Periodically I write an article that reviews the past few months of articles. Why on Earth would I do this? Primarily for two reasons. One is that many new readers are involved and often they do not go back and look at the past articles. Two is that my articles are rarely tied to anything that is happening in the markets. Generally, they are about experiences I have had as a technical analyst for almost 45 years; the good, the bad, and the ugly.
Note: Click on the title of the article to go to the article.
Hindenburg Omen – November 16, 2016
An indicator created by the late Jim Miekka. The late Kennedy Gammage of the Richland Report gave it its name; Gammage was on FNN in the 1980s a great deal. The Hindenburg Omen received much criticism from others when it doesn’t appear to work; that criticism is unfounded and usually from those who have never stopped to realize what it does. It identifies situations which often are present at market tops; nothing more. Is if perfect? Of course not, nothing is.
Dancing with the One That Brung Ya! – November 21, 2016
I was an aerospace engineering student at the Univ. of Texas in the late 1960s when the late Darrell Royal was the Longhorn’s head coach. I remember we were #1 in the Nation 2 years in a row. Darrell Royal is credited with the title of this article. Many forget how they got to where they are and is appropriate for investing strategies that have long-term success. I discuss how reconstructing the past involves combining a few facts with a sprinkling of personal beliefs and opinions.
Market Breadth and Technical Analysis – December 5, 2016
Some of my earliest articles dealt with the importance of market breadth. In this article I do a bit of that again but also explain my definition and belief of what technical analysis is and what it is not. Technical analysis should only be performed on prices that are traded. How often have you seen someone drawing trendlines on economic data? Can they trade it? Of course not. Understanding what the core concept behind a technical approach is paramount to using it successfully. Too many are just playing around with their software or website.
Tools of the Story Teller! – December 12, 2016
I wrote an article titled “The Many Faces of Technical Analysts” a couple of years ago and this was an extension of that article. Too often technical analysts are not true analysts who actually trade with real money, but those who write about things technically. I call these the Story Tellers. Many are quite good and bring a wealth of value to the field. The ones I am critical of are the ones who want you to believe they are actual traders, but are not. I suspect many of those have never made a technical analysis based trade. Pay attention to the practitioners; they back their comments with real trading.
Wake Up so You Can Sleep! – December 19, 2016
I’m not sure how I came up with this article or its title. I cover the concept of knowing what the facts are by using the Malaysia Airlines flight that disappeared on March 8, 2014. If you listened to the parade of experts, you would quickly realize no one had a clue as to what happened. However, when you review the few FACTS that are known you can make some educated guesses. I offer my opinions based on the facts as I was a commercial pilot with over 21,000 flight hours. That does not make me an expert; but hopefully give me an edge over someone who has only viewed the world from windows on the side of the airplane.
New Year Nonsense – January 2, 2017
Every year there is a flurry of dumb analysis concepts tied to statistics. Folks, you cannot make consistent and successful investment / trading decisions from statistics. I cover the January barometer and explain how it works and how it is easy to believe it can provide you with advice. I mention the Super Bowl indicator but cannot bring myself to comment further on its foolishness. Sell in May and Go Away is another one I review and show you how by focusing on the positive events can cause you to ignore the negative events. You tend to forget that some of the time it has to contribute to the times it doesn't work.
Did 2016 Meet Your Expectations? – January 8, 2017
This article served as a reminder that looking at charts will provide you with a much better picture of the past than looking at year-end numbers. Too often, the financial media is locked into the ending numbers and totally ignores the path taken to get those numbers. Why is this? Because they act like everyone is a buy and hold investor and that is all you need to do if you are. I show a couple of rolling return charts of 10-year and 20-year returns on the S&P 500. I explain the need (or not) of adjusting returns for inflation AND using total returns (dividends) to reflect reality. Bottom line is that if you look at total returns (dividends included), you should probably also adjust for the effects of inflation. Better yet, just look at price; that is what you trade.
Diversification and Multicollinearity – January 23, 2017
I was going to title this article “Syllables” but decided not to. I have often talked about the free lunch of diversification and explain what it really is versus what many think it is. Multicollinearity is a new concept to most as it helps one define indicators to use for analysis. The thinking being that using a bunch of volume based indicators does not mean you have better information; you just need one volume-based indicator. Most volume-based indicators will tell you essentially the same thing. Diversify your indicators.
Capitalization – February 2, 2017
This is not an article about grammar or punctuation. Here I try to explain the concept behind the market indices which are capitalization weighted, price weighted, equal weighted, etc. Knowing how they are created will help you interpret what they are doing. When the Nasdaq 100 index is moving higher it is generally because the top 10-15% of cap-weighted stocks in that index are moving higher. This is why breadth is so good at market tops; breadth treats every stock equally.
0100111000100000 – February 13, 2017
The infatuation of the media with round numbers has been around forever, however, it seems 20,000 is even more so. The title is binary for 20,000. I start off the article by saying: There are 10 types of people in this world, those that understand binary and those that do not. Just in case: 10 in decimal is 2 in binary. The article goes on to show a table of the number of times round numbers (thousands) are crossed by the Dow Industrial Average. Real traders know this is all nonsense. Store tellers and hobbyists are excited about it. Sad.
The Reign of Error – February 20, 2017
This is yet another article about the foolishness of forecasting. I give examples throughout history of these great forecasts and then show that most are totally wrong. The few that are even close to being correct, are usually a singular event in the life of that forecaster. Do not pay attention to forecasts. Some have said they can tell you how high the market will go and when it will get there; but not both at the same time. Still just nonsense.
Dance with the Trend,
Greg Morris
