, 531–537, SG:161, SG:167
Ratio scales. See Logarithmic/ratio scales
Raymond James, 686, 687
Real bodies, 341, 342–343. See also Candlestick charts
Real estate investment trusts (REITs), 674
Recession. See Business cycle
Recession-associated top (RAT), 742
Rectangles, 119–123, SG:49, SG:55
accumulation patterns, 120
consolidation patterns, 120, 121, 122, SG:53, SG:57
continuation patterns, 120–122
distribution areas, 120
distribution top, 125–126
downside breakout signal, 119, SG:53, SG:58
downside continuation breakout signal, 120, 123
formation, 137
reversals, 119, 120, SG:53, SG:57
upside breakout signal, 120, SG:53, SG:58
upside continuation breakout signal, 120, 121
volume considerations, 133
See also Flags
Relative momentum index (RMI), 291–292, SG:93, SG:95
calculation, 291
RSI versus, 291�
��292
Relative strength (RS), 401–422, SG:127–132, SG:131–137
1989-2001 Dow Jones Transportation Average, 423, 425–428
construction of RS line, 403–404
individual stocks, 414–415
international stock market, 704–707
interpretation of relative trends, 404–412
Know Sure Thing (KST), 415
long-term trends, 412–414, 415–417
market index, 445
momentum, 415–421
positive and negative RS divergences, 132, 404–405, SG:128, SG:132
price and, 403–404, 409–410, 411, SG:129, SG:132
sector rotation, 461, 463
short-term trends, 417–421
spreads, 402, 421–422
in stock selection, 674–677, 682–683, SG:198, SG:201
technical principles, 402, 414
trend-reversal techniques, 405–412
using, 401–402, SG:127–132
Relative strength indicator (RSI), 247, 279–293, SG:83, SG:89
calculation, 279–280
Chande Momentum Oscillator (CMO), 289–291, SG:92, SG:93, SG:95
comparisons between securities, 280–281
constructing overbought/oversold lines, 281–283
extreme readings, 285, 287
failure swings, 285, SG:92–95
interpretation, 284–288
Know Sure Thing (KST), 324
origins, 279
overbought/oversold levels, 281–283, SG:92, SG:94, SG:95
peak-and-trough progression, 288, SG:93, SG:95
point and figure chart, 381, 382
rate of change versus, 280–281, SG:91, SG:95
relative momentum index (RMI), 291–292, SG:93, SG:95
smoothing, 286, 288
stochastics versus, 301
time spans, 281–284, SG:92, SG:93, SG:95
trendline violations and pattern completions, 285–288
Reliance Communications, 547
Reliant Energy, 676
Replacement value, stock market, 478
Resistance area, 117–118
Resistance level, 561
Retracements, 177
approximate one-third retracement requirement, 14
defined, 131
key reversal bar, 201
one- and two-bar price pattern, 187
support and resistance zones, 65–66, SG:30, SG:31
valid breakouts, 131
Reversals
bear to bull market, 48–49
bull to bear market, 47–48
candlestick chart, 346–364
defined, 119
on a dime, 115, 116
head and shoulders, 138–143
island, 180, 184, 205–206, SG:66, SG:68, SG:69, SG:70
key reversal bars, 201–204, SG:68, SG:70
moving average, 213
moving-average crossovers, 405–407
point and figure chart, 374–375, SG:116, SG:117
price momentum trend, 253, 269–275, 292–300, SG:84, SG:89
rectangle, 119, 120, SG:53, SG:57