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

RISK

by Greg Morris

Dictionary.com says:  Risk is the exposure to the chance of injury or loss; a hazard or dangerous chance.  American Heritage Dictionary says: Risk is the possibility of suffering harm or loss; danger.  These are just two of the many entries and these were just for the noun.  Risk in the world of investments and finance is more succinct.  Risk is the uncertainty of outcome; however, risk can be quantified whereas uncertainty cannot.  Many use risk as a quantitative measure and uncertainty for measuring the non-quantitative type.  This article will attempt Read More 

Dancing with the Trend

Relative Performance

by Greg Morris

First of all, you cannot retire on relative performance.  Relative performance is often a valuable tool, but is also a marketing concept dreamed up by financial pundits who rarely outperform the market.  Table A is a table of various asset classes and their relative performance since 2009, with the last 3 columns being the last 3 months.  Keep in mind that each column (year) is totally independent of the other columns, and the assets classes at the top performed better than those at the bottom of each column.  You do not know if they both lost money, both made money Read More 

Dancing with the Trend

Dollar Cost Averaging

by Greg Morris

Dollar cost averaging is simply the act of making like dollar investments on a periodic basis, say every month or every quarter.  It is sold as a technique because they want you to believe that no one can outperform the market.  There are many papers written on this subject and I don’t want to dwell on it.  Dollar cost averaging is very dependent upon when you start the process.  If you start the process at the top of the market, just prior to a large bear market, you will be buying all the way down and this process could last a couple of years.  Your average Read More 

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 

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