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CUP WITH HANDLE
Editor,The article "Cup-with-handle and the computerized approach" in your October 1998 issue was great, but authors Rick Martinelli and Barry Hyman certainly leave us in the dark as to the software that will enable us to use the ideas expressed there. Producing a valid system using the "Cup-with-handle" article as a basis would take a high level of programming knowledge.
See Traders' Tips next month for software code implementing the cup-with-handle concept. Most months, Traders' Tips features programming code contributed by vendors of popular technical analysis software.--EditorAceebo,via E-mail
Chagrin Falls, OH
TRADING THE TREND
Editor,Thanks very much for your great magazine. I am a proprietary trader in the FX markets for a regional bank and most of my successful systems are due, in part, to things that I have learned from your magazine over the years. I was wondering if there were any plan to release the EasyLanguage code for the system discussed in the September 1998 article "Trading the trend" by Andrew Abraham. I enjoyed reading about the strategy but the article didn't describe it well enough for me to write the code myself. Thanks again.
Many software vendors specialize in writing and developing third-party software code. Check the Omega Solution Providers listing each month in our Classifieds, or look through the Omega Research special advertising section in our November 1998 issue for vendors of EasyLanguage code.-- EditorKent Shaw, via E-mail
MEATS & GRAINS
Editor,First, let me compliment you on such a fine magazine.
I am looking for accounting software to track stocks and commodities. I saw that Quicken won a Readers' Choice Award in your 1998 Bonus Issue, but is the program as user-friendly for futures traders as for stock traders? Last, I would like to thank Don Lemley from San Jose, CA (September 1998 Letters to S&C), for emphasizing the fact that the S&P, DJIA, and OEX are all overemphasized. Are Lemley and I the only two traders left who trade the grain and meat markets? If so, maybe we should trade between ourselves and save on commissions.
We would be happy to consider article submissions using technical analysis for trading grains and meats. If anyone would be interested in writing an article on trading grains, meats or other commodities, call us at 206 938-0570 for a copy of our Author Guidelines, or read them at our Web site, https://www.traders.com. You can even E-mail your article proposals to editor@traders.com.-- EditorK. Bowie, via E-mail
FUNDAMENTAL ANALYSIS
Editor,In the past few months I've noticed what appears to be an increased focus on fundamentals in your magazine. In July 1998, you published an article about forecasting prices based on earnings figures ("Predict the stock market with earnings per share"). In the October 1998 issue, I see an article about interest rates and their (alleged) effects ("The next discount rate change"). Do you still believe that price discounts everything?
We haven't changed the editorial focus of the magazine. But over the years, technical analysis itself has evolved. For example, when we compare changes in interest rates to changes in the stock market, we look at the two charts and observe the relationships. This approach -- that is, intermarket analysis -- was popularized by technicians John Murphy and Martin Pring and is certainly technical in nature.John Bruch, via E-mailFurther, understanding how a particular fundamental statistic such as earnings growth correlates with price may not seem strictly technical, but it is quantitative. Finally, for my own work I have always liked using the historical dividend yield concept (used by Quality Trends newsletter publisher Geraldine Weiss) or the relative dividend yield approach (popularized by Anthony Spare and Nancy Tengler in their book Relative Dividend Yield) as a starting point for stock screens to identify buying opportunities. These two techniques use dividend yield to help the trader find what to buy, and from there I can use technical analysis to decide when to buy it. -- Editor
WORST 90 TRADING DAYS
Editor,Your October 1998 interview with James O'Shaughnessy seems to contain an error. On page 71, O'Shaughnessy brings up the old thoroughly unscientific statement that "a study showed that over a 30-year period, if you had invested a dollar at the beginning of the period, it would be worth about $25 at the end, but if you missed the best 90 trading days, your dollar would be worth only $2.10."
The last time I heard this old chestnut, someone asked the obvious question, "What would happen if you missed the worst 90 days instead of the best?" The answer was that your dollar would be worth well over a hundred dollars, since markets go down faster than they go up. Focusing on only the best 90 days is an example of the very thing that your guest was disparaging in the interview.
Jim O'Shaughnessy replies: The study I was referring to was conducted by the University of Michigan for the period 1963-93. I would be interested in seeing the study you refer to about one dollar growing to "well over a hundred dollars" by missing the 90 worst days. Could you tell me where I could get a copy of the study? The reason I referred to the UM study was to point out that, in my opinion, it's foolish to think you will be able to identify the best, or worst, days ahead of time. It seems to me that someone so gifted would grace the top of the Forbes 400, yet I don't see any timers there. I think for the vast majority of investors, a commitment to a strategy that has proven itself over time will be much more rewarding than trying to time their buy and sell decisions. Good luck.David Holroyd, via E-mail
MONEY FLOW OSCILLATOR
Editor,Thank you for your great magazine. Could you please tell me where can I find information about money flow oscillator (not the money flow indicator)? All the literature I have read about technical analysis only describes the money flow indicator.
See my interview with Marc Chaikin in our January 1994 issue, "Chatting with Marc Chaikin," but in particular, see the sidebar that accompanied that article for an explanation of the money flow oscillator. Contact our Circulation Department by E-mail at circ@ Traders.com or by phone at 800-TECHNICAL or 206 938-0570 for information on purchasing past issues.-- EditorYuriy Gashpar, via E-mail
Moscow, Russia
LOOKING FOR CHARTING SOFTWARE
Editor,I am looking for software that will allow me to input raw data and obtain linear charts with moving averages. Does your company offer such software, and how much is it? If not, do you know if any of your advertisers would have anything like this?
