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Volume 8 Article List

Enhancing Index Stock Portfolios With Futures

The benefits of diversification are well known: most investment managers diversify by including bonds and cash in a stock portfolio already diversified across many industry groups. Less well known is the fact that managed commodity futures portfolios are an attractive diversification candidate that can lead to a disproportionately large increase in return while simultaneously reducing risk. Thus, stock portfolio managers, regardless of their degree of risk-aversion, should consider futures to improve the return-risk tradeoff of their portfolios. By Donald L. Jones and Timothy Walsh

Put-Call Sentiment Indicator

Put/call ratios based on volume and dollar value have been widely used by technicians. But a third approach has been substantially overlooked. By Robert R. Prechter and David A. Allman

Trading Volatility

One of the first things to understand about volatility is that it does not exhibit long trends like some common stocks but is more cyclical in nature. Thus, extremes in volatility are more likely opportunities to fade the market's volatility than chances to go with the breakout. By Andrew Sterge

Fund Managers' Performance

Should we monitor the actions of mutual fund managers? They are paid a salary to do a better job of investing than the common person. While some managers may not live up to expectations, on the average, they should be labeled "smart money." By Arthur Merrill, CMT

Elliott Wave Dilemma: Bull or Bear Market?

The Elliott wave theory, while complex and subject to individual interpretation, offers a powerful means of putting the overall market developments into reasonable perspective and provides some guidance for what to expect of the future direction of the market. At the end of 1989, the stock market was at a critical juncture but subject to two contrary wave theory interpretations. By C. R. MacDowell

Stochastics and Long-Term Trends

While there appears to be an overwhelming number of fundamental factors that could make the price of bonds volatile, the large economic forces affecting bonds actually tend to produce very long trends. Examine how one trader uses Lane's oscillator to gauge price direction and potential reversals. By Thom Hartle; pages 29-30.

Stock Timing to the Discount Rates

Use the discount rate to scope out the underlying tone of the stock market. By Jay Kaeppel; pages 31-32.

Successfully Trading Currency Options

With the proper use of point-and-figure charts it is possible to derive certain probabilities of success for different formations. The astute option trader can change the risk-reward characteristics of options trading By selecting an underlying instrument in this case, a currency with a chart pattern that has a high probability of success. By Thomas Dorsey; pages 33-36.

Trading Five-Wave Reversals

Locate the final wave of Elliott's corrective pattern to make your safest entry in any market trend. By Dan Akin Dimock; pages 37-39.

Increasing OBV Reliability With Stock Index Futures

Apply on-balance volume to the NYSE Index futures for better signals than the NYSE Index. By Gerald Appel; pages 40-43.

Unchanged Stocks

The history of stock market inactivity yields some intriguing discoveries. By Charles A. Jaffee; page 44.

Product Review: A Program to Behold!

The most promising technical analysis package for the Macintosh is here. By John Sweeney.*

Software review: Behold! V. 1.2.1 (for Macintosh)

Book reviews: Investing in Growth Stocks, 1989/1990 Encyclopedia of Closed End Funds, The Complete Guide to Closed End Funds

Modeling the Markets With Bezier Curves

The Bezier curve is a mathematical construct for tracing a smooth path between a series of key support and resistance points. It is also a powerful new tool for predicting commodity markets. By Mark Angel; pages 47-55.

Martingales

Wager wisely in the futures market with lessons from the roulette wheel. By James William Ferguson; pages 56-59.

Stock Market Timing With Interest Rates, Part 2

A simple interest rate ratio proves itself one of the best bull market signals available. By Jay Kaeppel; pages 60-62.

Insider Insight

No news is the most profitable news when evaluating peculiarities in stock market charts. By Richard W. Arms Jr.; pages 63-65.

Staying With the Markets

Combine statistical analysis with technical analysis and use multiple regression number crunching to find telltale price divergences. Examples are provided in copper and precious metals. By Eric L. Sharp; pages 66-69.

2-Bar NR and ORB

This price pattern quantifies contraction points to the most profitable short-term trades. By Toby Crabel; pages 70-73.

