Skd Converter - Point Figure Charting 3Rd Edition Thomas Dorsey Pdf Files - Foxit Pdf Editor V2 0 10 11 News Lincoln. - Corps Of Engineers Small Boat Operator License - Manual Del Ingeniero Mecanico Marks Pdf Free - Aladdin Hardlock Usb. USER MANUAL v. 1.0 OVERVIEW OF THE SOFTWARE. This CD edition is very strictly limited to 1,0. Reissue of classic Deram album by keyboard dominated progressive rock band from the UK.- Agamenon: Todos Rien De Mi. CD / LP (GUESSCD0. Hippie group from Madrid, this is no doubt the most acid psychedelic rock album recorded in Spain in the 7. It is their sole album, originally. Conduire Un Vehicle De Promenade Pdf Writer - Light Up Sketchup Mac Crack - Canadian Foundation Engineering Manual 2006 Pdf To Excel - Point Figure Charting 3Rd Edition Thomas Dorsey Pdf To Excel - Tomtom Chinese Voice Download For Gps.
288 The Point and Figure Methodology—A Complete Analysis Toolfell 10 percent. In 2002, the 30 Year Yield Index fell 12 percentand the S&P 500 fell 23 percent. Conventional wisdom wouldsay that in a rising interest rate environment, the long end ofthe curve would be the most volatile and thus the most risky.This isn’t always the case. The 5 Year Yield Index moved to abuy signal in 2004, well before the 30 Year Yield Index did inOctober 2005. The 5 Year Yield Index is up substantially morethan the 30 Year Yield Index since April 2004, and thus theshort end bond ETF, the iShares Lehman 1 to 3 Year Bond Fund,has underperformed the long end, the iShares Lehman 20+ YearBond Fund. It reminds me of the following Zen story (source: http://www.rider.edu/∼suler/zenstory/zenstory.html): After 10 years of apprenticeship, Tenno achieved the rank of Zen teacher. One rainy day, he went to visit the famous master Nan-in. When he walked in, the master greeted him with a question, “Did you leave your wooden clogs and umbrella on the porch?” “Yes,” Tenno replied. “Tell me,” the master continued, “did you place your umbrella to the left of your shoes, or to the right?” Tenno did not know the answer, and realized that he had not yet attained full awareness. So he became Nan-in’s apprentice and studied under him for 10 more years. In the end, the market will do what it wants to do. Our job isto listen and be aware of the market’s movements by examiningthe charts and then taking the appropriate actions. At this point in the book, you have really learned all of theconcepts there are to know. It’s just a matter of applying thoseconcepts to different areas of the market. For instance, let’stake the RS tool that is applied to individual equities and applyit to the fixed income markets. Using this dynamic tool, we cancompare the fixed income markets to the equity markets andwithin the fixed income markets, we can find out those areaswith the weakest and the strongest relative strength. For thiscomparison we will use the iShares Lehman Aggregate BondIndex (AGG) to the S&P 500 (SPX). The iShares Lehman AGG is
Fixed Income Indicators 289a measure of a broad spectrum of different types of bonds aswell as maturities and quality so it is a good overall picture ofthe bond market. In the RS chart we will use a smaller scalethan the traditional equity chart so we can still look at the buyand sell signals for guidance as to when we want to overweightfixed income in the portfolio. The gray shaded areas are whenthis RS chart is on a sell signal and the denominator, the S&P500, should outperform. The lightly highlighted area is whenthe RS chart is on a buy signal and suggests the numerator, theAGG, should outperform. As with most RS charts, once a trendis established, it tends to last several years. And you see thatthe RS chart has aptly guided us with respect to the weightingof fixed income versus equities in the portfolio. From Novem-ber 2000 to July 2003, this RS chart was on a buy signal and theAGG was up 23 percent, while the S&P 500 was down 25 per-cent. Once the chart moved to a sell signal, one would havelightened up their fixed income positions in the portfolio andadded to their equity positions. Since moving to a sell signal,the AGG is down about a percent while the SPX is up almost 30percent (see Figure 9.5). Another concept that you’ve learned about that can also beapplied to our fixed income fund analysis in the same manner asanalysis on the equities funds is the Bullish Percent. We chartthe bond fund prices using the Point and Figure method and thenuse the basic Bullish Percent method where we measure bondmutual fund charts for buy signals just as we do for stock and eq-uity funds. Figure 9.6 is an example Bullish Percent for the groupAll Fixed Income funds (BPMU99), which covers over 3,000 dis-tinct bond portfolios. This indicator tells you the percent of theentire fixed income fund universe that is on a buy signal on theirdefault trend chart. (We also have Bullish Percents on subcate-gories of the fixed income universe.) The back and forth actionfrom X’s to O’s is interpreted the same way that you would inter-pret a stock bullish percent. In Figure 9.6, you will notice theBPMU99 chart reversed into O’s in October 2005. That was alsowhen the trend of the 30 Year Yield Index we discussed earliermoved to I-95 South. Do you see how these pieces of the puzzleare coming together?
Figure 9.5 Fixed Income versus Equities. 290
Figure 9.6 Bullish Percent for All Fixed Income Mutual Funds. 291
292 The Point and Figure Methodology—A Complete Analysis Tool POINTS AND FIGURES BY DORSEY, WRIGHT MONEY MANAGEMENTAnything you can do, I can do better. Those words from an old IrvingBerlin song encapsulate the current status of the battle of man and ma-chine. According to a recent article in the New York Times (“Maybe WeShould Leave That Up to the Computer,” July 18, 2006), professor ChrisSnijders of the Eindhoven Institute of Technology is convinced that com-puter models can do a better job making decisions than humans. He evenissued a challenge to any company willing to have its humans competeagainst his computer models. Scientists have known for a long time that mathematical models gen-erally perform better than humans on a variety of complicated tasks. Ac-cording to the article, studies have shown that models can better predictthe success or failure of a business start-up, the likelihood of recidivismand parole violation, future performance in graduate school, various med-ical diagnoses, picking the winning dogs at the racetrack, and credit scor-ing. You can add to that list playing chess, as no human player, including acouple of World Champions, has been able to defeat one of the siliconmonsters in a match for several years. Yet, each time I see one of these articles, I always think to myself thatthey haven’t got it quite right. The articles always somehow imply thatcomputers make better decisions than people, without fully incorporatingthe notion that humans simply wrote a computer program to reflect theknowledge that they already possessed. What’s really happening is thatcomputers are much more efficient at executing the decisions that knowl-edgeable humans might make under ideal circumstances. In the case of the early chess programs, continuous improvementfrom feedback was critical. The first generation of programs played horri-bly and was beatable by low-level players. As programmers got more guid-ance from chess masters and learned better ways to reflect the knowledgethat expert human players already had, the programs got stronger andstronger. Humans, as many of us know from experience in the office, oftendon’t take feedback well, and/or don’t incorporate it going forward! Butchess programmers used the feedback and now a $50 CD that will run onany desktop can wipe the floor with a regular player. The second big advantage computers have is their consistency inmaking decisions. Really, it’s just that they are consistent and humans tendto be inconsistent. Computer models do not have psychological hang-upsstemming from childhood trauma. Models do not get emotional, tired,hungry, or cranky, but people do. This is very apparent in a chess pro-gram. You can set up an inferior position for it to play from, but ratherthan panicking or giving up, it will continue to grind away and often will
Fixed Income Indicators 293be able to draw or even win against a human. When money is involved,people definitely get emotional, so there is a big advantage for computersin financial modeling. The traditional knock on computer modeling is that it can’t recognizewhen conditions have changed. (Actually, humans aren’t very good at thateither!) If the model doesn’t adapt as conditions change, it can be thrownfor a loop when the underlying data distribution changes. Developing amodel that is adaptive is important to overcoming that hurdle. We tried to utilize the advantages of computerized modeling and tominimize the disadvantages when we developed the Systematic RS portfo-lios. We feel the consistency of executing the strategy improves the perfor-mance. To minimize the problems, the stock selection is based on relativestrength, the best adaptive tool we know. The portfolios are designed tochange as market themes change. It might just be the tool you need tomove your business to the next level.
