Dancing with the Trend

Misunderstanding Average

by Greg Morris

Did you hear about the six-foot tall Texan that drowned while wading across a stream that averaged only 3 feet deep?  The “World of Finance” is fraught with misleading information.  The use of average is one that needs a discussion. Figure A shows how easily it is to be confused over what is average.  And of course, this time it is intentional.  This example should put it in perspective.  You cannot relate rates of change linearly.  In Figure A, point A is 20 miles from point B. If you drive 60 mph going from point A to point B, but returning from point B to Read More 

Dancing with the Trend

Bear Market Preparedness

by Greg Morris

Here is the scenario: You believe we are near a top in the market.  I won’t bother to discuss what makes you think that, but if you do, then here is a sampling of things to consider.  I was originally going to do this in an enumerated list, but decided my rambling would be better. I know you have stops on all of your holdings, so I won’t spend much time on that.  However, just in case you don’t; this would be the time to do so.  Personally, I use a moving stop that is a percentage below a previous high price.  For example, if my model has me fully invested, that Read More 

Dancing with the Trend

What Will You do When the Bear Arrives?

by Greg Morris

I would imagine there are many readers that are fairly new to market analysis and in particular, technical analysis.  We have had 10 bear markets in the S&P 500 Index since 12/30/1927 and 15 bear markets in the Dow Jones Industrial Average since 2/17/1885.  A bear market is defined as a drop of over 20% from the previous high.  Not sure who said or claimed this, but I’m accepting it.  Our last bear market lasted from 10/9/2007 until 3/9/2009 (top to bottom).  If you have not been an investor or trader during a bear market (last 8+ years), then you have missed Read More