Volatility Skews

Take advantage of option mispricings using the Black-Scholes theory of options valuation. By Andrew J. Sterge; pages 74-77.

Volume Indicators

Measure crowd enthusiasm toward a market with these two volume indicators. By Arthur A. Merrill; pages 78-79.

WAD trades ABX

Use Williams' on-balance volume indicator together with high-low-close graphs for trade signals. By Joseph Barics; page 80.

Product Review: Option Valuation Model 3.05

Customize options evaluations with an upgraded version of a popular software package. By Steve Barr.

Book Review: Short-Term Trading in Futures

Our reviewer finds the secrets of day trading are still safe with the publication of this book. By Dr. Alexander Elder.

Book reviews: The Technical Analysis Course: A Winning Program for Stocks & Futures Traders and Investors, The Encyclopedia of Technical Market Indicators, Dow Theory Redux, York Institute of Finance's Investor's Desk Reference, Reminiscences of a Stock Operator

Newsletter: Wall Street Micro Investor

Reducing Profit Variability from Technical Trading Systems

Because profits produced by technical trading systems vary, traders are better off trading a variety of contracts at a time. By Milton S. Boyd and B. Wade Brorsen; pages 83-89.

Moving the Dollar

Though the U.S. dollar isn't an important trading vehicle in itself, its price changes have effects on other markets. Analyze and correlate these quantitative relationships with multiple regression and number crunching to find out w hat moves the dollar and how that affects other markets. By Eric Sharp; pages 91-95.

The Average Maturity of Money Market Funds and Eurodollar Futures

Correlations can be found between Eurodollars and changes in money market maturities, says this author. Use average maturity to forecast short-term rates. By Glenn Mancher; pages 96-100.

The 42/49/55 Day Reaction Technique

Use this infrequent signal to buy or sell a stock or index. By Chuck Carpino; pages 101-103.

Reverse Martingales

In this sequel to a February 1990 S&C article, another form of the Martingale is applied to trading with promising results. By James William Ferguson; pages 105-108.

Volume-Adjusted Moving Averages

Time-based moving averages make the assumption all days are equal. But they're not. By Richard W. Arms Jr.; page 109.

Resistance

This index measures resistance to price movement and it's worth watching. By Arthur A. Merrill, C.M.T.; pages 112-113.

The Electronic Bulletin Board Comes of Financial Age

Find free investment programs in electronic bulletin boards! Here's all you need to get started: a step-by-step on how to tap into one and a list of 9 places to start. By Marshall Rens and Federico L. Brown; pages 114-116.

Tactical Asset Allocation With Market Forecaster

How to use the Market Forecaster program to allocate assets. By Mark Hallinan; pages 117-120.

Liquidity Data Bank: Big Promises, Small Deliveries

It was a promising and revolutionary venture. Did it deliver? By Thomas K. Bonen; pages 121-123.

Options? Let's Get Real

When used for pure speculation, a trader's chance of making any money consistently in options is in the ballpark of zero. By Ana Maria Wilson; pages 124-125.

Book reviews: The Dow Jones-Irwin Guide to Trading Systems, Stock Market Technique: Number Two, Leading Indicators for the 1990s

Playing Copper

Seize the chance to detect and use major trends perhaps the best way to succeed in futures trading. This author presents two techniques for computer-aided trading that helped him interpret and stay with the 1987 copper bull market. By Eric L. Sharp; pages 127-131.

A New Indicator for the S&P Stock Index Futures

The negative volume index, a mix of old indicators, promises to be a sensitive barometer for determining intermediate-term trends in the S&P 500.. By Daniel E. Downing; pages 132-133.

Correlations of Common Stock Indicators

Some stock indicators appear to be correlated with each other and with the Dow Jones Industrial Average. This author checked the cross- and auto-correlations on more than 25 years of weekly data for DJIA and NYSE indicators and presents the best correlations. By Frank Tarkany; pages 134-136.

Plurality

A 50-year-old advance/decline index still speaks with authority. By Arthur A. Merrill, C.M.T.; page 137-138.