Chapter 10 UTILIZING THE EXCHANGE TRADED FUND MARKET Timing Is EverythingIt is said that timing is everything. In my life, I certainly havefound this to be true. I remember my early navy days and how justfour short months changed my life. I joined the navy with the ex-press purpose of entering Underwater Demolition (UDT) andthen move on to SEAL Team I. Out of Boot Camp, I was told I hadto first go to my duty station, Naval Air Squadron VP31, and thenapply for Underwater Demolition. I did so and was accepted. For-tunately for me, I was stationed just down the road from the UDTtraining school while I waited for the next class to start. Since Iwas a Red Cross Water Safety Instructor, the squadron personneldepartment placed me in Air-Crew Training. They had been wait-ing for a Water Safety Instructor to come through for months bythen. I was immediately placed in the Deep Sea Survival Instruc-tors group. My duties were to teach pilots, who were heading toVietnam, how to survive in the ocean if they had to abandon theirplane over the ocean. As an enlisted man, the position as a Deep Water Survival In-structor was as good as it could get. So, when my Underwater De-molition Class was about to begin, I decided to postpone the class 295
Update: I've added a short section on deleting elements and using the tool with dynamic guides. Download sample dae files c4d.
296 The Point and Figure Methodology—A Complete Analysis Toolfor the second half of my enlistment if the Squadron would allowme to stay in my survival instructor position. The Squadron wasperfectly happy to have me stay on so the die was cast. I simplyput on hold my desire to become a U.S. Navy SEAL until my lasttwo years of enlistment. Well, all good things must come to anend, and my first two years of shore duty were rapidly expiring. Ihad a choice—go to sea or go back to Underwater DemolitionClass. I chose UDT/SEAL training. I was accepted to class again after spending three months get-ting in shape for the entrance test a second time. I ran into a littleadministrative wrinkle though. Since I waited for the second halfof my enlistment to attend class, the navy required I extend myenlistment by four months to qualify for having two full years ofnaval duty following the end of training. Since I had made a com-mitment to go back to college at the end of my enlistment, I de-cided not to extend. As I look back in retrospect, this was a majorturning point in my life. I was transferred to Vietnam on an Air-craft Carrier already positioned in the South China Sea. In fact,they flew me out to the ship on a mail plane. Experiencing an ar-rested landing on an aircraft carrier that was under full steam inthe middle of an ocean is an experience I’ll never forget. I spent the next two years both at sea and on shore in SanDiego. When I was honorably discharged from the navy, I imme-diately went back to college. I’m sure, had I chosen UDT, I wouldnot have gone back to college and would more than likely own adive shop in some part of the world. It’s interesting how life is fullof choices. I made the right choice for me and went back to col-lege, but at the same time I lost an opportunity to test myself thatfew others have. Soon after graduation and a short stint as a pro-duction supervisor at a winery, I found employment on WallStreet as a stockbroker at Merrill Lynch. One decision, not to ex-tend my enlistment for four months, profoundly affected how mylife turned out. Timing is everything. During World War II, the United States was cut off from rub-ber produced in Southeast Asia just as demand for the rubber wasincreasing significantly. Do you know what happened? We madesynthetic rubber through a large national effort to both increasethe output and quality of this rubber. Here is the clincher though.After the war, we went right back to natural rubber even though
Utilizing the Exchange Traded Fund Market 297we had weaned ourselves off it by creating high quality, syntheticrubber. Why would we do that? It doesn’t make sense. We had al-ready broken away from the addiction to Southeast Asian rubber,but we went right back. The reason is simple; we just weren’tready as a society for synthetic rubber. Many years later we gravi-tated back to synthetic rubber, but only when we were ready as asociety to accept it. The war accelerated the process of substitu-tion beyond what was natural. After the war we settled back tothe natural curve. It’s like the technology gap. New technologies emerge whilewe fight tooth and nail to hold on to the old guard. I remembermy company had to drag me away from WordPerfect to beginusing Microsoft Word when the quality of Word was already supe-rior to WordPerfect. I wanted the old technology I was used to.Look at the resistance that electricity met when Thomas Edisonfirst developed it. People cried about the demise of the candle in-dustry, not the acceptance of this new source of light. And, so it iswith financial products. They have a time and a place and untilthe time is right, substitution for the new will be slow coming. History of Exchange Traded FundsI remember my first thoughts on securitizing a basket of stockscame from working with the PHLX Gold & Silver Index. I knewearly on, before Exchange Traded Funds (ETFs) hit the market,their viability, as an investment vehicle, was undeniable. I re-member vividly my conversations at the time with JosephRizzello, head of product development and marketing at thePhiladelphia Stock Exchange (PHLX). The Philadelphia Stock Ex-change is one of the most progressive and forward-thinking ex-changes in America. In 1983, the PHLX had just come out with anew product, options trading on indexes. It was truly a revolu-tionary idea developed by Joseph Rizzello who was then the headof marketing at the PHLX. Joseph was also one of he real thinkerson Wall Street. Much like the first commodity-based ETF was ingold, the first index options traded were on the PHLX Gold & Sil-ver Index (XAU). This was the first product of its kind where aninvestor could simply make an investment in an option on an
298 The Point and Figure Methodology—A Complete Analysis Toolindex of stocks in a particular sector, rather than having to focuson one stock itself. At the time, the index was priced around the $600 level, andthe options were naturally very expensive as well. That would betantamount to trading options on a $600 stock. It hit me one daythat the real product was not the options that traded on thisindex, but rather the ability to buy the index itself. Having been astockbroker in the past, I knew exactly what would have madethe most difference in my business, and it would have been theability to buy the index, a basket of stocks with a common theme.What the PHLX needed to do was split the XAU 10-for-1, makingit a $60 per share index and then securitize it. Undercover brother ita download dvdrip movies. In other words,trade the XAU as a $60 stock, a stand-alone product. Then, addthe options for those who were so inclined. I knew in my heart that this had to be a fantastically success-ful product. It was as clear as a bell to me. I went to JosephRizzello, who was a close friend of mine. He concurred. It wouldbe a huge undertaking to create a product like that. It would beexpensive to accomplish and it was very forward thinking, maybein