Most blog authors on StockCharts.com are writing about the current markets and do an exceptional job. Erin Heim has become a chip off the old block – her Dad, Carl Swenlin. I do not write about the current markets as wanted to share my experiences after 40+ years as a technical analyst. Not only experiences with trading and investing, but model building and money management. I also share the details of all the Master’s degrees I have – those expensive learning experiences that hopefully I learned something from. Since I rarely go back into the archives of other’s blogs that I read, I wondered if that is common or not. Hence, after talking with Chip, a summary of my past articles might encourage new readers to take a look as most of the material is timeless. That’s timeless, not worthless! This is the first of the summary series and starts at the beginning (Sep 2014) up until the end of Feb. 2015. I’ll do the remaining summaries before year end and then do them whenever I have a dozen or so articles to include. You can click on the article name for a link directly to the article.
Why Market Breadth is So Important (CGMBI) – Sep 29, 2014
2nd most read article
My first article for StockCharts.com was an introduction to my soon-to-be revised book, “The Complete Guide to Market Breadth Indicators.” I discussed the various breadth components, their relationships with each other and price, and provided a listing of breadth indicator categories. I also showed how breadth has changed over the years especially when we went from minimum moves in stocks from eighths, to sixteenths, and then to decimal (cents) in 2001. I wrapped up with an example how breadth can be used in one’s analysis as it always shows up at the party on time, and always leaves early.
This article was similar to the first one as I needed to cover a number of concepts about breadth before getting into the chapters in the book in later articles. Here I also showed tables of StockCharts.com’s symbol catalog for all the breadth indicators along with their start dates for the NYSE, the Nasdaq, and the Toronto exchange. Then I covered an important concept about charting which explained digital indicators and how they were often more beneficial than the typical analog indicators. One can never cover the basics of breadth without explaining that weekly breadth cannot be created from daily breadth, unlike price data they are completely different. Then I wrapped up with the “Breadth Dance,” sort of my way of explaining how all of the major breadth components played out during market moves.
Are you Using Chart Patterns Correctly? – Nov 5, 2014
After four decades I have noticed that many are not using classical and candle patterns correctly. I think this has a lot to do with computerized technical analysis software and many who have not read many books on the subject. Or have read some of the books where the author also did not know how to use patterns. I give a number of examples for both classical patterns and candlestick patterns. I then discuss candle patterns and whether they can be used on weekly data or intraday data. I wrap this one up discussing the problem with single day patterns and why there are more reversal patterns than continuation patterns.
On Trendlines – Nov 24, 2014
3rd most read article
Like almost everyone else I used to draw trendlines all over the chart. In the last 15 or so years I have stopped using angled trendlines and only use horizontal trendlines. Horizontal trendlines are defined by price and coupled with the heuristic of anchoring, they seem to work so much better. Especially since support and resistance are so important to successful trading. I next talk about long term trendlines and how they should become broader in width over time, sort of like an expanding fan. This is because investor psychology fades over time so you need a broader area for support and resistance. A brief discussion about doing technical analysis on data that does not trade is foolish. As an example, can a moving average have support and resistance? Of course not, it doesn’t trade. However, that does not keep many analysts from telling you that it is at support, blah, blah, blah.
Do Markets Trend? Why? – Jan 5, 2015
7th most read article
This article supports Chapter 10 of my Investing with the Trend book. I show how to determine if a market trends or not. I present a large table of all of the sectors and how each one ranks based upon three independent measure of trendiness. This concept is critical to understand if you want to be a trend follower. And finally, many forget the most important first step: what is the minimum length trend you want to follow? You must decide that or you will not be a good trend follower.
Advance Decline Ratio Indicators (Chapter 5 – CGMBI) – Jan 13, 2015
9th most read article
Here is the first article that delves into the upcoming revised book. We started with Chapter five because it had the fewest charts and indicators. This deals with advances divided by declines and indicators that use that relationship. Advance Decline Ratio, Breadth Thrust, Breadth Thrust Continuation, Duarte Market Thrust, Eliades’ Sign of the Bear, Hughes Breadth Momentum Oscillator, Panic Thrust, and Short Term Trading Index are just a few of the indicators in this chapter.
The Many Faces of Technical Analysts – Jan 20, 2015
I had fun writing this one, not to be critical of anyone, but to show that technical analysts come in many different faces and flavors. I can write about them all because after 4 decades I have been every one of them at one point or another. Newbie, Hobbyist, Salesman, Story Teller, Practitioner, Academic, and Author are all covered with examples of each along with my opinion about who to listen to and who to ignore.
Know Thyself – Jan 30, 2015
8th most read article
In the last 20-25 years a fairly new field of analysis has surfaced called “behavioral investing,” which is similar to heuristics and rules of thumb. These are human traits that attempt to make shortcuts seem logical. The following heuristics are covered in detail: anchoring, confirmation bias, herding, overconfidence, and recency. I then present what I call “bias tracks” so you can see how all of the heuristics build upon each other. I have Know Thyself II on the drawing board.
Market Prescience – How Devine! – Feb 17, 2015
I have stated vehemently that I believe no one knows the future, not later today, tomorrow, next week, next month, next year, or anytime into the future. However the financial media spends all day parading experts in front of you guessing about the future. Sadly there are no consequences when they are wrong. Maybe we should treat it like baseball – three strikes and you’re done. I also discuss how financial academia likes to use math equations in their papers, equations that most readers don’t have a chance at understanding. Then I present a humorous example of a test run on an academic paper where they removed all the equations and inserted equations that had nothing to do with the paper.
What is it with Modern Finance? – Feb 20, 2015
The first part of my Investing with the Trend book is spent showing how foolish much of modern finance is; in fact I’m on record saying it is almost a hoax. As an engineer I know that when you begin research you usually begin with some basic assumptions. In modern finance they started with these: the markets are efficient, investors are rational, market returns are random and normally distributed. All are horribly wrong assumptions. How can you possible derive a theory of any value, if you start out with incorrect assumptions? You can’t. Academic finance is the marketing department for Wall Street.
A Few Things “Other People” Should Know About Technical Analysis – Feb 26, 2015
4th most read article
This is one of the articles I wrote because I continue to see the misuse or at least the misunderstanding of many basic technical concepts. Many truly do not understand some of the subtle differences between arithmetic (simple) and exponential moving averages. I also show that the difference between Stochastics %K and Williams %R is merely that one is the complement of the other. When I see someone’s chart with both of them on it, I know immediately that they know not what they are doing. I cover some of the reasons why Wilder’s RSI is reasonably good at divergences. I wrap it up explaining the Moving Average Convergence Divergence is nothing more than price and a moving average, just using different smoothing values.
Please consider sending a link to this article to your friends and investment groups. It would be appreciated. Thanks!