ISSUE 68 – DECEM DECEMBER BER 2010
THE SOCIETY OF TECHNICAL ANALYSTS A profes professiona sionall network network for tech technical nical analy analysts sts
MARKET TECHNICIAN TECHNICIAN MARKET THE JOURNAL OF THE STA IN THIS ISSUE T. Pelc
The rhythm of time .................................................................................................... 1
R. Miller J. Monfort
Point and figure charting ........................................................................................... 5 Acute monthly reversals (AMRs) ............................................................................. 7
D. McMinn
DJIA peaks, seasonality and market outcomes.................................................. 10
D. Watts
Bytes and Pieces ...................................................................................................... 13
STA Diploma results .................................................................................................................................... 6
Welcome to the new look journal. We have tried to give it a more 21st-century style and to tie it in with our website. If anyone has any comments or suggestions please e-mail them to Katie at
[email protected] This year's IFTA conference was held in Berlin in the week that the city was celebrating the 20th anniversary of the Wall coming down. As usual it provided an excellent forum for technical analysts around the world to meet and exchange views. One day of the conference was devoted to the energy markets and we hope that some of the speakers will submit articles to the journal in the coming months. Next year's conference will be held in Sarajevo Sarajevo on 6-8 October.
FOR YOUR DIARY TUESDAY January 11th Panel Discussion ....................................................... ......................................................... ..................................... ........Brenda Sullivan, Sucden Financial Commodities ........................... ......................................................... ......................................................... ......................................................... .................................. .....Peter Goodburn, Wavetra Equities ............................ Wavetrack ck ...................................................... ......................................................... ................................................... ......................Tim McCullough, Lloyds TSB Fixed income .......................... ......................................................... ......................................................... ......................................................... ..............................William Moore, RBS Foreign exchange............................. TUESDAY Februa TUESDAY February ry 8th Market analysis using the Elliott Wave Theory ...................................................................Thomas Thomas Anthonj, JP Morgan Chase TUESDAY TUESDA Y March 8th The 3T methodology (trend, targets, timing) ...........Jean-Francois Owczarczak, Management Joint Trust, Geneva
THE SOCIETY OF TECHNICAL ANALYSTS www.sta-uk.org
COPY DEADLINE FOR THE NEXT ISSUE FEBRUARY 2011 PUBLICATION OF THE NEXT ISSUE MARCH 2011
MARKET TECHNICIAN
The rhythm of time By Tom Pelc MSTA CFT CF Te The key theme of my talk to the STA earlier this year was the third tenet of technical analysis analysis – “History repeats repeats itself”. itself”. There is a cyclical cyclical nature to
the natural cycle of the Earth. If we take a top down approach (big picture to small picture), as we should in technical analysis, we see the Earth Earth has roughly a 26,000 year cycle (25,820 years). This is how long it takes to complete the procession of the Equinoxes (for the Earth to travel past all 12 signs of the Zodiac).
financial market oscillations mainly because what we are actually analysing an alysing is human investment investment behaviour behaviour.. This is arguably driven driven by three primary primary emotions “fear “fear,, greed and hope” hope”,, whatever the culture you you look at. at. People People react to a predictable predictable series of emotions emotions in their investments investments – from being cautious about investing investing to eventually facing facing fear and disgust, (being closely linked to Dow Theory) – and this forms the basis of a simple simple Sine wave, which
We are currently in Pisces (the Fish) moving to Aquarius (Water). Arguably an indication of major change in our spiritual belief systems/behaviour, but definitely a cycle change period in late 2012 (December) for the Earth.
in turn is one cycle. The cycle cycle repeats itself over time in in a similar rhythm but Splitting this grand cycle into sub structures we can see 5 smaller cycles (5,125 years each – from the Mayans), with our current sub structure starting around 3113BC and finishing around 21 Dec 2012.
maybe not exactly in the same way.
DOW THEORY
Conviction Enthusiasm
Distribution
d
e t e n e G r m Confidence Growing recognition p o l Participation e v F e e D a r e Caution c i Skepticism r P
5,125 years =
Hope Disbelief
Apprehension Shock & fear
13 smaller cycles called Baktuns 1 Baktun = 394 tropical years (144,000 days Fibonacci no.) Thus we are in the 13th Baktun cycle 1618-2012 according to the Mayan calendar.
Accumulation
Disdain
Time
Looking for when markets may turn, using cycles gives us the timing element for strategic activity (50% of the equation, equatio n, the other other half is focusin focusing g on price). pric e). The The prem premise ise is that that we, we, as people, manipulate our measurement measurement of time (and the calendar) and the suggestion is maybe we should use external influences such as planetary
Surrender Disgust
movements, moveme nts, or lunar lunar cycle cycles, s, or the the actual natural Earth cycle for timing events. The argument is there may be little dualism between natural events and the reactions of the financial markets. There is a lot of speculation about the 2012 date generally; it is significant in
Chart 1: The Grand Cycle – The Heavens and the the Earth Grand Cycle Procession of the Equinoxes = 25,820 yrs
The Grand Cycle – The Heavens and the Earth But measuring time is an interesting exercise since humans have manipulated our measurement of it in history. Today we use the Gregorian calendar (still out by 26 seconds a year) which was a product of its predecessor the Roman calendar. Why do we have 28 days in February and 31 in July and August? It is thanks to Augustus Caesar. But 90 countries today use the alternative lunar calendarr in their calenda their culture culture – namel namely y the 13 13 months calendar with 28 days per month.
•
65% of US publicly traded companies use January to measure the fiscal year.
•
In the UK, prepre-gov govern ernmen mentt owned companies eg, BT Group and National Grid, continue to use the government’s financial year which ends on the last day of March.