fact, too forward thinking for the time. Nothing happened with that idea for the XAU. But JosephRizzello and the PHLX did come out with a product called CIP,Cash Index Participation units, on the S&P 500 (SNP) and DowJones (BIG). These were theoretical baskets of stocks that actedlike an index portfolio. You owned the unit in perpetuity and hadcash-out provision once a quarter. If the cash-out provision wasdrifting away from the net asset value, those long the unit couldask for the net asset value of the unit. This prevented short sellersfrom manipulating the value of the unit. Because you owned theunit, when any components went ex-dividend, you would collectthe dividend by debiting the short sellers and crediting those longthe unit. The Cash Index Participation unit (CIP) could also bemargined. It was a fantastic product, but doomed from the start. I trav-eled all over the country with the PHLX holding seminars topacked houses. I mean packed houses of 500 to 600 brokers andprofessionals. The investment world wanted this product. But, itwas doomed because the futures exchanges decided to sue for theproduct. They suggested that the product was a futures contract
Utilizing the Exchange Traded Fund Market 299and should come under their purview. This lawsuit resulted in afamous ruling called the Easterbrook Decision. The judge ruled infavor of the futures exchanges. While this instrument had all theelements of a security, it also had an element of futurity. There-fore, the courts ruled in favor of the futures exchanges. The fu-tures exchanges, after winning the lawsuit, simply took theproduct and shelved it—“Dead on Arrival.” That decision spurred the workings of the ETF that we nowhave in our arsenal of trading tools, but it came from an unlikelysource. The Toronto Stock Exchange came to the PHLX to learnhow the CIP was created. The Toronto Stock Exchange createdthe first ETF called TIPS (Toronto Index Participation Units),which traded on the Toronto Stock Exchange. Following thedebut of the TIPS, the AMEX created the SPDRs (SPY) and nowwe have numerous vehicles to invest in that have the same char-acteristics as the CIP we first traveled the country marketing.Once again, timing was everything. Like the final development ofsynthetic rubber I discussed earlier, this time society was readyand willing to accept the product. Today’s Exchange Traded Fund MarketThe ETF market exploded in the late 1990s with the popularity ofthe SPDRs and the QQQs, representing the S&P 500 and the Nas-daq 100, respectively. Merrill Lynch then introduced the HOL-DRs and Barclay’s burst onto the scene with the mostcomprehensive listing of index-based, sector-based, and interna-tional ETFs named iShares. Sector Select SPDRs are available andother companies like Vanguard, well known for its vast mutualfund offerings, have been entering the scene. Since then we haveseen more ETFs introduced including Powershares, which aremore philosophy-based rather than index-based, and the most re-cent ETFs introduced have been commodity-based ETFs, moresubsector ETFs as well as more equal weighted sectors. Before we get into the ins and outs of using technical analysisto trade and invest in ETFs, let’s start out with some basics. Thereare a couple of different types of structures to the ETFs but thebasic premise is this vehicle allows us to buy a package of stocks
El camino real alfred reed pdf to excel free. Dur: 5:00 PRODUCT INFORMATION Publisher Hal Leonard Format Score Only Pages 36 Length x Width 12 x 9 inches Shipping Weight 0.31 pounds East Coast Music Product Code ZHL4003473 UPC Code 18 Voicing Description Score Band Grade Description 3.5 1st Publication Date 07/2013 INSTRUMENTATION LIST For the purchase of the additional scores or parts as listed below please email us the Product Code above and the quantities you wish to purchase. A rewarding and distinctive work! By shortening the duration and reducing the instrumentation and extreme technical demands; Robert Longfield has masterfully adapted this gem into an authentic sounding edition for younger players. Costs are about $7.50 per score and $4.00 per part.
300 The Point and Figure Methodology—A Complete Analysis Toolas just one vehicle, much like a mutual fund. ETFs are differentfrom mutual funds because ETFs do not trade at Net Asset Value(NAV). However, traders on the floor will arbitrage the stocks un-derlying the ETF if a price disparity develops. They are also differ-ent from mutual funds because they trade throughout the day.You can buy and sell anytime during the day using stop-loss or-ders and limits just like you would with a commodity or a stock.Also, like stocks, and commodities, ETFs can be sold short. ManyETFs have options allowing for other strategies like the coveredwrite and other methods to gain long or short exposure. ETFs arealso transparent. That is, most mutual funds do not list their cur-rent holdings and weightings (there are a couple of exceptions tothat including the Rydex Funds). On any day, you could go to theweb site of the ETF in question, and find the current holdings andthe weighting. This is very important in the evaluation of theETF as you will learn a little later in this chapter. Below we havelisted some web sites you will find helpful in learning more aboutETF structures and what’s available as you begin to use this prod-uct in your investments and trading: www.ishares.com www.vanguard.com www.powershares.com www.rydexfunds.com www.currencyshares.com www.spdretfs.com www.holdrs.com www.ftportfolios.com www.proshares.com www.vaneck.com www.wisdomtree.com www.bldrsfunds.com The ETF landscape is changing so quickly that we aren’tgoing to list every ETF available right now, but at our web site(www.dorseywright.com), we have the most comprehensive listof ETFs available with all of the Point and Figure technicalanalysis tools you see for stocks also applied to the ETF uni-verse. Part of the analysis is a series of worksheets with holdings
Tree path: root node -> 9e62ba0a0 clusters in node: 578 spam scores: The spammiest documents have a score of 0, and the least spammy have a score of 99. The spam score is the percentage of documents in the collection more spammy than this document. Cluster spam scores are averaged across all documents in a cluster. DOWNLOAD Elcometer EDCS Plus + + crack DOWNLOAD Optitex 9.03 and 9.2 all modules + crack DOWNLOAD DVP 5.3 Complete W/S, Aero Triangulation, Vectorization, AT, Orthomosaic + crack DOWNLOAD SDS Steel Detailing System v 6.34 Full + crack DOWNLOAD Aspen Oneliner/Power Flow version 9 + crack DOWNLOAD SES CDEGS 10.1.6 Full - All modules + crack. Re: Program CDs, last six months. Discussion in 'Backup Software' started by javier, Nov 23, 2004. Javier Guest. Sex Beach 2 Crack for PC-DV 127 15 928 TOTAL TRAINING ADOBE PHOTOSHOP CS DISK 4 15 929. Mindscape Write Ambition - Movies 16 173. Ruffian 2 15 132 Sacred (c) Encore Software Inc. [2 CDs] 15 134 AutoDesk Architectural Desktop 2005 *Proper* [3 CDs] 15 137 BETTER HOMES AND GARDENS HOME DESIGN SUITE V6.0 [2 CDs] CD KEY: EDPR1KM-MG3RR4M 15 139. Look at most relevant Descargar autoship windows 7 websites out of 159 Thousand at KeyOptimize.com. Descargar autoship windows 7 found at egpet.net, windows-7-home-premium.en.softonic.com, habbioz. Autoship 9 2 crack mindscape.