Fault-Prone Options Traders

What shape is your failure in? By Jerry Kopf; pages 139-141.

Trading With Gann Lines

Determine support and resistance areas with Gann lines. By David Lamarr; pages 142-144.

Technically Trading the Yen

These authors statistically tested 34 indicators for trading the IMM yen contract and here they present the results. By Thomas P. Drinka, Timothy L. Krehbiel, Stephen Ptasienski; pages 145-151.
Predicting Market Order With the Delta Phenomenon

Wilder predicts T-bond turning points for the next 10 years. By J. Welles Wilder; pages 152-154.

Volatility Analysis in Tactical Stock Trading

Recognize and use the signals of impending price changes. By Peter Eliason; pages 155-157.

Optimizing Moving Averages

Speed up moving average programming with more efficient routines. By Charles J. McGuinness; pages 158-162.

Profit Mapping

Calculate profit by making a three-dimensional map of the result. By John F. Ehlers; pages 163-166.

Software reviews: DoubleDisk compression program, Statistical Analysis of Stocks and Indices

Book reviews: Winning the Investment Game, The Psychology of Speculation

Determining Stock Value from Price and Earnings

This author presents his formulas for using earnings, yield and interest rates to help value stocks, and examines historical data to learn how to predict market sentiment. By Paul Holliday; pages 169-173.

Trading Threshold

In radar, the signal-to-noise ratio is used to detect targets better. In trading, we can use this simple concept to hit profit targets better. By John Ehlers; pages 174-177.

Quantifying Pain via Drawdown Size

Investors want the most gain with the least pain. To help you determine your risk-aversion curve in futures trading, this author presents a new way to quantify pain thresholds. By Richard A. Harrison; pages 178-181.

The Elliott Wave: Fact or Fiction?

How do I love thee ... or not? Let me count the waves. By F. David Minbashian; pages 182-184.

Simple Moving Average

There are countless ways to use moving averages. While most systems depend on a crossover or penetration of some type, this one simply looks at direction. By Peter Aan; pages 185-186.

Ease of Movement

The Ease of Movement indicator developed by Richard Arms is an oscillator designed to reveal the direction that a stock or commodity is moving with the least amount of resistance. By Richard W. Arms Jr.; pages 187-190.

Finding Reliable Trading Strategies

Analysts should not only identify the best trading strategy for a historical time period but also test that optimal strategy in a subsequent time period to evaluate its reliability in actual trading. By Thomas P. Drinka; page 191.

Trading Five-Wave Reversals, Part 2

Optimal entry can occur at the end of any wave C that has subdivided into five lesser waves of sufficient price range. Learn to distinguish this wave. By Dan A. Dimock; pages 192-194.

Percentage B Complements On-Balance Volume

Combine on-balance volume with %B percentage of buying for the day to observe supply and demand. By Joseph Barics; pages 195-196.

New High and New Low Indicators

Use exponential moving averages of the daily new highs and lows of the New York Stock Exchange to help define market cycles. By Mike Burk; pages 197-198.

Commitments of Traders for Sentiment

Introducing a sentiment indicator using the C.O.T. report. By Stephen E. Briese; pages 199-204.

Stocks Above Moving Averages
How useful are these figures? By Arthur A. Merrill, C.M.T.; pages 204-205.

Software reviews:
Professional Breakout System, PC-Hookup 2.0, Trader's Profit Motive

Book:
The Facts About Speculation, Inside the Commodity Options Market

Overlay Profile for Current Market Analysis

Here's a new graphic analysis technique that promises to handle noise without lag. By Donald Jones and Christopher Young; pages 207-211.

1989 Cycles

Examine 1989 cycles with 12 perpetual contracts. By John F. Ehlers; pages 212-215.

Avoid the Call-Writing Hazard

Is call-writing hazardous? By Jerry Kopf; pages 216-217.