•
Many universities have a fiscal year ending in summer months
Earth transits through each of the 12 Zodiac signs = 2152 yrs approx each
We enter the age of Aquarius in 2012
We enter the age of Aquarius in 2012
This article is an abridged version of a talk given to the STA on 8th June
ISSUE 68 – DECEMBER DECEMBER 2010 2010
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MARKET TECHNICIAN
•
In Australia and New Zealand the fiscal year runs from 1st July to 30th
Chart 2: Three cycle principles
June Whateverr the measure, Whateve measure, the cycle is still the same – namely driven by the primary emotions. emotions. If we can get get the data of an instrument going back we can look for the three three cyclic cyclic princ principles iples to to measure forward the next cycle. We need the amplitude (how big a cycle gets), the period, (distance between cycle cyc le troug troughs) hs),, and phas phase e distan distance ce between varying cycle troughs. (Chart 2) When the cycle is not exactly rhythmic we can use various cyclic principles to smooth the pattern from “summation” to “synchronicity” and we can use the concept of proportionality. The amplitude of a 20 day cycle should, in theory, be roughly double a 10 day cycle. The best best situation situation is if if you have a cycle which has a turn confirmed by a
Chart 4 legged ed Doji & Sankawayoi Sankawayoi no myojyo Long legg
Simple example = next cycle date end of July 2010
Kenuki
price pattern or you could try summation to generate pattern signals. (Chart 3). Takuri
Chart 3
Kirikomi
H
Doji S
S
Cable
Subtract
Upside
Upside
Upside
Upside
Upside
Upside
Upside
High
RULE OF 7
Additive
Divide
Given
Multiply
Given
Add
minus
Constanct C
Sequence S
Range R
R*(C/S)) R*(C/S
Low
Objectives
NL C/S
7.00
1.00
7.00
0.32
2.26
1.3682
3.6236
01/06/2003
1.6904
7.00
2.00
3.50
0.32
1.13
1.3682
2.4959
01/06/2001
1.3682
7.00
3.00
2.33
0.32
0.75
1.3682
2.1200
0.32
7.00
4.00
1.75
0.32
0.56
1.3682
1.9321
7.00
5.00
1.40
0.32
0.45
1.3682
1.8193
7.00
6.00
1.17
0.32
0.38
1.3682
1.7441
7.00
7.00
1.00
0.32
0.32
1.3682
1.6904
Low
Total
Cycle
Yo-sentsutsumi
The best situation, is if you have a cycle which has a turn confirmed by
Chart 5
a price pattern, you could also try summation to generate pattern
When the Earth is at the mid-point betwixt two planets 45, 90, 135 and 180 degrees are considered as difficult angles and tough for stocks.
signals eg. previous Double Top.
A 36 week cycle for GBP/USD (chart 4) sees technical patterns signal turns on cycle dates using Japanese candlesticks and added to this is a Lucas table (using
Aug 24 1987 1987 –five –five planets planets were were on the same same ecliptic longitude, this last happened 800 years ago
Monthly Dow Jones
Aug 1987 1987
ratios of 7 compared to range extremes and added to a sequence low – key is the results column on the table far right.) This
is
a
simple
example
of
just
measuring time as a static cycle, but we can use more esoteric techniques such
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ISSUE 68 – DECEMBER DECEMBER 2010 2010
Aug 6 2008 2008 – Mars Mars-Uranus -Uranus crash crash cycle
AUG 1 2010 -
+/- 1 week week 5 pla plane nets ts aligned Cardinal Climax not happened in 1,000 years watch out stock market and the world………
Aug 2008
MARKET TECHNICIAN
Chart 6: UK 10 Year generic generic yield – weekly and 39 week week cycle
as sunspot activity or lunar cycles or even in alignments. Professor
some
Tchijevsky
cases
in
planetary
the
1920s
suggested that, as sunspot activity approaches its maximum, the number of important mass historical events, taken as a whole increases, approaching its maximum during the sunspot maximum
and
decreasing
to
its
minimum during the periods of the sunspot minimum. Sunspots reach a maximum about every 11 years, but
39 week cycle
successive maxima have spots with reversed magnetic polarity, thus the whole cycle is 22.2 years year s long. We are in a quiet period at the moment but huge activity could come between 2011 and 2012 – be warned.
Chart 7: USD Index – Weekly chart with 39 week cycle
KENUKI TOP
When China revalued the Renminbi on 21st July 2005, it was the closest closest the Moon was to the Earth in eight years. My suspicion is that, as a result of their cultural heritage, they are extremely aware of important natural dates. On the Summer Solstice, 21st June 2010, another China story hit the market. The authorities announced they were adopting adop ting a more more “flexi “flexible” ble” exch exchange ange rate policy, moving from the US dollar peg. The charts 6, 7 and 8 are examples of some of the cycles I have observed. The optimal cycle across across many many markets markets is the 37.33 week cycle as my studies have concluded between 36-39 weeks is where most cycles for many assets
Chart 8: Nymex Oil – 25.8 months cycle (sub cycle = 8.6 months x3)
Very simplified E-Wave count with the cycle on a logarithmic chart
cluster. Martin Armstrong is a strong proponent of this 37.33 week cycle and I dedicated a slide in my presentation to his invaluable work. To conclude, conclude, I illustra illustrated ted two two major cycles,, one for cycles for fixed fixed income income products products and the other the decennial cycle of the stock market in years ending with a 7 based on Gann’s original observations. For the fixed income example, calendar weeks 32-34 in 2005 since 1980 were 88% time positive for long bonds i.e. yields fell for that three week period on a net basis. I gave numerous examples of how this this cycle cycle is still still going on; not only has the curve in 2s30s in Swaps flattened overall in that time period but also the butterfly trade 2s10s30s was lower (which is like trading 2s10s vs 10s30s).
ISSUE 68 – DECEMBER DECEMBER 2010 2010
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MARKET TECHNICIAN
One example of this fixed income cycle which is still on going and relevant for this August calendar weeks 32-34. (Chart 9)
Chart 9: US 2s10s30s fly (using Swaps) Daily chart 2006
2006
Finally the decennial cycle for the Dow Jones with bear markets, years ending with a 7 (Chart 10a)
7 th Aug
So what about 2007? What actually happened thereafter thereafter… …
It did did not add up… the market market sho should uld have turned South or a new cycle was building (Chart 10b). The Dow The Dow di did, d, in inde deed ed,, tu turn rn a wee week k afterwards on the 11th October. The initial impulse decline until January 2008 was 20.5% = a bear market. The lunar dates tied in with examples I gave that the decennial cycle has turned on major lunar dates – either New and Full moons or awkward angles. (Chart 10)
Conclusion Seasonality plays a part in many people’s analysis (including economists). The longer the history with reliable data, the more powerful the argument is if it ties in with technical technical signals. signals. There are are cycles within cycles so first look for the big picture picture then work small smaller er.. Use the the rule of multiple techniques. Some suggested key dates to look out for: March 11 2011 and April 4th 2011. These are likely to be a positive time for stocks but increased periods of volatility. volatili ty. More important is mid-June 2011. 2011. This is a major cycle period using 4.3years sub cycle from long term 51 year cycle.