Utilizing the Exchange Traded Fund Market 301for each ETF categorized by market asset class, sector, or inter-national area. This allows you to compare similar ETFs for nu-ances in their construction. In addition to the Point and Figurechart of each ETF, we also have available Relative Strength (RS)charts, technical fund scores for ETFs, the ability to create cus-tomized box size charts on ETFs, and you can search ourl Services Sector (IYG)* The IYV had been in the portfolio since 8/3/99 and was up 77%, the IYW had been in the portfolio since 9/25/98 and was up 118%, and the IYZ had been in the portfolio since 11/26/97 and was up 62%. Figure 10.5 Conservative iShares Sector Manager—2000 Snapshot. Advanced ETF Relative StrengthThe RS concept is so transferable and the comparisons you can doare almost unlimited, but I wanted to give you an idea of some ofthe ones we find especially helpful by first taking a look at the in-ternational markets. As we pointed out in Chapter 5, we can doan RS chart of the broad international markets to the U.S. mar-kets to help determine “where in the world” you want to invest.But just as we do more in-depth analysis of the U.S. markets, wecan also do the same for international markets. There are cur-rently over 30 international ETFs listed on the U.S. exchangesand trading in U.S. dollars. On the international area of our website, you’ll also find a complete list of all the international ETFsdenominated in Euros but we’ll stick to the international ETFs
314 The Point and Figure Methodology—A Complete Analysis Toollisted on the U.S. exchanges for the purposes of this example. Ihighly recommend you get to know these international ETFs be-cause this broadens your horizons in investing globally. Withtoday’s Internet, you can trade in any country you wish. I cur-rently have accounts open for online trading in Indonesia, Portu-gal, and Australia. My account at www.DIF.pt (change thelanguage to English) allows me to trade all European stocks fromone location and all ETFs from this location whether they are in-ternational or domestic. I hold U.S. Bonds as collateral for the ac-count simply as an added safety factor, but over the years I havenot seen a real need for this. It is the best trading platform I haveseen and you can execute our Sector Rotation Models on the siteautomatically even if you are an individual investor. Generally,our models are primarily for professionals who then invest inthem on individual investors behalfs. Okay, let’s get back to theU.S. side of the equation. So let’s say that you’ve done an RSchart of the U.S. markets versus a broad international index likethe MSCI EAFE Index and it suggests the international marketsare favored over the U.S. markets. Okay, now what? Throughoutthe world, some areas are going to be stronger than others andthe best way we’ve seen to determine the strength across the en-tire globe is through a simple RS chart. Figure 10.6 is a comparison of the iShares Latin America 40Index (ILF) to the iShares MSCI Japan Index (EWJ). When thischart is on a buy signal, it suggests the ILF should outperform theEWJ. Conversely, if this chart is on a sell signal, it would suggestthat we would want to own Japan over Latin America. The RSchart of the ILF versus the EWJ moved to a buy signal on Novem-ber 19, 2002, and remains on that buy signal as we write this. It’sbeen three and a half years since that signal has been given andthe ILF is up 257 percent while the EWJ is up 97 percent. Bothhave far exceeded the returns of the U.S. markets as the S&P 500is only up 39 percent during the same time but clearly the ILFwas a better place to be with your international allocation. Taking this concept a step further, we can construct a DWAInternational Matrix (Figure 10.7 on p. 316) to give us a snapshotof strength in the international markets. This Matrix is essen-tially the culmination of a large arm wrestling tournament. In our
Utilizing the Exchange Traded Fund Market 315Figure 10.6 iShares Latin America 40 Index (ILF) versus iShares MSCI Japan Index (EWJ).tournament, every international country arm “wrestles” anothercountry until every country has been wrestled. To determine thewinner of the tournament, we merely count up the “wins” or RSbuy signals for each country and then rank the countries with theone with the most wins at the top of the matrix. With about 30international ETFs in the matrix, you want to focus your invest-ments in those that are outperforming at least half of the total
316 The Point and Figure Methodology—A Complete Analysis Tool Figure 10.7 iShares International ETF Matrix.universe. Utilizing the International Matrix concept (you can’timagine the computer power it takes to do this), we have con-ducted some studies creating a portfolio out of these principles.The portfolio holds five international ETFs in an equal weightedmanner. An ETF can fall out of the portfolio by losing significantRS against the field. That ETF will be replaced, not rebalanced,with the next highest ranked ETF in the matrix not currently inthe portfolio. The back test on this portfolio only dates to 2002but the results are impressive with the portfolio returning 145percent and the MSCI EAFE Index (EFA) up 62 percent and theS&P 500 (SPX) up 11 percent thru the first quarter 2006. This portfolio is designed to point out RS across the world,and does not take into account absolute price declines. In otherwords, if the market goes down, this portfolio will likely movelower too but should outperform over the long term on a relativebasis. In markets like April through June 2006, we found the highRS international ETFs were extremely volatile. We came into this
Utilizing the Exchange Traded Fund Market 317period up 28 percent for the year. The decline in the world mar-kets was so severe we lost 25 percent of those gains in a heart-beat. Once the markets stabilized we shot back up 10 percent butwhat a ride that was. Over two trillion dollars of equity was lostworldwide during this period. The U. S. markets were just asvolatile. When the plug is pulled on the world markets there isnowhere to hide. The strong RS snapped back fast however whenthe dust settled. So, to manage the absolute price risk, you’llwant to use things like the Bullish Percent and actual trend chartpatterns to help manage that portion of the risk. Remember, RS isjust that, relative. It does not speak toward absolute performanceunless you are a delta neutral investor where you would go longone and short the other. International markets definitely havevolatility. That ride I discussed earlier was like riding the bull“Bodacious” in a rodeo. That bull has put more professional bullriders in the hospital than all the other bulls combined. It’s notunusual to see these markets move 5 percent to 8 percent in justa week’s time. Professional DWA clients have access to the DWAInternational ETF Manager with weekly updates as iShares spon-sors this portfolio on the web site. Yet another way to analyze the ETF market is versus the mu-tual fund market. In any given year, over 80 percent of the mutualfund managers don’t outperform the S&P 500. If that is the case,why should you pay for active management of that fund whenyou purchase an ETF for a much lower expense ratio? There arefund managers that can and do outperform their benchmarks andthe extra fee is well worth it. Furthermore, those managers thatoutperform the indices change from year to year. A broad observa-tion about this type of outperformance is that when the bench-mark, small caps, growth, value, and so on is a leading asset class,the harder it is for the active manager to outperform his or herbenchmark and you’re probably better off with the ETF. The re-verse is also true—when the benchmark is an underperformer tomost asset classes, the greater likelihood you can find a managerwho is in fact adding value. Let’s look at an example how you canuse the RS tools to determine whether the active manager isworth the fee. Phoenix Capital Growth (PHGRX) invests with a DomesticGrowth style so we would want to do a RS chart of the PHGRX
318 The Point and Figure Methodology—A Complete Analysis Toolversus a Domestic Growth ETF like the iShares S&P 500 GrowthIndex Fund (IVW). If the RS chart were on a buy signal, it wouldtell us that the manager(s) of Phoenix Capital Growth wereadding value over the index. If the RS chart were on a sell signalthough, it would tell us that we would be better off in the indexitself. By looking at the RS chart in Figure 10.8, we see that theRS chart is on a sell signal. That signal was given on March 27,2001. Since that RS sell signal, the fund is down 20 percent whilethe IVW, its peer index, is only down 1.4 percent. If I wanted toinvest in a large-cap growth fund that had a higher probability ofoutperforming the IVW I might look at something like the Amer-ican Funds New Economy (ANEFX). This RS chart moved to abuy signal on August 19, 2003 (see Figure 10.9). So let’s say thatwe like the American Funds family and this was our inventory wewere working from. Prior to August 19, 2003, instead of purchas-ing the New Economy Fund, we were instead using the IVW forour domestic growth exposure. Once that RS chart moved to abuy signal, we would call up the New Economy fund from thefarm team and substitute him on the field for the IVW, essentiallyputting him on the bench. Making that simple substitution on ourmutual fund team, we enhanced our performance tremendously—the ANEFX is up 36.7 percent compared to the IVW only being up Figure 10.8 Phoenix Capital Growth (PHGRX) versus iShares S&P 500 Growth Index Fund (IVW).
