Posts Tagged
‘dow theory’
by ilene - February 16th, 2010 10:38 pm
Here’s the second chapter from Pharmboy’s “Handbook of Technical Analysis.” If you missed the introduction and first chapter, click on “Understanding Market Cycles: The Art of Market Timing” to read from the beginning. – Ilene
Courtesy of Pharmboy of Phil’s Stock World
Technical analysis dates back hundreds of years. According to historical records, a great Japanese rice trader named Homma Munehisa (1724-1803) developed a form of TA known as candlestick charting.[1] A candlestick chart is a style of bar-chart used primarily to describe price movements of securities, derivatives, and currencies over time. It combines aspects of a line-chart and a bar-chart, in that each bar represents the range of price movement over a given time interval. It is most often used in TA of equity and currency price patterns.
Technical analysis is an art. With focus and diligence, TA can often be learned within a short period. A chartist using TA reads and interprets chart patterns and then attempts to predict the most likely short-term outcome based on his methods. Figure 1 shows a 6 month Diamonds (DIA) candlestick chart and many patterns and studies that traders often use to enhance their trading. Moving averages convergence divergence (MACD) and relative strength index (RSI) are two studies very commonly used by technical analysts. MACD is a trend-following momentum indicator that shows the relationship between two moving averages of prices, while RSI is a technical momentum indicator that compares the magnitude of recent gains to recent losses in trying to decide overbought and oversold conditions of an asset. Because candlestick charting is the basis of this handbook, I use these types of charts almost exclusively in my examples.
In the U.S., TA first gained a following from Charles Dow’s Dow Theory in the late 19th century. The six basic tenets of Dow Theory, as summarized by Hamilton, Rhea, and Schaefer, are as follows:
Tenant 1. The market has three movements (Figure 2):
- The primary trend, or major trend, may last from less than a year to several years. It is bullish or bearish.
- A secondary trend moves in the opposite direction of the primary trend, or as a correction to the primary trend. For example, an upward primary trend will
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Tags: charts, dow theory, Pharmboy, Stock Market, technical analysis, trading techniques
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by ilene - July 2nd, 2009 12:00 am
Courtesy of Ben, the Financial Ninja
FN: I’ve pointed out some of the divergences over the last few weeks that are mentioned in this Bloomberg article.
Banks Falling 23% Since May Foreshadow S&P 500 Slump (Update1): "Declines of more than 20 percent in regional banks and homebuilders and the failure of transportation companies to erase their annual loss may be signs the rally in the Standard & Poor’s 500 Index is about to fizzle.
Smaller lenders in the gauge lost 23 percent since climbing to a four-month peak on May 8, while builders tumbled 26 percent from May 4, when they reached the highest level since October. Concern that mortgage rates, credit losses and foreclosures are increasing spurred retreats in the companies forecast to be among the biggest beneficiaries of $12.8 trillion in government stimulus spending.
Slumps in bank stocks foreshadowed previous declines in the S&P 500 as investors focused on real-estate losses that curbed lending. Regional banks’ 51 percent plunge over 28 days starting Dec. 8 came a month before the S&P 500 began a 28 percent slump to a 12-year low of 676.53. The lenders’ all-time high in February 2007 occurred seven months before the S&P 500’s record.
FN: I pointed out three times that banks had stalled, rolled over and were threatening to break down in: Financials: Charts Say "Decision Time", Update1, Update2.
“If housing and credit led us into all this, they will have to stabilize,” said Mark Demos, a Minneapolis-based money manager at Fifth Third Asset Management, which oversees $18.7 billion. “There’s a growing concern that they’re not out of the woods. Less bad does not equal good.”
Speculation government spending will end the first global recession since World War II helped push up the S&P 500 by 15 percent since March 31, the biggest quarterly increase since 1998. Financial shares gained the most among the S&P 500’s 10 industry groups, rising 35 percent. Futures on the index rose 0.6 percent to 920.60 at 7:12 a.m. in New York today.
Stocks began to decline three weeks ago as economic reports spurred speculation the U.S. economy isn’t recovering fast enough to justify the S&P 500’s 36 percent advance since March 9. The Federal Reserve said in its
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Tags: dow theory, financials, homebuilders, Stock Market, Transports
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by ilene - June 14th, 2009 5:11 pm
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Courtesy of Corey Rosenbloom of Afraid to Trade
There’s interesting chatter in the “Dow Theory” community as to whether we’re experiencing a non-confirmation in the Industrials and Transports currently – namely, the Industrials are at a new high for 2009 and are above the 200 day SMA while the Transports are not. Let’s take a look at both.