-8bp to -21b -21bp p in weeks 32 -34
Chart 10a 1887 1897 1907 1917 1927 1937 1947 1957 1967 1977 1987 1997 2007
Dec 3 1886 Sept 10, 1897 Jan 19, 1906 Nov 21, 1916 Oct 3, 1927 Mar 10, 1937 May 29, 1946 Apr 6, 1956 Feb 9, 1966 Sep 21, 1976 Aug 25 1987 Aug 6, 1997 ?????? YT Y TD
Apr 2, 1888 Mar 25, 1898 Nov 15, 1907 Dec 19, 1917 Oct 22, 1927 Mar 31, 1938 June 13, 1949 Oct 22, 1957 Oct 7, 1966 Feb 28,1978 Dec4 1987 Nov 12, 1997 (05/10/07)
-20.1% -24.6% -48.5% -40.1% -10.2% -49.1% -24.0% -19.4% -25.4% -26.9% -35.1% -13.2% +12.52% post payrolls
Chart 10b 1887 1897 1907 1917 1 92 927 1937 193 7 1 94 947 1957 195 7 1967 19 67 1 97 977
September Septem ber 19 (-2 (-2.24 .24%) %) and Oct Octobe oberr 12 12 (-2. (-2.29% 29%)) Septem Sep tember ber 21 (-3 (-3.95 .95%) %) and Oct Octobe oberr 12 12 (-3. (-3.90% 90%)) March Marc h 14 14 (-8. (-8.29% 29%). ). Maj Major or ban bankin king g pani panic c Octo October ber 22 Novemb Nov ember er 01 (-4 (-4.16 .16%) %) and Nov Novemb ember er 08 (-4 (-4.21 .21%) %) October 8 ((-3.65%) Octo Oc tobe berr 18 (-7 (-7.7 .75% 5%)) Pan Panic ic/d /dep epre ress ssio ion n April 14 14 ((-2.95%) Octo Oc tobe berr 21 21 (-2 (-2.4 .48% 8%)) Cre Credi ditt cr crun unch ch No fa fall ll => =>2. 2.00 00% % re reco cord rded ed July 27 (-2.17%)
1987 1987 1997 199 7
Octobe Octo berr 1 19 9 (-2 (-22. 2.61 61%) %) Bl Blac ack k Mon Monda day y Octo Oc tobe berr 27 (-7. (-7.18 18%) %) Bl Blue ue Mo Mond nday ay
Chart 10: Dow Daily chart New Moon 11th Oct 2007 and a bearish key day reversal
8th-26th Aug 2011 very bullish rebound period for US long bonds (calendar weeks 32-34). Picks for future investment based on long term cycles are nuclear energy and African stock markets markets – South Africa, Africa, Kenya and Egypt. Others to watch going forward long term are food EDF (PF) and Mitsubishi heavy industries (MITS). “Millionaires don’t use astrology, Billionaires do” J.P. do” J.P. Morgan
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ISSUE 68 – DECEMBER DECEMBER 2010 2010
Fall was 20.5% from Oct 11, 2007- Jan 22, 2008
Full Moon
MARKET TECHNICIAN
Point and figure charting By Richard Miller
Over many years I have studied various charting techniques but, as time went by,, I found that 3-box reversal Point and Figure by F igure charts (P&F charts) char ts) were the most suitable method to use for the analysis of movements in market prices. The objective nature of P&F charts definitely gives a significant advantage over other forms of charting which, in general, rely heavily upon a subjective input in order to achieve a clear result from interpretation. With a 3-box reversal P&F chart, 45 degree trend lines can be drawn objectively from the
With close-only construction the close price only for each chosen time period is added to the chart. This method works well in certain markets, but it does not take into account the intra-time-period highs and lows. This can leave a major data gap, especially when analysing volatile markets. This data gap can, of course, be overcome by using the high/low data for each chosen time period thereby taking into account the full range of price movement. In short, one can say, for example, that a 1 minute high/low P&F chart is extremely close to using tick-data.
first thrust away from the top or bottom, vertical and horizontal counts are also taken objectively. Again, it is purely the product of an objective observation, whether a market is in upward or downward trend.
From my studies, the P&F chart purist concluded that the only data which can be used effectively for the construction of P&F charts is tick-data [i.e., the concept of data based on the old ticker tape, trade by trade, reporting]. There is no doubt, of course, that only tick-data can provide the basis for a totally correct P&F chart construction. However, in today's markets there is just too much tick-d ata and the
Chart 1
process of storing all this data to construct P&F charts, which will inevitably date back over a period of time, would be hugely cumbersome and beyond the scope of all but the larger computers. In stepping away from tick-data, there are two other methods which are used, namely: close-only construction; and, high/low construction.
The main problem with using the high/low construction method is, to state the obvious, that there are two pieces of price data for each time period. This problem can, of course, be overcome by applying a trend biased system. The normal application of this trend bias works in the following manner, namely: when there is an existing column of X's the high takes priority; when there is an existing column of O's the low takes t akes priority. This maintains the correct support/resistance levels on the P&F chart until an “outside price” period occurs where the high and
Chart 2
ISSUE 68 – DECEMBER DECEMBER 2010 2010
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MARKET TECHNICIAN
STA Diploma Results DISTINCTION Pretesh Bhayani Bruno Vignoto Woo Fook Mun
PASS Joy Basford Magnus F Becher Dmytro Bondar Sammy Chammas Kyriakos Charilaou Jack Davidson Jamie Davis Daljit Dhaliwal Yeo Kam Fai Peter S Fox Goay Chia Chia Philip Heurich Leona Gomez-Lopez
the low are both significant. The problem in such a case is this: which price should be recorded? Some experts say that because it is impossible to tell whether the high or low came first during the time period, the basic rule should be maintained, namely: that in a column of X's the high takes priority; and, in a column of O's the low takes priority. Thus, in short, the other prices should then be discarded. This basic method works in most cases because the market invariably “catches up” and consequently the full price movement is recorded in the following columns. In short, the market confirms upwards or downwards movement. However, on some occasions this is not the case and the P&F chart is left with potentially incorrect support/resistance levels. Indeed, some well known experts in this field have said that although this is a problem it should be ignored as it is insurmountable. Well, after years of study and a sudden moment of realisation, I believe that I have found a workable solution to this insurmountable problem and I wish to share my idea with colleagues. By sharing my idea, I am hoping to see whether my idea is robust enough to withstand the scrutiny of others who are also users of P&F charts. For simplicity, I have called my idea the "RM Dot".
Peng Kong Mah James Maitland James Kenneth Seymour Andrew Stone Amresh Subramaniam Eu-Gene Toh Emily Chu-Chun Tseng Samuel Utere Luke John Warren Low Ley Yee
Date of next STA Diploma Exam Wednesday 13 April 2011
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ISSUE 68 – DECEMBER DECEMBER 2010 2010
the mistake of assuming that there is support at 95. Thus, when the price reaches 90 on Day 7, this could be a P&F double bottom sell signal. However, with the simple addition of the "RM Dot", which shows 2 "Dots" in the 2nd column, we have a record of the price reaching 90 and, thus, the P&F double bottom sell signal could be ignored until confirmation at, say, 85. The great advantage, short of recording full price movements, is that the addition of "RM Dots" play no other part in the P&F analysis; save the simple record that the price, e.g., in my given example, dropped to 90. The addition of the "RM Dot" should, of course, only be made if there is a blank box in the opposite direction. If there is an "X" or "O" in these boxes, then support/ resistance has already been recorded and the prices have no impact on support/resistance. I trust that this brief introduction to the "RM Dot", which I believe provides the missing factor in the great value of P&F analysis, is sufficient for you to understand why I am enthusiastic about its value and why I am keen to share the idea with colleagues. I would welcome all comments and further discussion. Please feel free to email me on
[email protected]. Even better, it would be great to see some discussion played out in the columns of this Journal.