Utilizing the Exchange Traded Fund Market 319 Figure 10.9 American Funds New Economy (ANEFX) versus iShares S&P 500 Growth Index Fund (IVW).12.7 percent. This is so interesting. I get goose bumps every timeI think about these concepts we have created. DWA is all aboutadding value to the investment process and we have come a longway with our RS work. Here’s another example in the small-cap growth area. As wehave outlined before in this book, the small-cap area of the mar-ket has been the place to be since February 2000. Over the pastsix years, funds have been emerging and falling against its peer inthe area, the iShares S&P Small-Cap 600 Growth Index Fund(IJT). On July 13, 2005, the Winslow Green Growth Fund(WGGFX) moved to a RS buy signal versus its peer group. Thattold us to expect this fund to begin to outperform the IJT. At thesame time, the MFS New Discovery Fund (MNDAX) remainedon a RS sell signal versus the IJT. So, if in July 2005 I was lookingto add some small-cap growth exposure to my portfolio, I wouldprefer to buy the WGGFX over the IJT and certainly the IJT overthe MNDAX. In the last 11 months, the WGGFX is up 8.4 per-cent, while the base index is up 3.55 percent, and the MNDAX,the weak RS chart, is only up 2.76 percent. These RS charts areextremely powerful for anyone using mutual funds and at ourweb site, you can easily click the “Peer RS” button and the chartis already done for you. As well, you can harness the power of
320 The Point and Figure Methodology—A Complete Analysis Tooltechnology and search our entire database of funds to cull outthose with a particular peer RS characteristic. For professionalusing mutual funds and ETFs to populate their asset allocationstrategy, this is a tool you cannot live without. It would be liketrying to build a house without a hammer. It’s all there for you atthe DWA web site. What Does the Future Hold?Where is the future of ETFs? We think it is only going to continueto expand. Just as we were writing this book, the first inverse andleveraged ETFs have been introduced. I saw this coming in 1982and, in my opinion, we are only in the first foot of a 26-milemarathon. DWA will be in the forefront of this product as wewere in 1982 when I went to Joseph Rizzello at the PHLX withthe idea of securitizing their indexes and trading them instead ofthe options. As well, currencies ETFs have just been introduced.These new ETF products really open a door to risk managementfor individual investors that previously was only open to insti-tutes. Cash management takes on a whole new meaning now. Infact, it can now become a profit center. The ETF product is cer-tainly a tremendous leap forward for our industry but it is theanalysis of the product that will make them a viable alternativeto an investor’s portfolio. Like investing in general, you musthave an operating system firmly placed in your mind before anyinformation about the investment process can effectively be eval-uated. It is the analysis we do in the ETFs that make an indexsomething that is truly special and one of the most viable invest-ment tools one has today. With the Point and Figure methodol-ogy’s robust, adaptive nature, you will be armed with the toolsyou need to evaluate any ETFs on the market. For instance, wehave developed a model based on RS for the currency ETFs as away to manage the cash side of your asset allocation. Managecash? You bet you can—now with flair. Just think about holdingcash in Euro’s instead of dollars when the RS chart suggested youdo so. You can now with ease thanks to Rydex’s efforts in bring-ing out ETF’s on currencies. We welcome all ETFs. The more themerrier for us and this form of analysis.
Utilizing the Exchange Traded Fund Market 321 POINTS AND FIGURES BY DORSEY, WRIGHT MONEY MANAGEMENTAccording to the Wall Street Journal (June 14, 2006), the Dow Industrials aredown 8 percent since May 10. And it’s not just the United States. Some of thestrongest foreign markets have been knocked down much harder. For exam-ple, Brazil (−21.3 percent), India (−28.1 percent), and Russia (−29.0 percent)have all dropped much more sharply. What’s more, the correction has hap-pened relatively quickly, which tends to get investors especially nervous. The irony of a correction in the market is that it can’t stop going downuntil everyone “knows” it’s going lower. The entire purpose of a correctionis to shake out the weak holders. In this sense, a correction is a healthypart of the market cycle. You can’t make any money in a crowded trade,and Mr. Market knows that. So he will do whatever he needs to make in-vestors dump their shares. If investors are already nervous, Mr. Marketknows that a 5 to 7 percent pullback will shake them out. If investors aresupremely confident, Mr. Market realizes it will take a bear market to makethe weak holders let go. Your goal is to hang on and not be shaken out. Instead of facing a correction with dread, look at it as an opportunity.The Chinese sage, Fu His, wrote that “a situation only becomes favorablewhen one adapts to it.” Instead of using all of your energy resisting the sit-uation, look at it as an opportunity to display your risk management skills,and when it is over, as an opportunity to buy at lower levels. Here’s the most important thing of all: Once you have a risk manage-ment plan in place, stay the course. Risk management can take manyforms. It can be done with sector rotation, through raising cash, or hedg-ing, or a combination of these things. Other common methods of risk re-duction are diversification and strategic asset allocation. Decide whatworks for you, and then stick to it. Risk management should not be done on the fly. The danger of not stick-ing to your preset risk management plan is well illustrated by the famousDalbar studies on investor returns. Almost every advisor is familiar with theDalbar study that shows how investors do not exactly optimize their returnsby getting nervous and managing risk by emotion rather than a carefullythought-out plan. According to a story in Investment News (June 12, 2006),from 1986 to 2005, investors in the S&P would have realized a return of 11.9percent annually, if they had just been able to sit on their hands. However,after analyzing fund flows, Dalbar was able to determine that the average in-vestor actually earned just 3.9 percent annually. In fact, investors havedemonstrated, in aggregate, that they can’t even sit still when they alreadyhave a “risk management plan” in place. Dalbar suggests that asset alloca-tion funds, balanced funds, lifestyle, life cycle, and target date funds are alleffective ways to make investors more disciplined. Yet the evidence doesn’treally bear them out on this count. The average asset allocation investor
322 The Point and Figure Methodology—A Complete Analysis Toolmade only 3.3 percent annually, even worse than the 3.9 percent of thetwitchy investors who were yanking their money in and out of the market.It’s apparent that asset allocation investors, despite going into funds thatwere more conservative and supposedly managed their risk to begin with,were still jerking around with their accounts trying to avoid losses! It’s not that the market itself is beating their brains out—investors aredoing it to themselves. And why is it happening? According to Dalbar,most investor mistakes are made in attempting to avoid loss! This is a per-fect example of the “karma boomerang” effect where having a fear ofsomething can actually “cause” the feared consequence. Managing risk is agood idea, but believing you can somehow eliminate it—which is what in-vestors secretly desire—is nuts. Dalbar concludes that “actions driven byaversion to loss are the primary causes of losses among mutual fund in-vestors.” (my emphasis) In other words, the more you fear risk and loss and try to run awayfrom it, the more it will seek you out! There needs to be an explicit recog-nition that even with a risk management plan in place, whether throughsector rotation, raising cash, hedging, or whatever, drawdowns are an in-evitable and healthy part of the market cycle. Face it—accept that youmight lose some money in a correction. It happens. It’s not a big deal if youare managing your risk the way you had planned. It’s only a problem if thelosses are uncontrolled and your emotions get involved. Client education about risk and risk management is absolutely centralto long-term investing success. In the market, risk is not a matter of beingcareful on an individual basis. Risk happens. If you’re in the market at all,you’re subject to it. The root cause of investor problems comes from notunderstanding what risk is, and specifically, not accepting what your riskis. Dalbar points out that a “good understanding of risk produces moreprudent behavior.” This is true, but it will never happen in real life. Studiesin psychology point out that human beings are not wired to take risk. Peo-ple take risk or put themselves in risky situations because they don’t thinkit is a risk. Investors (and people generally) are overconfident and imbuedwith a belief that “it won’t happen to me.” Ben Roethlisberger wasn’t plan-ning to bounce his face off a windshield. Instead, he thought, “if I’m care-ful, it won’t happen to me.” If he felt there was a risk, he would havecertainly worn a helmet, or maybe even not been on a motorcycle in thefirst place. This is an example of not having a good understanding of risk,and not having any kind of risk management plan in place. When the market corrects, implement your prearranged risk manage-ment plan. Recognize that corrections are healthy for the market and usethe opportunity to display your skills. Handled properly, corrections mightend up proving very beneficial for your business.