Implied Economic Forecasts

By having a portfolio that is significantly sensitive to a macroeconomic factor, we are taking risks that may or may not be justifiable. This author measures the sensitivity of 4,000 stocks to 7 macroeconomic factors, thereby quantifying and comparing their risk factors. By Dan DiBartolomeo; pages 218-221.

Price Patterns in Soybeans

Do price patterns signal the next day's market direction? By Toby Crabel; pages 222-224.

Are There Gaps in Your Thinking?

What didn't happen is as important sometimes as what did. By Richard W. Arms Jr.; pages 225-227..

New Highs/New Lows

Each day the number of stocks making new highs and new lows is reported in the financial press. Authur Merrill reports that these statistics may be useful. By Arthur A. Merrill, C.M.T.; pages 228-229.

Speculating in Vertical Spreads

Unlike the futures trader, whose spread choices are limited to 15 contracts, the options trader must deal with a bewildering assortment of contracts, each with its own price dynamics. Options spreads, though, can be more responsive to traders' and hedgers' needs than futures spreads. This author examines the vertical spread for its flexibility. By Bradley J. Horn; pages 230-233.

Confessions of a Technical Heretic

Technical analysis' popularity has become self-defeating, says this heretic. By Grant Noble; pages 234-235.

Options Ratios for Sentiment

Ratios of call and put volumes are commonly used as a sentiment indicator. Here we go a step further and examine the simultaneous changes in options volume and open interest By James P. Martin; pages 236-239.

BASIC Programming for Technical Analysis

Learn the rudiments of programming as it applies to technical analysis. By Steve Notis; pages 240-243.

Product review: Basic Training for the Options Wars

Get informed and gear up for battle with this options camp. By Patrick D. Bosold

Product review: Mutual Fund Selector, version. 1.2

Book reviews: The Analysis and Forecasting of Long-Term Trends in the Cash and Futures Markets;

Trading Rules: Strategies for Success

Newsletter review: Technical Traders Bulletin

A Short-Term Buy Signal for the DJIA

Buying the first retreat in prices following a strong move up in the DJIA is often profitable. Use a version of the 20-day stochastic oscillator to signal this buying time. By John Toombs; pages 245-247.

Absolute Tick Volume

Conventional volume analysis compares today's volume with yesterday's. This author suggests that using absolute volume instead of comparative may be promising. By Charles F. Wright; pages 248-250.

A New Market Index

What do you get when you combine four existing equity indices? According to this author, you get a market barometer worth watching. By Dan Downing; page 251.

January Barometer: Myth and Reality?

Is the January barometer a useful forecasting tool or just a nice theory? By Jay Kaeppel; pages 252-254.

'Tis the Season

Has stock-index futures affected seasonal tendencies? By Bob Kargenian; pages 255-256.

Basic Programming for Technical Analysis, Part 2

Here's a look at the TACHART program for technical analysis. By Steve Notis; pages 257-259.

Archiving the Experts

Experience on tap for when you need it. Sound far-fetched? It's not. By Jason S. Glazier; pages 260-263.

The Overlay Profile for Current Market Analysis

Continuing the analysis of how to handle noise without lag. By Donald Jones, Christopher Young; pages 264-269.

Trading Tomorrow's Wall Street Journal

Accidents can be helpful sometimes. By Hans Hannula, Ph.D.; pages 270-273.

Defining Advance/Decline Indicators

Take a good look at this popular indicator and review 9 popular or historical advance/decline formulations. By Fay Dworkin; pages 274-278.

Member/Odd-Lot Trading

Stock exchange members should know more than the public. Right? By Arthur A. Merrill, C.M.T.; pages 279-280.

The Advance/Decline Line

Distinguish cycles in the DJIA with the advance/decline line. By Mike Burk; pages 281-284.

Book reviews: Study Helps in Point and Figure Technique; Economics in Plain English

Product review: Swing Catcher

Finding Cycles in Time Series Data

Introducing a new and intriguing way to remove trend from data by using a new technique. By A. Bruce Johnson; pages 287-293.

Secondaries

Here's an indicator that measures informed bearishness. By Arthur A. Merrill; pages 294-295.