The "RM Dot" The clear major advantage of P&F charts is the ability to remove “noise” from the market and give clear, unambiguous indications of support/resistance and entry/exit points. Because of these significant advantages of P&F analysis over and above other forms of analysis, it is imperative that nothing is added to the P&F chart which would detract from these advantages or add in “noise” that has been so successfully removed. Now referring to the given example charts [see chart Nos. 1 and 2]: as P&F chart users will clearly see, Day 5 causes the problem [i.e., an “outside price” period – the problem which has in the past been described as insurmountable]. This is because in standard P&F charting there is no record of the fact that the price reached 90 and rallied to 125. The reader of the chart could therefore make
The STA Diploma Course The STA Diploma Course will commence in the New Year. The course runs for one evening a week over an 11 week period, commencing 12 January 2011. The course also includes an Exam Preparation Day. The cost of the January 2011 course is £2,695. The course fee includes membership of the STA for one year, the course itself, the Exam Preparation Day and Exam. For further information, please contact Katie Abberton on
[email protected]
MARKET TECHNICIAN
Acute monthly reversals (AMRs) By Joaquin Monfort Staying with the trend is the oft-stated goal of many an investment strategy and this article proposes a long-term strategy technique applicable across most markets which will aid investors in achieving precisely that. The results below show a solid track record back-tested over the last eight to 30 years, with consistent returns (see results below).
It has been noted that major trend changes often exhibit an early characteristic which distinguishes them from mere corrections of the prevailing trend. This is not true all the time but many times it is. This characteristic is that major trend reversals tend to occur with an initial ‘explosive’ change in price. This is the initial lift-off stage. Corrections can have this characteri characteristic stic too but it is more often the case that it accompanies stronger longer term cyclical market moves. Expressed in another anot her way, it is the angle of ascent or descent compared to the angle of the established trend which helps differentiate the two types of market activity. In a reversal, the angle tends to be sharper in the direction of the new trend than in the direction of the dying trend. This is illustrated in the diagram below:
rise after the low. The ‘y’ and ‘z’ degrees represent the angles of ascent and descent and the odds favour the occurrence of a reversal when y is higher than z over the same period of time. This can be represented mathematically as: Reversal = y degrees > z degrees (over same time period). Corrections tend to exhibit the opposite, which means the angle of the main trend tends to remain the more acute acut e as shown graphically below:
monthly timescale. Looking at new highs or lows and the bars on either side, it is possible to make judgement about the strength of a correction or reversal and which category the market activity might fall into. Whilst it could be possible to measure angles in real time and compare them, this approach would be complicated to develo dev elop p – alt althoug hough h it pro provide vides s an exciting area for further research. There is, however, a much simpler way which avoids complex trigonometry and yet encapsulates the core principle of the idea of a sudden explosive change in direction. By simplifying the application of the principle it can be adopted quite easily as a strategy technique. Using the height of price bars as a guide and using usi ng monthly bars it is possible to measure the rate of ascent and descent of a move quickly and easily. At market turns, where the price bar in the opposite direction to the established trend is stronger and higher then the preceding bar it signals that the ascent is an AMR. Where the bar is weaker it signals a correction. The charts below show how the principle is applied in practice. Fig 1a represents the initial green bar. The next requirement is for another bar which makes a new low/high, and a third bar which fails to make a new high or low and actually breaks down to below or above the low/high of the first bar. This signals a reversal. Figs 1a, b and c show the progression of the bearish version of the setup. The trigger for the analysis technique’s technique’ s signal occurs at point ‘a’ on figure 1c.
In this case the mode of market behaviour could be represented mathematically as
Fig 1a
Fig 1c
Correction = y degrees < z degrees (over same time period).
The diagram above represents idealised price activity during the tail-end of a bear market. The price has been falling but then bottoms out and rises again in a countertrend rally. The major change in trend is signalled by the rapid sudden
In a way this makes perfect sense given the initial drive required to change an established trend. I found that where this initial thrust was absent the odds
Fig 1b
favoured the anticipation of merely a corrective phase before resumption of the existing trend. The AMR works best on a longer term
ISSUE 68 – DECEMBER DECEMBER 2010 2010
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MARKET TECHNICIAN
The bullish version is the inverse of the above setup and is shown below: Fig 2a
Chart 1: GBP/USD
Fig 2c
Fig 2b
The bullish buy signal would be triggered at the high of candle 1: point b on the diagram. A correction is anticipated where the market fails to break above either points ‘a’ or ‘b’.
Chart 2: Real examples of AMRs
Variations Apart from the classic set-ups described above, I have included a variation. Obviously the main principle is that the market rebounds in a more acute move to that which it preceded and so I have widened the definition to include monthly key reversals too. A monthly key reversal is a bar which posts a new high or low and then during the same bar reverses posting a new low or high respectively. Chart 1 shows a bearish key reversal from the chart of the GBP/USD. The signal for the key reversal variant works a little differently from that of the classic 3-bar setup. Given that the usual signal point has already been surpassed by the 2nd key reversal bar, the signal is given at the low/high of the key reversal bar and is triggered when the 3rd bar passes below or above that point. Chart 2 is an illustration of some real examples of AMRs using EUR/USD.
Trading the signals The trading system derived from this analysis technique is illustrated above and derives its signals from the set-ups themselves. This is because the triggering of stops means de facto that the reverse signal has been given and a new order in the opposite direction is triggered at the same time, thus the
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ISSUE 68 – DECEMBER DECEMBER 2010 2010
trader is kept in the market for most of the time. The monthly time-scale reduces the number of whipsaws. Were trading the signals in the above chart of the EUR/USD, we would start by placing a buy trigger trigger order at at the May May ‘07 candle highs and our initial stop loss at the June ‘07 candlestick lows. July would have triggered our buy order since it broke the May highs. August set up another buy order with a lower low and September’s long marabuzo candle would have triggered another buy order at the July highs. We would now place stops for both orders at the August lows.
shooting star produces a more likely reversal opportunity and we would move our stops and short trigger up once again to the October lows but, once again, the market remains bullish and keeps rising. The next major opportunity to go short occurs in March ‘08 but although there is a move down the market fails to take out the February lows so our long trades are still running. Eventually in July ‘08 there is an acute enough reversal to trigger the stops on both our longs and open a short order. After the devastating bear of 2008 the market reverses in ‘09 but there is no AMR to close out our shorts and open
At the end of October we would move our stop up to the September lows in the unlikely event that the market turned around and came back down rapidly triggering a short. November’s
any longs. Eventually in November ‘09 there is another acute decline which opens a second short order so we are short 2 contracts. June’s hammer created another AMR set up which would
MARKET TECHNICIAN
require a breach of May’s highs of 1.3342 – a considerable reversal. As can be seen from the example above, this trading system is a simple low maintenance turn-key style strategy which is also quite good at keeping a trader in the trend. All that is required to operate the system is to check the monthly charts at the end of each month and move the stop-and-reverse orders to the high or low of the last candle. What is more, back-tested for major currency pairs it has proven profitable – particularly for the dollar pairs.