Chapter 11 EVALUATING THE COMMODITY MARKET FOR OPPORTUNITIESIt was October 19, 1987, another typical Monday morning, weprepared for the normal call volume of questions on which stockto buy, which to sell, what sector to consider, and all the othertypical questions professionals in the brokerage business mullover each day. We had already shaken off the hundred or so pointsthe previous Friday. That was about all we expected for the cor-rection, in fact we even bought into it. I bought call options onthe OEX (S&P 100) that Friday expecting a nice snapback trade onMonday. That Monday morning didn’t experience the snapbackthough, the selling pressure continued from Friday’s session. Itnever backed off all day. We watched in amazement as the DowJones Industrial Average fell 22 percent in one day. There wasonly one other day that saw more carnage in one day than Octo-ber 29, 1987, and that was December 12, 1914, when the DowJones fell 24 percent. In today’s numbers as I write this book, a 22percent decline in the Dow Jones would be 2,431 points. Can youimagine the field day the media would have with a number likethat? Heck we’ve already been there, done that, and got a T-Shirt.But the New York Times would probably lead in the feature arti-cle with a title “Chicken Little’s Revenge.” Well, that daychanged our life at Dorsey, Wright (DWA). You see we were in 323
324 The Point and Figure Methodology—A Complete Analysis Toolessence the only outsourced Options Strategy firm on WallStreet. When Watson and I started DWA, we simply moved theOptions Strategy Department I developed and managed for WheatFirst Securities, down the road. Following this fateful day in Oc-tober, I knew the options business would never be the same again.Some firms were rumored to go under because of options expo-sure. We immediately moved away from options and puts as thelocomotive for DWA, to the Point and Figure Technical Analysiswe had done for so many years. I also knew we needed an alter-nate source of income. Commodities were a natural extension forus so I created a commodity report and sold it to Interstate Secu-rities who had one of the best commodity departments on WallStreet. They were located in Atlanta, Georgia. It was simple tome. Commodity prices are governed by the irrefutable law of sup-ply and demand, making it a seamless application for our Pointand Figure work. I look at most things in both life and business inthe most simplistic of terms. Copper is, quite simply, a hunk ofmetal. Cocoa is simply a bean that grows, primarily, in the IvoryCoast, and from time to time the locusts will come and wreakhavoc. Coffee is similarly a bean that Juan Valdez and others cul-tivate down in Colombia. By the same token, IBM is simply astock that moves about on the New York Stock Exchange, itsprice governed by supply-and-demand imbalances. What makesthe movement of Cocoa’s price different from the movement ofIBM’s price? One could offer that there are no cocoa CEOs to becarried out of their offices in handcuffs for various improprieties.There are no claims of corporate malfeasance thrust upon LiveCattle. But in terms of what causes a change in price, there isnothing different between a share of IBM and a contract of coffee.IBM is to cocoa, as coffee is to copper, and so on. At the time I had never seen a soy bean, or a cocoa bean, oreven a coffee bean that wasn’t ground already. Armed with thePoint and Figure chart, I was an expert in their price movementjust the same. I knew that if there were more buyers than sellerswilling to sell gold, the price of gold would rise. Conversely, ifthere were more sellers than buyers willing to buy gold, the pricewould decline. If supply and demand for gold was in perfect bal-ance, the price would remain the same. There is nothing else toconsider.
Evaluating the Commodity Market for Opportunities 325 Still, it turned out to be the right product at the wrong time.The stock market was in the middle of a 20-year bull market,while commodities were amid a 20-year bear market. The reportwe had created didn’t take off as we would have hoped; it was,quite simply, 13 years early. The stock market instead began tomake up all the ground it lost in that one Black Monday and wason its merry way by year end. Commodities went back to beingthe red-headed stepchild of investing once again. Had we hung our hat on this single product, or any singleproduct really, we would have ended up in Wall Street’s graveyard,as Mr. Hamilton suggests. The beauty of Point and Figure is thatit is adaptive to any free market, and while the commodity busi-ness was ready to contract significantly for the next 13 years, thePoint and Figure Technical Analysis skill we had developed formany years prior to starting DWA was applicable to many otherfacets of Wall Street. There was one more act to the commodity show before we al-lowed it to atrophy back in 1987. There was a hedge fund man-ager in Europe who was a client of ours on the equity side. Italked to him one day and told him his temperament was moresuited to commodity trading. I offered him our commodity reportfor free so that he could get familiar with trading commodities onpaper before venturing into the real world of platinum, pork bel-lies, and currencies. This began a long and intriguing story atDWA, much of which I can only look back upon and shake myhead. It took this client about three months to get used to com-modities and then one day I received a call from him, “Tommy,I’m ready.” I replied, “Ready for what?” Unabashedly he offered,“Commodity trading.” Well, the rubber hit the road that second,and I was immediately called upon to advise this large, very nim-ble, hedge fund on commodity trading, and I had never traded thefirst commodity in my life. I had a disciplined methodology andan operating system to fall back on, but very little else at thattime. I set this client up with an Introducing Broker to clearthrough and we were off and running. If you can recall the lasttime you sat down to watch the Kentucky Derby, the horses areall in the gates, the bell rings, the commentator then offersheartily, “and they’re off.” Well, that was us. This hedge fund
326 The Point and Figure Methodology—A Complete Analysis Toolmanager had the intestinal fortitude of a gladiator. We startedtrading 500 lots of currencies at a time. A five-hundred con-tract position in something like the Euro today is still a mas-sive position, over 62 million Euros worth of leverage. At thattime I either didn’t, or couldn’t, fully conceptualize the scopeof these positions; it was simply colossal like King Kong hold-ing Ann Darrow in his hand. The commodity was King Kongand I was Ann Darrow. Come to think of it, I don’t think weever had a calculator that would quantify that amount of lever-age back then, so we just didn’t get the full flavor of the riskwe were taking. Today, I would break out into a cold sweatwith a position that size, but back then we did it, did it regu-larly, and didn’t flinch. At any one time, we could be long andshort a combination of currencies totaling $250 million invalue. Buying 600 gold contracts for this client became com-monplace. At this writing, each contract controls 100 ounces,or $50,000, worth of gold. Six hundred contracts is then $30million in leverage. Still, this client didn’t even breathe heavywith a position of this magnitude, and so eventually, neitherdid I. While my experiences trading currency futures 500 lotsat a time makes for a good story, the comfort I feel today inthe commodities market is far more a function of simply hav-ing a logical, disciplined approach toward managing risk to fallback on. I feel as comfortable trading commodities as I dostocks, I still don’t know what a soybean or a cocoa bean lookslike, but I have been very successful trading them over theyears nonetheless. We would suggest that you familiarize yourself with someof the basics of commodity trading, such as hours of trading,contract sizes, and other environmental influences. All of thisinformation is readily available on the Internet, much of it onour web site, or in various other commodity books. We won’trehash that work, but will rather focus specifically on why thisasset class might add value to your investment game plan, andon using the Point and Figure tools to develop a disciplinedtrading plan for commodities. We also won’t focus on only fu-tures contracts as the vehicle for commodity exposure as thereare many commodity-related vehicles that are present intoday’s markets outside that of strictly futures contracts. I