Dow Jones Industrial Index:
One may also ask the question “Is there a ‘Three Push’ Reversal pattern forming in the Dow Jones?” It would appear so, with three consolidating ‘pushes’ or impulses up that have formed on three lower highs in the 3/10 Momentum Oscillator. That alone is a serious non-confirmation of higher prices.
We also see a volume divergence setting in underneath price, with volume in the Dow Jones Index (1.1 Billion today) reaching a level that is clearly below the recent average – more importantly is the “trailing off.”
One can also see the multitude of ‘dojis’ (often known for their ‘reversal’ signal) that have formed over the last two weeks – that is showing signs of serious indecision.
In terms of Dow Theory, the Industrials have made a new high and have risen above their 200 day Simple Moving Average which is classically bullish… but the Transports Index has not.
Dow Jones Transportation Index:
Again, while the Dow recently formed new highs for 2009, the Transports could neither break above their May highs nor its 200 day simple moving average.
A negative momentum divergence has also formed as well as a negative volume divergence.
I could have easily titled this post “Major Sell Signal in the Dow Jones Index” but I dare not be so bold, given the ability of the market to rise against a negative fundamental and technical backdrop.
From a chart (technical) standpoint, the chart is literally screaming “sell signal,” but still we operate in a world of probabilities and stranger things have happened, so do continue to guard your risk and do your own analysis for additional insights.
Corey Rosenbloom, CMT
Afraid to Trade.com
Tags: DOW, dow theory, Transports
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by ilene - June 13th, 2009 2:54 pm
Courtesy of The Pragmatic Capitalist
Interesting read in yesterdays Journal on the Transports. Readers know that I am fond of following the REAL economy – consumer trends and blue collar jobs such as trucking score high on my scale of economic importance. Lately, we’ve been seeing an odd trend. The transport stocks and the general market tend to be trending higher despite little to no signs of strength in actual consumer spending or real economy industries like trucking and rails. The Journal writes:
A new high for transports would “confirm,” in technical lingo, a similar peak for the Dow industrials this week. According to the school of market analysis called Dow Theory, which arises from the ruminations of Wall Street Journal co-founder Charles Dow, having the Dow industrials and the Dow transports in such harmony is strong evidence a bull market is cooking.
But this indicator can send false signals. It was bullish in the spring of 2008, just before the transports and industrials tumbled together.
And reading these charts is a subjective art. Ryan Detrick, technical strategist at Schaeffer’s Investment Research, notes that one could take the view that transports have lagged behind the industrials all year, often a warning sign for stocks. And transports have a good reason for lagging behind: Transportation hasn’t caught up to other recent signs of economic recovery.
One measure of this is the number of railroad cars being loaded with coal, auto parts and other stuff at the nation’s major railroads. Car loadings this year are down nearly 20% from the same period in 2008, putting this on pace to be the worst year since 1982, according to the Association of American Railroads.
The AAR on Thursday reported that loadings jumped last week to their highest levels in nine weeks. But loadings have zigzagged up and down within a downward trend since March, even as transport stocks have risen. Ordinarily, transport stocks and car loadings are more closely correlated, said Ed Yardeni, chief investment strategist at Yardeni Research.
“The plunge in rail-car loadings,” Mr. Yardeni recently told clients, “is one of the most glaring nonconfirmation signals for those of us rooting for an economic recovery and a sustainable bull market.”
The King of Dow Theory sounds equally pessimistic, despite near confirmation in the
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Tags: consumer trends, dow theory, false signals, Stock Market, Transports
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February 11th, 2012 8:20 pm
Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Damn. Two (MJ and Whitney) of the big 4 of the 80s gone – Madonna and Prince remain. Probably the most well known Star Spangled Banner ever…
Disclosure Notice
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund's holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
...
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February 11th, 2012 8:05 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
We have posted various extracts from this piece from Credit Suisse previously. We will post from it again, because, to loosely paraphrase Lewis Black, it bears reposting... especially in the context of the latest and greatest Greek "bailout" (of Europe's bankers), which incidentally, will achieve nothing and merely bring the country one step closer to a military coup and/or civil war.
The flaw
The market is essentially proceeding on the assumption, as we see it, that banks’ capital requirements can be met organically, through earnings and deleveraging. We ...
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February 11th, 2012 6:46 pm
It's Well Past Time for Plan Z
Courtesy of The Automatic Earth
Mario Draghi captured the utter ineptitude of him and every other Eurocrat out there when he said the following at today’s press conference in response to a question about a Greek exit: “To have a Plan B means defeat already. I am confident that all the pieces of this will fall in the proper places.”
Most 5-year old children in pre-school have already been told not to believe that they can always win and that “winning isn’t everything”, but Draghi & Co. still refuse to consider the possibility of failure even as it is staring them in the face. What’s really disturbing is that the stakes here are obviously much, much higher than they are o...
