Surveying The Sizzling Commodity Markets
Jerry Toepke Of The Moore Research Center
by Jayanthi Gopalakrishnan
Watching the rhythm of the markets, and being able to anticipate market movement, can give the involved trader a boost. Jerry Toepke, who is editor at Moore Research Center, Inc. (MRCI), has gained an appreciation for the power of the seasonal study as well as how it integrates with technical and fundamental analysis since he joined MRCI in 1988. His interest in the futures market started in 1977, and since then, he has been a private trader and retail broker. STOCKS & COMMODITIES Editor Jayanthi Gopalakrishnan interviewed MRCI's Jerry Toepke on August 9, 2006, via telephone.
Can you tell us about the Moore Research Center?
The Moore Research Center is an independent, privately owned company engaged in seasonal research. The company has, and still does, conduct research under contract to certain futures exchanges, but generally, it is in the business to provide research to individual traders, from beginners to professionals to commercials, so they can better make their own trading decisions. The company is not an advisory service, and does not presume to make trading recommendations. Rather, our intent is to perform an objective analysis of historical futures prices, looking for price movements that are so reliably repetitive that traders can anticipate their recurrence on their own.
Is that kind of predictable repetition only in the futures markets?
I suspect it's true in most markets, but our forte is futures and that is pretty much where we stay. We have done some special reports, special publications, that we put out once in a while on the Dow Jones industrials, and on the Standard & Poor's 100. We determine when a specific stock, over the last x number of years, tends to make a seasonal high, a seasonal low, and seasonal trends in one direction or other. But primarily, our clientele, our business, and our focus are on futures.
So why is seasonality so important to a futures trader?
First, we need to define seasonality. We define it as the observed tendency of a market to move in the same direction during a similar period each year, with a high degree of past reliability. In essence, our seasonal analysis is a statistical study of historical futures prices looking for those tendencies. Once you do the seasonal analysis, then the application to seasonal trading is actually the use of that objective analysis to anticipate such seasonal movement. The assumption we have to make is that any market that has exhibited such reliable movement in the past is mostly driven by fundamentals. These tend to recur each and every year in a more or less timely fashion, and affect the market in a similar manner. Traders with that seasonal knowledge are able to anticipate, research, and plan for potential trading strategies well in advance.
So seasonal analysis is simply a study of what's normal. You know what the market normally tends to do, rather than something that is constantly reacting to the latest news, or a sudden move in the market, with no game plan. Knowledge of seasonal patterns and seasonal analysis really give a trader the necessary background to see what the norm is so the current market can be compared with the norm. This helps anticipate the recurrence of a seasonal movement, and that way, you can tell if the market is out of whack. Is it reacting to something bigger than the norm?
What are some things that can cause anomalies?
I think of a seasonal pattern as an annual cycle. Presumably, in most
cases, the normal seasonal fundamentals are going to be there, but something
that is more macrofundamental might override them.
...Continued in the October 2006 issue of Technical Analysis of STOCKS & COMMODITIES
Excerpted from an article originally published in the October 2006
issue of Technical Analysis of STOCKS & COMMODITIES magazine.
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