Evaluating the Commodity Market for Opportunities 327think you will be both amazed, and delighted, to see the variousinstruments available to you in today’s market. Futures ContractsIt was in the 1840s that Chicago became a commercial centerwhere farmers and dealers could meet to deal in “spot” grain. Atthe time, it was simple to exchange cash for immediate deliveryof wheat. This was the point in time when railroads, telegraphs,and the McCormick reaper provided a confluence of both supplyand widespread demand. The reaper lead to exponentiallygreater wheat production, while the railroads and telegraphallow farmers of the Midwest to sell their wheat to dealers whothen shipped it all over the country. Where previously thefarmer was at the mercy of a city with very few storage facilitiesfor such a supply of wheat and the limited availability of dealers(demand) standing ready to purchase his crop, the technology ofthe time allowed for both supply and demand to establish a moreliquid equilibrium. This liquidity allowed the futures contract to evolve towardessentially what we know it to be today: farmers (supply) anddealers (demand) committing to future exchanges of grain forcash. Then as today a farmer can agree with the dealer on a priceto deliver to him 5,000 bushels of wheat at a point in the future;the end of December, for example. As with any free and openmarket, the price goes up and down depending on the supply/demand relationship of wheat, which could be influenced byany combination of weather, soil conditions, or a change ineating habits. Trading Futures ContractsWhile we’ll discuss a number of different market vehicles in thischapter, we’ll begin with commodity-based futures contracts, andthe statement that they are first and foremost about trading; notinvesting. Most people (other than hedgers) trade commodities
3rd Edition Dc
328 The Point and Figure Methodology—A Complete Analysis Toolfor the purpose of profiting from relatively short-term swingseither directly or by investing with a commodity trading advisoror in a commodity pool. In the latter case, the commodity trad-ing advisor or commodity pool operator does not invest in com-modities either; he trades commodities for the purpose ofprofiting from relatively short-term swings. Why does this makea difference? Because the shorter your time horizon, the morecritical it is to select the correct entry point and the more impor-tant it is to pay attention to the technical characteristics (as op-posed to the fundamental characteristics) of a stock orcommodity. Always remember that following trends and near-term Point and Figure signals are imperative for those using fu-tures contracts because both the leverage and the time horizonmake this of paramount importance. Using Spot ChartsSpot refers to a cash market price for a physical commodity thatis available for immediate delivery. The Spot Month is basicallythe futures contract month closest to expiration, and is also re-ferred to as the “nearby delivery month,” or simply “near-month” contract. A continuous chart uses the current nearbyfutures contract price data, continually rolling to the next nearmonth as the earlier one expires. So, the price of a futures con-tract at expiration and the cash or spot price of the underlyingasset must be the same, because both prices refer to the same(physical) asset. By consulting a spot or continuous chart, youwill be provided perspective as to what the longer term trend of agiven commodity is, thereby directing your overall trading pos-ture. Spot charts are useful for establishing a posture on individ-ual commodities, as well as commodities as an asset class, bothof which we will examine in this chapter. The spot or continuous charts are generally considered longterm in nature. For instance, the NYMEX crude oil (CRUDE)chart reflects the spot price of West Texas Intermediate lightsweet crude and has maintained a generally positive technicalpicture since early 2002. We’ll revisit the merit of trend lines in a
Evaluating the Commodity Market for Opportunities 329moment, but clearly the price action of crude oil has trendednicely since 2002, creating an advantageous backdrop for thecommodity trader willing to explore exposure there. Over theyears, we have found it very helpful to follow spot charts for gold,crude oil, and copper. These specific commodities all carry no-table importance on an economic basis, so close monitoring ofthem can serve you in more ways than one. London Gold (UK-GOLD) is a chart that we have been keeping since 1987, posting itby hand for many of those years. The chart is now available onour web site under the ticker UKGOLD. In essence, this chart isthe London Gold PM Fixing. Copper is another commodity wetend to follow very closely. Copper, like gold or crude oil, is oftenconsidered a barometer of economic (industrial) health. I like toview both the spot chart as well as the future I intend to trade. Itjust provides more perspective (see Figure 11.1). Figure 11.1 NYMEX Crude Oil P&F chart (CRUDE).
Point Figure Charting 3rd Edition Thomas Dorsey Pdf Editor Free
330 The Point and Figure Methodology—A Complete Analysis Tool Trend LinesSo whether we are talking about shares of IBM or bushels ofcorn, one of the main premises of technical analysis is thatprices tend to trend. Therefore, one of the main purposes of achart is to help in the identification of the overall trend of agiven vehicle—and to then play the direction of that trend for aslong as it stays in force. Just like stocks, there are two maintrend lines that are used: the Bullish Support Line (BSL) and theBearish Resistance Line: 1. Bullish Support Line: • Also known as the Uptrend Line. • Suggests the commodity is recording higher prices. • The Bullish Support Line is always a 45-degree line, which is upward sloping to the right. • In an overall uptrend, your trades should be limited to long positions. Drawing this Uptrend Line is very easy—once the first buysignal is given, off the bottom or after a period of accumulation(moving sideways), you then go to the lowest-reaching column ofO’s in that pattern on the chart and begin drawing the trend lineby placing a mark in the box directly below the lowest O. Youthen move up and over a box and place a second mark, and repeatthis process which will result in an upward sloping 45 degree an-gled line—this is your Bullish Support Line: 2. Bearish Resistance Line: • Also known as the Downtrend Line. • Suggests the commodity is recording lower prices. • The Bearish Resistance Line is always a 135-degree line, which is downward sloping to the right. • In an overall downtrend, your trades should be limited to short positions. As a general rule of thumb, if a commodity is trading aboveits Bullish Support Line, in an overall uptrend, your trades
Evaluating the Commodity Market for Opportunities 331should be limited to long positions. This is hard to do some-times. There are times when a shorter term trend line can allowyou to fine-tune a position, which we will discuss later, but youroverall bias—long or short, will be determined by whether thecommodity is trading above or below its Bullish Support Line. Aviolation of the Bullish Support Line, coupled with a sell signal(recall the discussion on chart patterns) on a commodity chart isquite simply a “call to action.” It is a sign that you must changeyour current course of action with that particular commodity.Long positions, generally speaking, should be sold or some typeof protective action should be taken; as well, short positionscould then be considered. That’s the interesting thing aboutcommodity trading that is unlike stock trading. Once a com-modity proves you are wrong in the direction of the trade, youcan close it and execute an opposite trade going in the proper di-rection as dictated by the price action. By adapting your postureto the overall trend, you can let your winners run, staying withand catching a long-term trend. Or should a trend change, it al-lows you to, more importantly, cut your losses short. Over time,this is one of the keys to success in trading both stocks and com-modities. (See Figure 11.2.) Chart PatternsChart patterns such as the basic Double Top and Double Bot-tom break, as well as more developed patterns like the triangleor catapult formation, were discussed in depth earlier in thisbook. These patterns are simply a record as to whether supplyor demand is winning the latest battle in price, and they are asapplicable to commodity trading as they are to stocks. Bullishpatterns within a positive trend are a strong signal to be long afutures contract, and bearish patterns within a negative trendare strong signals to sell short a futures contract. Signals thatare counter to the prevailing trend (buy signals within a bearishtrend, or sell signals within a bullish trend) are most often usedas stop loss points, which will be discussed shortly, but arerarely used to establish a new position. A sell signal that is
332 The Point and Figure Methodology—A Complete Analysis Tool Figure 11.2 March 2005 Sugar Contract (SB/H5).given within a positive trend (counter trend) is typically a signof consolidation or a pullback toward the next significant levelof support, but not of a long-term change in direction. Such acondition is most likely to produce a move toward a previousbottoming area or long-term trend support, and can simply pro-vide an opportunity to reenter the position at lower prices.When trading futures contracts, focus on entering positions
Richer writes with scientific accuracy, but the artist's aesthetic requirements are always foremost in his mind. This English edition brings together the nineteenth century s greatest teacher of artistic anatomy, Paul Richer and today's most famous teacher of anatomy and figure drawing, Robert Beverly Hale, who translated and edited the book for the modern reader. Artistic anatomy by dr paul richer pdf to jpg.