Results:
July 2010
EUR/USD
USD/JPY
GBP/USD
USD/CHF
Gross Profit
58,691
281,570.00
528, 14 143.00
276,263.03
Gross Loss
10,711
79,069.00
156,491.50
99,933.35
Net Profit
47,980
202,501.00
371,651.50
176,329.68
Total no of trades
8
54
61
51
Profitable trades
4
24
27
25
Unprofitable trades
4
30
34
25
14,672.75
11,732.10
19,560.85
11,050.53
2,677.75
2,635.65
4,602.69
3,843.89
21,477
58,332.60
83,210.00
59,031.09
3,928
5,569.88
16,000.00
12,534.88
48,920
0
0
2,189.23
8 yrs
35yrs
35yrs
35yrs
3 mon onth ths, s, 1 da day y
3mon 3m on,, 29 da days ys
3mon 3m on,, 29 da days ys
3mon 3m on,2 ,29 9 da days ys
100,000
100,000
100,000
100,000
In US Dollars ($)
Avg winning trade Avg losing trade
largest winning trade
Strategy notes
largest losing trade
The signal created by the AMR can either be used in conjunction with other indicators or as a stand alone investment strategy. The signal works best in volatile markets so it could be optimised using Average True Range to avoid losing signals in sideways
Open position P/L
markets. If being used as a stand alone investment strategy, the following additional rules apply: 1) If a key reversal occurs, go back a month before the first month to find out the direction of the trend. If up then the key reversal is bearish, if down then bullish. 2) Allow for pyramiding: if multiple signals occur in the same direction, which is a feature of this strategy, allow pyramiding. When a signal in the opposite direction is triggered then close all the trades in the pyramid. Use the most recent trade entry point for stop placement and remember to make the stop/buy to cover orders for all the contracts in the pyramid!
Results The table shows the results for various periods up until July 2010. The start dates were between 8 and 35 years back, depending on the security in question. The euro, for example, it is eight years because it has a shorter history compared to the others. The results included a 1% commission cost and 3% slippage costs.
Capital Requirements Although trade size was set at 100,000
Trading Period Tradesize (In units of currency)
currency units, given that margin is
for periods out of the market was set at
quite generous in the foreign exchange market, the capital requirement varied depending on the maximum drawdown for the particular security. At the time of writing (in Oct 2010) these maximum draw-downs stood at $15,433.97 for the USD/JPY, $10,551.00 for EUR/USD, $48,430 for the GBP/USD and $28,616.80 for the USD/CHF.
2% in the broker account. Brokers do vary quite a lot however on what they will pay you. Calculating carry trade profit or loss would be a necessary exercise to any serious application of the strategy given the long periods in the market.
Risk/Reward There was no strict constant static risk/reward because the size of the initiating candlestick could vary. Given the moving stop beyond the first month, the risk/reward varied after that too. The results showed however that on average the rewards far exceeded the risks. But the actual probability success rate hovered around the 50% or just below and it was the greater reward that t hat made the strategy profitable rather than a higher probability success rate. This lends weight to the principle underpinning underpinnin g the strategy that the AMR is good at determining changes in trend at an early stage. It is also highlights the importance of overlaying any trading system with a disciplined money management approach i.e. letting profits run and cutting losses.
Comparison with 5% interest/annum Taking the minimum capital requirements above from the maximum draw-down figures we can also assess what the money would have earned had it been placed in a savings account to make a comparison. Below are the results for an annual 5% return. EUR/USD = $15,588.53 USD/JPY = $85,134.02 GBP/USD = $267,140.60 USD/CHF = $157,850.70 These show that, apart from the EUR/USD pair which far outperformed a regular savings account, the other pairs spread over 35 years only beat the 5% savings account by quite small amounts, particularly in the case of GBP/USD – but crucially they did outperform the savings account. This is particularly attractive in a low interest rate environment when it is increasingly hard to find assets yielding a 5% return.
‘Carry’ Trade Considerations Interest accrued or deducted because of interest rate differentials were also not included or calculated although interest
Joaquin Monfort is an analyst for the internet Forex broker www.Forex4you.com
ISSUE 68 – DECEMBER DECEMBER 2010 2010
9
MARKET TECHNICIAN
DJIA peaks, seasonality and market outcomes
Table 1
DJIA peak pairs and market outcomes
High
High
Comments
Sep Se p 04, 189 1895* 5*
Sep Se p 05, 05, 18 1899 99
AODPP AODP P rise rises s and and fall falls s took took pla place ce bet betwe ween en Dec Dec 18 18 and Dec 23. The final lows were recorded on Aug 08, 1896 and Sep 24, 1900.
If major peaks form around the same month, they will often be followed by similar peak-panic intervals and market outcomes, a trend that has held up very well since 1895. Numerous examples may be given of this phenomenon in US financial history. The peaks in the Dow Jones Industrial Average (DJIA) were considered in relation to the ensuing biggest one day rises and falls. The annual one day post peak (AODPP) rise and AODPP fall were taken as the biggest one day percentage DJIA rise or fall in the year after a major market top. t op. Seasonality was also appraised for DJIA peaks and subsequent panics and rallies. The timing of major DJIA peaks by month and day (year ignored) is hypothesised to have relevance on how subsequent market trends develop.