Historical Patterns in the Long-Term Stock Market

Use statistical analysis to reduce more than 100 years of market data to a simple mathematical model. By James G. Arnold; pages 296-298.

Programming for Technical Analysis, Part 3

Continuing the exploration of programming for technical analysis. By Steve Notis; pages 299-300.

An Overview in Elliott terms

Crash or not? If crash, then when? This Elliottician's conclusions may surprise you. By Mark Thompson; pages 301-303.

Elementary Bond Trends

Understanding the basics of trending periods and price formations is the first step toward successful trading. Examine an ideal price formation to diagnose the forces of supply and demand at work. By Thom Hartle; pages 304-306.

How Random Is Random?

Would prices appear random individually but not aggregately? Here is an expert re-examination of the old random walk debate on a new level By Clifford J. Sherry; pages 307-309.

Japanese Stocks : Potential Calamity or Business as Usual?

Should we be reading the Japanese stock market the same way we do the American one? By Eric L. Sharp; pages 310-312.

Bezier Curves: No Tool for Trading

Are Bezier curves practical for trading? Use this BASIC routine to find out. By Donald R. Lambert; pages 313-315.

On the Battlefield

What do you do when your indicators don't seem to work at all? By Mike Burk; pages 316-318.

Making Money With Chaos

Good news, bad news: An order exists in the market but it's not as perfect as some have made it out to be. But even a chaotic order can be profitable. By Hans Hannula; pages 319-322.

Don't Regulate Futures Like Stocks

Don't let the futures market be regulated because of misunderstandings about its mechanisms and functions, this writer says. By Howard Portnow; pages 323-324.

Product reviews: Lotus 3.0; OptionVue

Book reviews: 100 Million Dollars in Profits; Make Money with S&P 500 Options

The Principle of Contraction/Expansion

Look for these patterns of market contraction and expansion to help determine optimal entry points. By Toby Crabel; pages 327-331.

Weekly McClellan Oscillator

We wrote about a daily McClellan Oscillator last year. How does a weekly version perform in contrast? By Arthur A. Merrill; pages 332-333.

Delayed Channel Breakout

The channel breakout is a tried-and true trading method that's been in use for years. The delay is what makes this variation unique ... and profitable in long-term, well-defined trends. But watch out for these risky deficiencies. By Peter Aan; pages 334-335.

Trading Limit Markets

Those restrictive trading limits can be very frustrating to traders who find themselves locked into a position with the market limit against them. The solution? Synthetic futures positions created from commodity options allow positions to be traded even when a market is locked limit. By Douglas Arend; page 336.

Hedging With Spreads

Overcome cash flow problems associated with option positions through the use of vertical spreads. By Bradley J. Horn; pages 337-338.

Campaign: April '90 Gold

Keeping a daily trading/analysis log is a useful habit. Here is a sample journal that lets you take a peek into another trader's actual trades and accompanying analysis. By Robert Miner; pages 339-344.

Right on Target

A perfect trade isn't so perfect if you don't know when to get off the boat. Using volume-to-volume projections on Equivolume charts can be helpful in defining market moves. By Richard W. Arms Jr.; pages 345-347.

The Psychology of David Ryan

Three-time U.S. Investing Championship winner David Ryan tells the secrets of his success. By Dr. Van K. Tharp; pages 348-352.

Fibonacci, Elliott and Volatility

Plotting volatility like other traders plot prices allows us to use Fibonacci and Elliott analysis in analyzing volatility and allows us to see things that no one else sees. By Paul Williams; pages 353-356.

The Keys to Technical Conditions

Are you getting too dependent on your off-the-shelf trading system? Here is a quick self-check to see if you are a real trader. By James Gould; pages 357-358.

Dow Theory

Wall Street Journal founder Charles Dow left a legacy the theory at the very root of technical analysis. By Melanie Bowman; pages 359-363.

The Four-Year Cycle

All market trends continue to excess, whether above or below stock value. Strangely, the extent of these excess movements has demonstrated great consistency in past markets. By James G. Arnold; pages 364-368.

