Dancing with the Trend

Greg Morris
About the author: has been a technical market analyst for over 40 years and is the author of several popular financial analysis books including Candlestick Charting Explained, Investing with the Trend and The Complete Guide to Market Breadth Indicators. Before retiring, he served as the Chief Technical Analyst and Chairman of the Investment Committee for a technical-based money management company with over $5.5 billion under management. Greg has appeared on CNBC, Fox Business, and Bloomberg Television and has also spoken at numerous financial conferences around the world.

Latest Posts

Dancing with the Trend

The Enemy in the Mirror

by Greg Morris

I am a retired money manager and want to share some thoughts on that profession and investors in general.  Portfolio management is as much about managing emotions as it is about correlations, standard deviations and Sharpe ratios.  Over the decades much has been written about the “math” of portfolio management but the emotional aspect of the investment decision making process does not receive nearly the attention or research.  However, Behavioral Finance is a relatively new field that seeks to combine behavioral and cognitive psychology theory with conventional economics and Read More 

Dancing with the Trend

Reliability of Pattern Recognition

by Greg Morris

I developed this method primarily for candle pattern identification when I wrote my book, Candlestick Charting Explained (the book was first published in 1992 and now is in its third edition).  The reliability concept equally applies to any type of pattern, including the many chart patterns widely used in technical analysis.  My argument and complaint about most technical analysts, is that for a reversal or continuation pattern to be identified, you MUST first identify the trend.  How can you have a reversal pattern if you do not know what the trend is?  What is it Read More 

Dancing with the Trend

Pair Analysis - 4

by Greg Morris

This will wrap up the Pair Analysis series.  In this article I will show: Some basic statistics on the pairs I used in the analysis. The top 50 pairs based on performance. The bottom 50 pairs based on performance. The Sharpe Ratio is a measure of return and risk, with risk being standard deviation.  If you have read much of what I write, I think standard deviation is a inadequate measure for risk because it assumes random and normalized data, of which, most stock market data is not.  The modified Sharpe is an attempt to make a slight improvement.  I have no opinion Read More 

Dancing with the Trend

Pair Analysis - 3

by Greg Morris

The is the third article on Pair Analysis.  Here I will show the results for several different pair combinations with reduced commentary.  If you have not read the previous two articles on Pair Analysis, I strongly suggest you do so before continuing with this one. Recall, the pair analysis is accomplished on weekly data.   Think of the ratio line like this: when it is moving upward it means the numerator is outperforming the denominator.  When the Rate of Change (ROC) goes below the -4% line, it means the numerator is no longer outperforming the denominator Read More 

Dancing with the Trend

Pair Analysis - 2

by Greg Morris

To prove that I read all comments, here are some pair charts and data that is  updated to 12/31/2018. First a review of what pair analysis is. My pair analysis is accomplished on weekly data.   Think of the ratio line like this: when it is moving upward it means the numerator (IJR) is outperforming the denominator (IEF).  When the Rate of Change (ROC) goes below the -4% line, it means the numerator (IJR) is no longer outperforming the denominator (IEF). Hence, you want to rotate into the denominator (IEF); or sell IJR and buy IEF.  Complementarily, when the ROC Read More 

Dancing with the Trend

Core Rotation Strategy

by Greg Morris

This article expands on the pair analysis discussed in the previous article.  In that article I showed a simple process of trading a ratio of non-correlated ETFs, in particular the S&P 600 Small Cap (IJR) and the BarCap 7 to 10-year Treasury ETF (IEF).  Using a 4% trigger to switch from one to the other.  Here I expand that concept to build a strategy using 4 different ratios with each one representing 25% of the portfolio.  Table A shows the pairs used with an equal allocation of 25% each given to the four pairs.  This concept was originally designed to manage Read More 

Dancing with the Trend

Pair Analysis

by Greg Morris

I remember following Martin Zweig years (decades) ago and in fact used one of the techniques he described in his book, “Winning on Wall Street,” in the mid-1980s' (1984 to be exact).  In it he described a really simple technique using his unweighted index (ZUPI); trading it on a weekly basis whenever it moved four percent or more.  If it moved up four percent in a week, he bought, if it moved down four percent in one week, he sold.  Positions were held until the next opposing signal – just that simple.  The problem I had back then was not only in not following it as he Read More 

Dancing with the Trend

Bear Markets and Drawdowns - 2

by Greg Morris

This is a continuation of the previous article.  The Dow Jones Industrial Average, also referred to as The Dow by the financial media, is a price-weighted measure of 30 U.S. blue-chip companies. The Dow covers all industries with the exception of transportation and utilities, which are covered by the Dow Jones Transportation Average and Dow Jones Utility Average.  While stock selection is not governed by quantitative rules, a stock typically is added to The Dow only if the company has an excellent reputation, demonstrates sustained growth, and is of interest to a large Read More 

Dancing with the Trend

Bear Markets and Drawdowns

by Greg Morris

The month of December 2018 was a bad month for the market; the rally in the last week of the month was nice but small compared to the month’s decline.  2019 has so far continued the upward move, so I thought it was time to show some data on market drawdowns.  If you have been reading my scribblings for long you hopefully recall that I view drawdowns as the best measure of risk.  Unlike modern finance that says volatility is risk and volatility is defined by standard deviation.  Hey, if you use standard deviation, then you are also agreeing that the markets are random Read More 

Dancing with the Trend

Did 2018 Meet Your Expectations?

by Greg Morris

Welcome to 2019!  I was born in the 1940s and am delighted to be here.  If you were a trend follower with reasonable stop placement, 2018 was a tough year.  If you were a trend follower without reasonable stop placement, you are scared, if not panicky.  If you were a buy and hold investor in most stocks, then 2018 was a somewhat lousy year.  If you were a market timer and always trying to guess the tops and bottoms, 2018 probably wasn’t so great either.  I realize there are many other successful categories of traders and investors, but hopefully my message is Read More 

Dancing with the Trend

Help! I've Fallen and I Can't Get Up

by Greg Morris

Well, what do you think of 2018 so far?  As a trend follower, it has been difficult.  Reminds me of 2011, which happened to be the worst year my 25-year-old model has ever had.  Chart A shows the Dow Jones Industrial Average for all of 2011 with some data before and after that.  The blue filtered wave (zig-zag) is showing all moves of 10% or greater and the red filtered wave shows moves of 5% or greater.  When you cannot see the blue line, it is because it is the same as the red line.  The blue shows there were 2 big down moves before the market Read More 

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