Jun Ju n 12, 12, 1901 1901
May Ma y 29, 29, 1946 1946
Two ma majo jorr one one day day fa fall lls s six six da days ys ap apar artt occ occur urre red d in in earl early y September after each of the respective highs in June and May. AODPP rises were recorded on Sep 16, 1901 and Oct 15, 1946. The protracted bear markets persisted until Nov 1903 and Jun 1949. Black Thursday occurred
On a technical note, the DJIA data are based on closing values throughout this article. Peaks at the beginning of a bear market were sourced from
By David McMinn
The peak at the beginning of a bear market can be a key indicator for predicting US market outcomes. This paper considers two key factors – the intervals between the peaks and ensuing panics, as well as the seasonal timing of these events.
on May 9, 1901 prior to the 1901 top, but this dramatic spring event had no counterpart in 1946. Jan Ja n 19, 19, 1906 1906
Jan Ja n 14, 14, 2000 2000
AODPP AODP P ris rises es an and d fal falls ls oc occu curr rred ed in th the e 7 wee weeks ks to Ma May y 4. 4. The parallels continued into the subsequent year, with stock market tremors on Mar 14, 1907 (-8.29%) & Mar 12, 2001 (-4.10%) and major autumn panics in 1907 and 2001. Bear market lows took place on Nov 15, 1907 and Sep 21, 2001.
Nov No v 19, 190 1909 9
Nov No v 21, 1916 1916
AODPP AODP P fal falls ls we were re ex expe peri rien ence ced d a fe few w mon month ths s lat later er on Fe Feb b 07, 1910 and Feb 01, 1917. The final lows were reached on Sep 25, 1911 and Nov 19, 1917.
Sep Se p 30, 1912 1912
Octt 09, Oc 09, 2007 2007
Pan anic ics s hap happe pene ned d on on Jan Jan 20 20,, 191 1913 3 and and Ja Jan n 21, 21, 20 2008 08.. Bot Both h bear markets were drawn-out and severe. In 1914, the New York stock market was closed after the outbreak of WWI, while the world financial system neared complete collapse during Black October in 2008.
Nov No v 03, 03, 1919 1919
Nov No v 12, 12, 1938 1938
The AOD The AODPP PP fa fall lls s wer were e exp exper erie ienc nced ed on Ma May y 21, 21, 19 1920 20 an and d Apr 08, 1939. The parallels extended in the subsequent year with major one day rises and falls taking place in the two months to July 15.
Sep Se p 03 03,, 19 1929 29
Aug Au g 25 25,, 19 1987 87
The bigg The bigges estt stoc stock k mark market et cra crash shes es in in US hist histor ory y took took place some 55 days after these peaks. The dramatic slumps were brief with post crash lows on Nov 13, 1929 and Dec 04, 1987.
Aprr 06, Ap 06, 19 1956 56
Aprr 27, Ap 27, 19 1981 81
Ther Th ere e were were no no nota notabl ble e AODP AODPP P fall falls s over over -2. -2.25 25% % afte afterr these peaks. Even so, similarities were experienced in the subsequent year, year, with key falls on Oct 21, 1957 and Oct 25, 1982. Final lows were recorded on Oct 22, 1957 and Aug 12, 1982.
Jan Ja n 05, 05, 19 1960 60
Jan Ja n 10, 10, 197 1973 3
The AOD The AODPP PP fa fall lls s occ occur urre red d on on Sep Sep 19 19,, 196 1960 0 and and No Nov v 26, 26, 1973. Otherwise there were no resemblances between the 1960 correction and the severe 1973-74 bear market.
Jull 16, Ju 16, 19 1990 90
Jull 17, Ju 17, 19 1998 98
AODP AO DPP P fa fall lls s we were re ex expe peri rien ence ced d on Au Aug g 06 06,, 19 1990 90 an and d Au Aug g 31 1998 respectively respectively.. Both markets declined by around -20% and the financial distress was short-lived with lows on Oct 11, 1990 and Aug 31, 1998.
* High based on the 12 Stock Average index.
10
ISSUE 68 – DECEMBER DECEMBER 2010 2010
fiendbear.com for the 100 years to 1996, with additional DJIA peaks in 1998, 2000 and 2007 being inserted by the author a uthor..
Peak – AODPP Fall Intervals If DJIA highs occurred near the same month and day, then close parallels can arise on how the ensuing market unfolded. The September 3, 1929 and August 25, 1987 record peaks provided the best example, as both were followed 55 days later by the most spectacular October panics in US history. The violent market decline lasted only a few months, with the DJIA hitting bottom on November 13, 1929 and December 4, 1987. An overall summary of peak – AODPP fall intervals for the DJIA is given in Table 1 and Appendix 1. Some of the parallels were quite remarkable as, for example, the highs in 1895 – 1899, 1901 – 1946, 1906 – 2000 and 1929 – 1987. Anomalies. DJIA peaks occurring at the same time of the year will not always be followed by comparable market outcomes. Trends after the secular high of September 3, 1929 aligned with those experienced after August 25, 1987. Comparisons could not be made with outcomes after the September 4, 1895 or September 5, 1899 tops. Other peak DJIA pairs did not produce parallelism: parallelism:
MARKET TECHNICIAN
September 12, 1939 and September 21, 1976; January 5, 1960 and January 10, 1973; December 13, 1961 and December 3, 1968; January 10, 1973 and January 14, 2000.
Table 2
The obvious question arises as to whether the approach was valid or due to coincidence. Statistical testing would be very difficult to undertake to help clarify this point. However, it seems improbable that the numerous examples in Table 1 would take place collectively by chance. When the peak-panic parallels do arise, they can be very precise (eg: 1895 – 1899, 1901 – 1946, 1912 – 2007, 1929 – 1987 and so forth). Importantly, some years cannot be appraised because they contained no significant AODPP falls over about 2.25% (eg: after the 1956, 1968, 1976 and 1981 peaks). The April 23, 2010 DJIA high marked the beginning of yet another market collapse and aligned most closely with peaks on April 6, 1956 and April 27, 1981. No one day falls over -2.25% were experienced in the year after the tops in 1956 or 1981. Even so in the month to June 5, 2010, there were three days that registered falls between -3.10% and -3.60%. (This included the May 6 Flash Crash, when the intra-day low plunged by over 9.00%.) Given such inconsistencies, the 2010 market decline may not follow other historic DJIA bear markets that commenced in April.
Seasonality
DJIA highs, seasonality and AODPP falls
DJIA Highs
DJIA AODPP Rises and Falls (a)
No
Feb 01 – Sep 10
Aug 05 – Feb 05
23
Anomalies
-
Sep 11 – Jan 31
Jan 20 – Aug 05
Anomalies
Nov 13, 1919, Sep 19, 1960, Nov 26, 1973 & Dec 22, 1916
22 4
(a) AODPP rises and falls => 2.00%
Table 3
DJIA Highs
AODPP Falls
No
AODPP Rises
No
Feb 01 – Sep 03
Aug 01 – Oct 31
9
Sep 05 – Oct 31
7
Anomalies
Feb 01, 1982
1
Jan 28, 1982 Jan 17, 1991
2
Sep 04 – Sep 10
Dec 18 – 23
2
Dec 18-23
2
Anomalies
-
-
-
-
Table 4 DJIA Peak
1st OD Fall
%
2nd OD Fall
%
Jun 12, 1901
OD Rise
%
Sep 07, 1901
-4.43
Sep 13, 1901
-4.27
Sep 16, 1901
+4.10
May 29, 1946
Sep 03, 1946
-5.56
Sep 09, 1946
-4.41
Oct 15, 1946
+3.58
May 21, 2001 *
Sep 11, 2001
na
Sep 17, 2001
-7.13
Sep 24, 2001
+4.47
May 02, 2008 *
Oct 09, 2008
-7.33
Oct 15, 2008
-7.87
Oct 13, 2008
+11.08
(a) These intra bear market peaks were the high for the calendar year year.. Abbreviation: OD – One Day Day..
