Periodically I write an article, such as this one, 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 45 years; the good, the bad, and the ugly. You can think of my articles as sections in a book. You can click on the headers for a link to the article.
FOR NEW READERS of THIS BLOG: Below are the links to the past Article Summaries followed by links to the articles covered in this article. A suggestion was made by a wise reader that many new readers do not go back and read the old blog articles. I can’t blame them; however, this will provide you with an index and short summary for each of them. Currently, about 166 articles.
This is the third and final article about Tushar Chande’s Trend Meter (CTM). Here I introduced using asset commitment levels to CTM to reduce the volatility of CTM. Reducing volatility in an indicator you want to use to trade is important because when they are too volatile and generate too many signals, you just won’t stick with it. I also in this article show that you can plot CTM, %K, and RSI with adjusting the parameters so that all three look almost exactly alike. Price is Price!
I have spent the past 20 years showing advisors and investors how flawed modern finance is; often stating that is just marketing for Wall Street. Subjects covered here are: Buy and hold, economists are good at predicting the market, diversification will protect you, compounding is the eighth wonder of the world, missing the 10 best days of the year, probability and risk are the same, and chasing performance will work. All of these are things the salesmen of Wall Street want you to believe.
This is the final article in this series and is also tied to the 3 articles on Weight of the Evidence. Here I show the asset commitment approach to CTM during the 2007 to 2009 bear market. I show trading results over that time period. I also provide a link to a version of CTM on StockCharts.com so you can see the indicator and its various trading levels as time moves on.
This article came about because the media seemed to be once again focused on it. Sadly, most in the media can’t even spell it correctly, let alone understand it. I review it and provide a short bio on Jim Miekka, the creator of the Hindenburg Omen. The Hindenburg Omen is available on StockCharts.com in many various versions. Here is the symbol for the NYSE version: !BINYHOD.
Technical analysts come in many flavors and disciplines. I attempt to explain some of them in this article. I cover Newbies, Hobbyists, Story Tellers, Practitioners, Salesmen, and Academics. I can be critical or supportive of all these as at one time or another in the past 45 years I have been all of them. The practitioner is the one that you should pay attention to.
This article came about from a question in the comment section. The thing to remember is that when you are dealing only with price, many indicators can look alike. I show examples of the calculation of Momentum and Rate of Change along with charts and explanations. I then show a chart Momentum, Rate of Change, and Price Difference to show you that the lines are all exactly the same. Hence, use which ever one you like, but don’t fool yourself and use more than one.
This is sort of a continuation of an earlier article entitled Technical Analysts. In the early days reading books was just about the only source of information for one to learn about technical analysis. Believe me, I think I read them all. Some are very good, most are not. Newsletters is also a good source for learning, but you must be very careful about who you read. I think many like to read newsletters, so they get some comfort in making trading and investing decisions. It helps them pull the trigger.
I have written often about the many advantages of using breadth in a trend following model because it simply arrives at the party on time and always leaves early. The leaving early is the important part as it gives you a head up in the topping process. I also share in the article some of my favorite breadth indicators, all of which are available on StockCharts.com.
Here is discuss my strong belief that absolutely no one knows what the market is going to do tomorrow, next week, next month, next year, or any time in the future. Yet, the financial media parades these experts in front of you all the time. There are no consequences for being wrong. I show data from CXO Advisory where most pundits are rarely right half of the time. A coin toss would be just as good; maybe even better. I point out a particularly interesting comment by CNBC’s Jim Cramer where he was horribly wrong. Remember, Jim Cramer is what CNBC thinks of you.
Indicators monitor and reflect behavior, they do not dictate it. Indicators are the sight not the trigger. I give an example of a car’s brake lights. When they come on it depends on the environment as to what they mean. They could mean the car is stopping, just adjusting speed, preparing to turn right, turn left, make a U-turn, etc. I used to get asked what a good indicator is, and I address my answer in this article.
Here I go being critical of the financial media again. The infatuation with the fair value derived from morning futures drives me crazy. The talking heads believe if the exact value of the open of the stock market for whatever index they are talking about. My son provided a detailed explanation of how it is calculated, and I wrap it up with my usual strong opinions on its worthlessness.
I had a long-time customer who help create my interest in research Japanese candlesticks. I traveled to Japan a few times to meet with him. Imagine that; an author who wrote a book on candlesticks, actually going to the source for data! This is a long interview, so I divided it into two parts. Hikita-san was a very successful trader and is the source for the name of my blog – Dancing with the Trend. He always would tell me, “Mr. Morris, dance with the trend, dance with the trend.”
This the final part of my interview with Hikita-san. I did not change he responses to be grammatically correct as I think it reads better when the somewhat broken English.
Merry Christmas and Happy New Year!
Dance with the Trend,