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February 11th, 2012 5:35 pm
Courtesy of Doug Short.
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
It's interesting to watch some of the terms bandied about in headline news. For example, the LA Times headline reads S&P says student loan debt could be next financial bubble.
Next? Could Be?
What with the word "next"? Also what's with the words "could be"? Without a doubt student loans are in a bubble and have been for many years. The source of the problem, as it always is with financial bubbles, is cheap money, loans to nearly anyone, and in the case of student loans, no way to discharge the debt, even in bankruptcy.
From the article:
"Student-loan debt has ballooned and m...
more from Chart School
February 11th, 2012 12:00 am
Top 5 RisersStockRatingAnalysis
ICABUYThe projected value for Empresas ICA is still rising quickly even though past earnings have already improved significantly.
XBUYThe projected value for US Steel is still rising quickly even though past earnings have already improved significantly.
FEICBUYProjected value continues to rise for FEI while long term increases in earnings growth are also becoming more widely expected.
ASBCBUYMany analysts are expecting higher than previously expected long term growth from Associated Bancorp, and its near-term earnings outlook is also improving....
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February 10th, 2012 6:20 pm
Courtesy of Benzinga.
The following are the M&A deals, rumors and chatter circulating on Wall Street for Friday February 10, 2012:
Actuant Acquires Jeyco Pty
The Deal:
Actuant (NYSE: ATU) announced Friday that it has acquired Jeyco Pty Ltd (“Jeyco”). Headquartered near Perth, Australia, Jeyco designs and provides specialized mooring, rigging and towing systems and services to the offshore oil & gas industry in Australia and other international markets. Additionally, its highly engineered products are used in a variety of applications for other markets including cyclone mooring and marine, defense and mining tow systems. Jeyco generates annual revenues of approximately $20 million.
Actuant shares closed at $27.33 Friday, a loss of 0.18% on average volume.
...
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February 10th, 2012 4:11 pm
Courtesy of John Nyaradi.
Greece was “saved” for less than 24 hours but now major ETFs around the world skid into the weekend on Greek fears
After wangling for a week or more, Greek took their new deal to the European Ministers meeting, only to have it promptly rejected and so as we go into the weekend, major global markets and ETFs have again hit the skids on Greece.
After two years of wangling, the European zone is demanding yet more and deeper cuts for Greece to qualify for the next round of bailout loans that will keep the country from going bankrupt on March 20th.
Major European and United States ETF responded negatively to the new developments:
SPDR Dow Jones Industrial ETF (NYSEARCA:...
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February 10th, 2012 1:40 pm
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February 10th, 2012 1:22 pm
Today’s tickers: TRLG, KR & IGT
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February 6th, 2012 9:02 am
Reminder: OpTrader is available to chat with Members, comments are found below each post.
This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options.
Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.
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February 5th, 2012 5:19 am
NEW: Elliott and Ilene are available to chat with Members regarding topics presented in SWW, comments are found below each post.
Here's the latest Stock World Weekly, called "The Relentless Pursuit of Meaningless Metrics."
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January 30th, 2012 7:22 am
Here is a quick update of past trades and our current position.
AA Money
No trade this week as we wait for AA to settle. Phil remarked last week that AA seemed overvalued. In the meantime, it looks like we might have to roll our Feb 9 calls. Good thing we sold only 5 of them against our position.
Last week P&L - 310.00
We lost ground last week, but we still have 11 months to sell premium!
FAS Money
Very good week for FAS Money as we benefited from the large amount of premium sold the previous week. We covered most of the shorts in advance of the Fed speech, but sold another set of options on Wednesday after the speech - 2 FAS calls that expired worthless on Friday, 2 FAS put that we are still holding and 2 FAZ put that we bought back for a profit on Friday. A late stick comparable to last week's almost gave us problems at the end of the day though!
Last week P&L - $4277.00
IWM Money
A decent week in this virtual portfo...
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January 18th, 2012 1:09 am
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Finding new and exciting Biotech companies that target novel mechanisms is like trying to find a needle in a haystack. Sure there are many companies working on cutting edge science, but investing in those companies to reap the rewards of their work is a very dangerous game. More often than not, companies fail because the mechanism does not pan out, the compound(s) do not have pharmacokinetics (get into the body or last very long in the body), or an adverse event happens that knocks years off a development timeline. In addition, the stock can be manipulated by market makers so investors don't know which way is up. I approach investing in biotechs as a long term prospect. I continue to like our current portfolio of biotech companies (join in chat for many of those plays), and we continually add/subtract shares and sell/buy options on ...
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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