Since 1910, major September-October annual one day falls (=> -3.60%) were preceded by a peak in one of three
NB: The annual one day fall is taken as the biggest % one day fall in the year commencing commencin g March 1.
ways: For all highs between February 1 and September 10, the 23 ensuing AODPP rises and falls (=> 2.00%) happened in the half year commencing August 5, with NO EXCEPTIONS (see Appendix 2). This would be very unlikely to arise by chance. For the DJIA peaks between September 11 and January 31, most ensuing AODPP rises and falls occurred in the 6.5 months commencing January 20. (Table 2) Remarkably, DJIA peaks between February 1 and September 3 nearly always had ensuing AODPP falls (=> 2.00%) in the three months to October 31. The corresponding AODPP rises (=> +2.00%) happened in September and October, with two anomalies in January. (Table (T able 3) 3)
• A record high happened between
•
•
September 5 and October 31 and was followed by an AODPP fall within 10 days. The associated downturn was a brief correction (1927, 1955, 1986 and 1989). If the record high occurred from July 15 to September 3, a major AODPP fall took place some months later and the market decline was usually severe but only lasted a few months (1929, 1987, 1997 and 1998). If the market peak for the calendar year happened between February 24 and May 31 and was not a record high, then the ensuing autumn AODPP fall was within a protracted bear market (1931, 1937, 1946, 2001 and 2008).
Curiously, four autumn panics occurred after market highs between May 1 and June 12. Each consisted of two major one day percentage falls six days apart. The autumn panic of 1901 was triggered by the assassination of President McKinley and has been included, together with the 1946, 2001 and 2008 events. (Table 4)
Conclusions There was a notable propensity for peak-panic intervals to be similar for those bear markets beginning at the same time of the year. As a trend it quite reliable – surprising given simplicity of the approach. When peak-panic parallels do arise, they
ISSUE 68 – DECEMBER DECEMBER 2010 2010
was the the can
11
MARKET TECHNICIAN
be very precise. Unfortunately, the peak-AODPP rise intervals had a poor track record and only worked well on a few occasions (eg: 1895-1899 and 1929-1987-1997). Thus it would be spurious to use them as an indicator of future AODPP rises. Seasonality in the timing of major DJIA tops and AODPP rises and falls was the other notable finding. The peaks from February 1 to September 3 were often followed by AODPP rises and falls in the three months to October 31. Peaks taking place between September 11 and January 31 usually had the ensuing AODPP rise and falls in the 6.5 months commencing January 20. From the findings, major DJIA peaks can be a useful indicator, when the subsequent AODPP falls were most likely to occur. The month and day when a major peak formed at the beginning of a bear market are crucial for comparisons to be made to historic trends. However, the relationship was not 100% accurate, with historical anomalies being evident. McMinn (2006, 2009) established strong links between Moon-Sun cycles and market cycles. Given the importance of DJIA peak seasonality, the position of the Sun on the ecliptical circle could be hypothesised to be highly relevant in the timing of US stock market peaks and panics. (The Sun is at the same position on the ecliptical circle at the same time of the solar year.) Alas, the Moon-Sun mathematics involved in market timing is extremely complex and impossible to
Appendix 1
DJIA peak – AO A ODPP fall intervals
1895 and 1899 Peaks DJIA Peak
AODPP Fall
%
AODPP Rise
%
Sep 04, 1895 (a) Sep 05, 1899
Dec 20, 1895 Dec 18, 1899
-6.61 -8.72
Dec 23, 1895 Dec 19, 1899
+4.37 +4.72
BM Low Aug 08, 1896 Sep 24, 1900
1901 and 1946 Peaks DJIA Peak
AODPP Fall
%
OD Fall
Jun 12, 1901 May 29, 1946
Sep 07, 1901 Sep 03, 1946
-4.43 -5.56
Sep 13, 1901 Sep 09, 1946
%
AODPP Rise
%
-4.27 -4.41
Sep 16, 1901 Oct 15, 1946
+4.10 +3.58
1906 and 2000 Peaks DJIA Peak
AODPP Fall
Jan 19, 1906
Apr 27, 1906 May 01, 1906 Apr 14, 2000
Jan 14, 2000
%
AODPP Rise
%
-2.76 -2.73 -5.64
May 04, 1906
+3.04
Nov 15, 1907
Mar 16, 2000
+4.98
Sep 21, 2001
OD Fall Jan 19, 1906 Jan 14, 2000
%
Mar 15, 1907 Mar 22, 2001
OD Rise
-8.72 -4.08
%
Mar 16, 1907 Mar 26, 2001
+6.69 +3.28
BM Low
Panic Oct 22, 1907 Sep 11, 2001
1909 and 1916 Peaks DJIA Peak
AODPP Fall
%
AODPP Rise
%
Nov 19, 1909
Feb 07, 1910
-3.44
Nov 21, 1916
Feb 01, 1917
-7.24
Jun 07, 1910 Jul 28, 1910 Dec 22, 1916
+2.99 +3.01 +5.49
1912 and 2007 Peaks DJIA Peak AODPP Fall Sep 30, 1912 Jan 20, 1913 Oct 09, 2007 Jan 21, 2008
% -4.90 (b)
AODPP Rise Jun 12, 1913 Mar 11, 2008 (c) Mar 17, 2008 (c)
% +3.01 +3.55 +3.41
1919 and 1938 PEAKS DJIA Peak
AODPP Fall
Nov 03 1919
May 19 1920
-4.22
%
AODPP Rise Nov 13 1919
+3.30
%
OD Fall Jun 20 1921
-3.49
%
OD Rise Jul 06 1921
+3.18
%
Nov 12 1938
Apr 08 1939
-3.86
Sep 05 1939
+7.26
May 14 1940 May 21 1940
-6.76
Jun 12 1940
+4.74
-6.78
1929, 1987 and 1997 Peaks DJIA Peak
AODPP Fall
%
AODPP Rise
%
Sep 03, 1929
Oct 28, 1929
-12.83
Oct 30, 1929
+12.24
Nov 13,1929
unravel based on current knowledge.