Reversal Patterns

Here's an overview of identifying changes in trends using classic chart analysis. By Melanie F. Bowman and Thom Hartle; pages 371-376.

Early Trend Identification

The author explains how he identifies a trend in the heat of the battle. By John F. Ehlers; pages 377-381.

Can Stock Fundamentals Protect You?

Can you use fundamentals to identify characteristics of crash-proof stocks? By Lewis Carl Mokrasch, Ph.D.; pages 382-384.

Is the DJIA a Defective Indicator

Should we be relying on the DJIA as much as we do? By Max Bader, M.D.; pages 385-387.

The Broadening Formation and the Bond Market

Trading the bond futures market offers opportunity to the skilled chartist, our Technical Editor says. By Thom Hartle; pages 388-391.

Measuring Volatility

Are financial markets becoming more and more volatile? By Jean-Olivier Fraisse; pages 392-395.

Negative Volume Divergence

The respected technician explains why you shouldn't rely on this indicator. By Arthur A. Merrill, C.M.T.; pages 396-397.

Market Forecasting Model: ARIMA

ARIMA has been adapted for use in modeling futures prices series by using a microcomputer. Now let's use the model by applying it to the CBOT wheat contract. By Albert E. Parish Jr.; pages 398-403.

Review: CompuTrac/M

Reviewing CompuTrac's technical analysis program for the Apple Macintosh. By Thom Hartle.

Review: Market Analyzer PLUS

Presenting Dow Jones's advanced-level technical analysis program. By John Sweeney

Book reviews: Crashes and Panics, Black Monday

Consolidation Patterns

What happens when a price trend takes a breather? Identifying such congestion areas and interpreting the evolving price action to determine the next direction provides tradeable opportunities. By Melanie F. Bowman and Thom Hartle; pages 405-409.

A Trader's Tale: Post-Crash Profits With Fast Action

Fast action makes the difference. By Patrick D. Bosold; pages 410-412.

The Market Facilitation Index: 1/89 to 3/90

Here's an update on the performance of the MFI, an indicator of an efficient and tradeable market. By Charles F. Wright; pages 413-416.

Second Hour Index

We all know that the last hour of the trading day can be ominous in futures trading, right? Technician Arthur Merrill, to whom a truism is never true 'til tested for himself, says that maybe we've been giving our attention to the wrong hour. By Arthur A. Merrill, C.M.T.; pages 417-418.

Volatility and Trading

Volatility is unreliable for market timing, but it provides valuable data. By Jean-Olivier Fraisse; pages 419-422.

Stage Analysis

Here's a way to interpret the current balance between demand and supply. By Thom Hartle; pages 423-425.

Interview

Jim Owen on Professional Investment Managers

Here's what the author of The Prudent Investor had to say. By Mike Takano; pages 426-428.

Timing the Bond Market With Elliott and Fibonacci

These two theories can help project market objectives and turning points. By Roger Farley; pages 429-431.

Percent Difference Oscillator

Use this oscillator to determine intermediate-term turning points. By Darryl W. Maddox; pages 432-433.

Moving Average Myths

Efficiency in calculating moving averages is quite important. By Jason S. Glazier; pages 434-437.

Trading as Teamwork

Can teamwork in trading help boost profits and guard against failure? By Franz-J. Buskamp; pages 438-440.

One Approach to Trading Bonds

Our Technical Editor explains his trading approach. By Thom Hartle; pages 441-443.

East Meets West: CandlePower Charting

Combine candlestick charting and Equivolume and get a hot new technique. By Greg Morris; pages 445-448.

Combining Andrews With Elliott Wave

Considering how different they are, are the two techniques complementary? By Ron Jaenisch; page 449.

Clues to Market Direction With the S&P 500 Premium

Need a clue to market direction? Try the premium between the S&P 500 futures and the cash index. By Jean-Olivier Fraisse; pages 450-452.

Gaps

What kinds of stories do gaps tell? Learn how to read between the lines. By Thom Hartle and Melanie F. Bowman; pages 453-455.

Perennial Mutual Funds: Staying With Winners