Evaluating the Commodity Market for Opportunities 333that are on buy signals within positive trends or shorting con-tacts that are on sell signals below trend. These are the situa-tions that present the greatest probabilities for success incommodity trading. A look at the Gold Continuous Chart (GC) over the past fewyears shows numerous buying opportunities when implement-ing the concepts recently discussed in this chapter. There werea number of occasions where we witnessed gold prices retraceto its long-term Bullish Support Line only to hold support andgive a Point and Figure buy signal, this happened in February2002 at $328, again in June 2005 at $448, in November 2005 at$480, and still again in June 2006 at $592. As well, patternrecognition proved profitable over the years by identifying theBullish Triangle patterns that were completed in August 2003at $380 and April 2006 at $640, each of which foreshadowedmoves higher of more than 10 percent in the price of gold inshort order. (See Figure 11.3.) Risk ManagementRisk is basically the amount and probability or possibility of in-curring a meaningful loss (of capital), or series of losses. Thereare several types of risk inherent to trading commodities. Avoidable risk is risk which can be reduced or eliminatedwithout any reduction or compromise in reward. A couple exam-ples of this type of risk would be trading an illiquid market, andnot properly diversifying your commodity portfolio. Illiquid mar-kets can provide a great deal of slippage and bad fills on trades.Diversification typically will serve to reduce risk. Unavoidable risk is risk which cannot be reduced or elimi-nated. In other words, there will always be some risk involved intrading commodities, stocks, or any investment for that matter,given that there is an expected return or profit. Controllable risk is risk that can be reduced or mitigated asa function of your entry and exit points. This will be dealtwith in more detail in our discussion on stop-loss points, andrisk-reward.
Point Figure Charting 3rd Edition Thomas Dorsey Pdf Editor Free
334 The Point and Figure Methodology—A Complete Analysis Tool Figure 11.3 Gold Bullion Continuous chart (GC/). As mentioned, with any investments, and in this casewith commodity trading, there is risk involved. To a largeextent, you can reduce or mitigate your risk with smart riskmanagement techniques. Truly, over the long haul, it is properrisk management that will be the key to your success incommodity trading. You must always be aware of the risk you
Evaluating the Commodity Market for Opportunities 335are taking on any given trade—the risk of loss. Being awareof your risk is important, as is defining that risk in ourexperiences. Stop-Loss PointsStop-loss points are a key element of risk control. Recall our def-inition of risk—the probability of significant loss of capital. Oneof the best ways to provide a control mechanism on risk isthrough the use of a stop loss. That is why we always determinewhere we are getting out before we even get in (to a trade). So todetermine if the risk is acceptable on any given trade, you mustknow what you will do (and where you will do it), if things gowrong. At DWA, we must deem the risk to the stop (the poten-tial loss) acceptable before we place the trade. But then once thattrade is executed, our approach dictates that a stop order beplaced GTC (good til cancelled). This serves a couple of pur-poses. One, you don’t have to constantly watch each tick of trad-ing, for fear of missing your exit point. Two, it removes much ofthe emotion from the trade. Having a predetermined exit strat-egy (a GTC stop) can protect you from large losses because youcan’t procrastinate or rationalize staying in a losing trade thathas negated your reasons for entering. Avoidance of severelosses, truly, is the key to success in any trading. Using a stop-loss point reduces the possibility of a severe loss. In fact, therehas been plenty of research conducted on this subject, with theresults showing that the key to a successful trading program isthe size of your winners versus the size of your losers, not thenumber of winning trades versus the number of losing trades. Socutting your losses short, while letting your winners run is re-ally what it’s all about. This is why a trend-following systembased on Point and Figure analysis can be so helpful in achievingthis goal. To that end, how do you know where to place stops usingPnF? If the entry point is where risk is low and the potential re-ward high, then the exit point (stop loss) is where the risk ishigh and the potential reward low, or increasingly uncertain.So, where would risk be high and potential reward uncertain?
336 The Point and Figure Methodology—A Complete Analysis ToolTurning to the PnF chart, it would be where the commoditywill break a significant bottom or violate its trend line—basi-cally, a point at which the chart suggests supply has won thebattle, not necessarily the war but at least the battle, and there-fore suggests you no longer want to be long the commodity. InFigure 11.4, we provide you with two such stop loss examples.The main point to remember is that you should always have anexit strategy for each and every trade you enter. The beauty ofusing the Point and Figure chart is the ease with which you candetermine this exit point, or stop, and then the fact that youmay design a trade with a defined risk up front. As well, the PnFchart allows you to raise (or lower) the stop as the chart un-folds. This serves to reduce risk further as price action developsin your favor, allowing you to protect a profitable trade and itsrelated gains. In general, sell signals given above trend suggest the poten-tial for a meaningful breather for the commodity, while sell sig-nals that involve a violation of trend suggest a structuralchange in the supply-and-demand relationship for that com-modity. So while a near-term sell signal for a commodity thatoccurs within a positive trend may setup a re-entry point atlower prices in the near future, a violation of trend suggeststhat any trade in that commodity in the near future will likelybe in the opposite direction. Relative Strength with CommoditiesWe now want to turn our attention to the application ofRelative Strength (RS) within the commodities realm. When in-terpreting an RS chart, there are two main points to deter-mine—the most recent signal given on the chart, and thecurrent column. In other words, was the last signal given on theRS chart a buy signal (a previous top broken) or a sell signal (aprevious bottom broken)? As well, is the chart currently in acolumn of X’s or a column of O’s? So go back to our discussionof chart patterns.
337 Figure 11.4 Setting Stop-Loss Points: Trend Stops versus Signal Stops.