Aug 25, 1987 Aug 06, 1997
Oct 19, 1987 Oct 27, 1997
-22.61 -7.18
Oct 21, 1987 Oct 28, 1997
+10.17 +4.71
Dec 04, 1987 Nov 12, 1997
References
1956 and 1981 Peaks
fiendbear.com. DJIA Bear Markets of the Past 100 Years. www.fiendbear.com/bearenc1.htm
DJIA Peak
OD Fall
Apr 06, 1956 Apr 27, 1981
Oct 21, 1957 Oct 25, 1982
%
OD Rise
%
-2.48 -3.52
Oct 23, 1957 Aug 17, 1982
+4.12 +4.90
PC Low
BM Low Oct 22, 1957 Aug 22, 1982
1990 and 1998 Peaks
McMinn, David. Market Timing By The Moon & The Sun. Twin Palms Publishing. 2006.
DJIA Peak
AODPP Fall
%
AODPP Rise
%
Jul 16, 1990 Jul 18, 1998
Aug 06, 1990 Aug 31, 1998
-3.32 -6.63
Jan 17, 1991 Sep 08, 1998
+4.57 +4.98
McMinn, David. Market Timing Moon Sun Research 2006-2009. Privately Published. 2009.
(a) Peak based on the 12 Stock Average index.
PC Low Oct 11, 1990 Sep 10, 1998
(b) Worldwide stock market panics occurred on January 21, 2008. However However,, the US market was closed on the day due to Martin Luther King Jnr holiday. Even so, this date was taken as the DJIA AODPP fall for 2007. (c) The two biggest percentage one day rises in the 11 months after the Oct 09, 2007 high. Abbreviations: BM Low – Bear Market Low; PC Low – Post Crash Low. AODPP – annual one day; OD – one day. Source: McMinn, 2009.
12
ISSUE 68 – DECEMBER DECEMBER 2010 2010
MARKET TECHNICIAN
Appe Ap pen ndi dix x2
DJIA DJ IA pe pea a ks ks a nd nd en ens s uri uring ng AO AODP DPP P ri ris ses and f all alls s (a (a) ) % Fall
DJIA AODPP Fall
Feb 09, 1966
Oct 03, 1966
-2.10
Oct 12, 1966
+2.58
Mar 10, 1937
Oct 18, 1937
-7.75
Oct 20, 1937
+6.07
Apr 06, 1956
(b)
Apr 27, 1981 (c)
Aug 24, 1981
-2.23
Feb 01, 1982
-2.22
May 29, 1946
Sep 03, 1946
-5.56
Oct 15, 1946
+3.58
Jun 12, 1901
Sep 07, 1901
-4.43
Sep 16, 1901
+4.10
Jul 16, 1990
Aug 06, 1990
-3.32
Jan 17, 1991
+4.57
Jul 17, 1998
Aug 31, 1998
-6.63
Sep 08, 1998
+4.98
Aug 25, 1987
Oct 19, 1987
-22.61
Oct 21, 1987
+10.17
Sep 03, 1929
Oct 28, 1929
-12.83
Oct 30, 1929
+12.34
Sep 04, 1895 (d)
Dec 20, 1895
-6.61
Dec 23, 1895
+4.73
Sep 05, 1899
Dec 18, 1899
-8.72
Dec 19, 1899
+4.72
Trade with Precision
Sep 12, 1939 (c)
May 14, 1940
-6.76
Jun 12, 1940
+6.73
May 21, 1940
-6.78
Head trader Nick McDonald presents free training online to those who open an account with the brokerage firm ICE Futures. He aims to give people a real feel for trading the markets. So, for the price of a trade, you get free training. For those with a large enough brokerage account, two complimentary trading videos are available via the following link. http://www.tradewithprecision. com/ice_market_outlook.
-
-
DJIA AODPP Rise
% Rise
Bytes and Pieces
DJIA High
(b) Jan 28, 1982
+2.56
Sep 21, 1976
(b)
(b)
-
Sep 30, 1912
Jan 20, 1913
-4.90
Jun 12, 1913
+3.01
Oct 09, 2007 (e)
Jan 21, 2008
(f )
Mar 11, 2008
+3.55
Mar 17, 2008
+3.51
Nov 03, 1919
May 21, 1920
-4.21
Nov 13, 1919
+3.30
Nov 12, 1938
Apr 08, 1939
-3.86
Jul 17, 1939
+3.41
Nov 19, 1909
Feb 07, 1910
-3.44
Jul 28, 1910
+3.01
Nov 21, 1916
Feb 01, 1917
-7.24
Dec 22, 1916
+5.49
Dec 03, 1968
(b)
Dec 13, 1961
May 28, 1962
-5.71
May 29, 1962
Jan 05, 1960
Sep 19, 1960
-2.56
(b)
Jan 11, 1973
Nov 26, 1973
-3.40
May 24, 1973
+3.27
Jan 14, 2000
Apr 14, 2000
-5.64
Mar 16, 2000
+4.98
Jan 19, 1906 (c)
Apr 27, 1906
-2.76
May 04, 1906
+3.04
May 01, 1906
-2.73
-
(b)
+4.68 -
(a) The ensuing AODPP rise and AODPP fall were taken as the biggest one day percentage change in the year after the peak at the beginning of a DJIA bear market. (b) No AODPP rise and/or AODPP fall over 2.00% took place in the year after the peak. (c) Two almost identical percentage AODPP falls occurred after the highs in 1906, 1939 and 1981. (d) Based on the 12 Stock Average index. (e) Two AODPP rises of about +3.50% were recorded in mid-March. They were the biggest one day rises in the 11 months after the Oct 9, 2007 peak. (f) Major o ne day falls were recorded worldwide on January 21, 2008. However, the US stock market was closed due to the Martin Luther King Jr holiday. Even so, this date was taken as the DJIA AODPP fall for 2007.
Maximize your profits with Omnitrader 2011 Nirvana Systems Omnitrader now comes with a new dynamic profits module that maximises the potential profit in every trade by allowing optimisation of systems, filters, confirmers and stop exits. This uses the adaptive reasoning module to derive the optimal parameters via a dynamic optimisation that can constantly adapt to new market conditions. For details, see: http://www.omnitrader.com/up grade/OT2011.pdf
Tick-Tock ProRealTime is an excellent online charting and technical analysis program that allows system testing using real-time data down to tick level for stocks, futures, indices and currencies. The integrated data handling makes this pack a pleasure to use. www.prorealtime.com/ Gannalyst Pro 5.0 is now free It is not often that you get a $500 technical analysis program (especially one that has a set of Gann Tools) free of charge – although donations are welcome. This is a firm favourite technical analysis package as its professionally programmed. There is also free training available with a Gann slant no doubt. http://www.gannalyst.com/
Source: McMinn, 2009.
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