Our free software for paid subscribers, Graphics Plus and Apex, will both allow you to input raw data and plot charts with moving averages. Call our Circulation Department at 800-TECHNICAL for more information or E-mail them at circ@Traders.com. -- EditorDarryl Hitchings, via E-mail
San Antonio
PUT/CALL RATIO
Editor,I am a subscriber to your magazine and commend you for producing a first-rate product. I have found it to be of great value in developing my trading methodology.
I am interested in studying the put/call ratio in terms of its effectiveness as a "bullish consensus" type of indicator. Could you please inform me in which past issues you have covered this topic, and also whether you are aware of any data vendors that provide this indicator as part of their datastream?
Here's a selection of past STOCKS & COMMODITIES articles pertaining to the topic of bullish/bearish consensus:Frank Bongiorno, via E-mail, Melbourne, AustraliaBullish/Bearish Percentages and the DJIAHope these articles interest you.-- Editor
(February 1995, Volume 13)
Curious about how state of mind plays a role in trading? This author has studied investment surveys that detail bullish and bearish states of mind of advisors and investors and he has identified patterns that indicate trading opportunities for stocks and stock indices. By Christopher CadburyCombining Sentiment Indicators for Timing Mutual Funds
(January 1992, Volume 10)
Market sentiment can be useful in market timing, for mutual funds in particular. Here's a method in which a careful perusal of Investor's Intelligence, Market Vane and Barron's can help you predict the best times to buy. By Joe DuarteTrading Bond Funds
(June 1992, Volume 10)
Bond funds have become popular investment vehicles for income-oriented investors. However, the bond market is often more responsive to news events than the stock market is, so volatility can be extreme. Technical intermarket analysis can be a useful tool in trading the bond market. By Joe DuarteTrading Bond and Currency Funds
(March 1993, Volume 11)
Today's broad selection of different types of mutual funds allows traders to allocate assets based on your own expectations of changes in the stock market, interest rates and currencies. Newsletter publisher Joe Duarte presents his methods to increase gains in a portfolio by including currency-based mutual funds as a choice for instruments. By Joe DuartePut Volume Indicator
(March 1993, Volume 11)
Although it has been mined for many years, one of the richest veins in technical analysis remains the sentiment area. Here, money manager and market analyst John Bollinger discusses one such indicator. By John Bollinger
Sidebar: Formulas
BOOKS FOR BEGINNERS
Editor,I'm a reader of STOCKS & COMMODITIES. I'm interested in learning how to read charts and apply technical analysis to my trading. Please tell me how I can obtain such educational books. Thank you.
Here is a list of basic reading on technical analysis:Syminton Cai, via E-mailColby, R.W., and T.A. Meyers [1988].
The Encyclopedia of Technical Market Indicators, Dow Jones-Irwin.Edwards, Robert D., and John Magee [1997].
Technical Analysis of Stock Trends, 7th ed., AMACOM.Fosback, Norman G. [1985].
Stock Market Logic, The Institute for Econometric Research.Krausz, Robert [1997].
A W.D. Gann Treasure Discovered, Geometric Traders Institute, Inc.Meyers, Thomas [1989].
The Technical Analysis Course, Probus Publishing.Murphy, John J. [1986].
Technical Analysis of the Futures Markets, New York Institute of Finance.______[1991].
Intermarket Technical Analysis, John Wiley & Sons.______[1997].
The Visual Investor, John Wiley & Sons.O'Neil, William J. [1988].
How to Make Money in Stocks, McGraw-Hill.Pring, Martin J. [1985].
Technical Analysis Explained, McGraw-Hill.Rhea, Robert [1962].
The Dow Theory, Rhea, Greiner & Co.Wyckoff, Richard D. [1931].
The Richard D. Wyckoff Method of Trading and Investing in Stocks, Wyckoff Associates, Park Ridge, IL.In addition, see our "Books for Traders" section each month for new book listings.-- Editor
ERRATA
On page 62 of the October 1998 STOCKS & COMMODITIES, an old address was given in the references listing for the Connors & Raschke book Street Smarts. The correct address is 611 W. Sixth St., Suite 2870, Los Angeles, CA 90017. The phone number is 213 955-5777.In the August 1998 issue, we incorrectly listed the E-mail address for subscribing to the ATI (Advanced Trading Ideas) Internet list. The correct address for list subscription is:
ati-subscribe@sciapp.com
In "Cup-with-handle and the computerized approach" in the October 1998 STOCKS & COMMODITIES, two misprints appeared on page 66. In the paragraph under the fourth equation, the sentence should have read, "...in frame 3 be larger than 1. Similarly, the next sentence should have read "...in frame 4 also be greater than 1 ...".
In response to reader questions about the time element for the cup-with-handle pattern discussed in the article, author Rick Martinelli replies:
The time restraint between point A occurring and the rest of the pattern being completed may be read off the chart in Figure 3 on page 66 of the October 1998 issue. There, each of the four time frames is given both a maximum and a minimum number of days. Starting with point A, for example, we may add numbers from the chart to get 25 days for the shortest allowable pattern, and 175 days for the longest. Other times may be similarly determined.
IN MEMORIAM
We regret to report the passing of market technician Bruce Babcock, former editor of CTCR newsletter and author of The Dow Jones-Irwin Guide To Trading Systems. Babcock was interviewed in STOCKS & COMMODITIES in July 1986.
