relative strength (RS), 405–412
secular trends, 485–495, SG:146, SG:150
top and bottom, 115, 116
trading range, 117
trendline, 74–78, SG:33, SG:34, SG:37, SG:39, SG:40
two-bar, 197–201, SG:66, SG:67, SG:69
volume indicator, 108–109
Reverse divergences, stochastic, 305, 306, 307
RF Micro Devices, 555
Rhea, Robert, 30, 31n, 32, 46, 49–53
Right-angled broadening formation, 152–155
Right-angled triangles, 159–161
Rising and falling three methods, 364–365, 366
RMI. See Relative momentum index (RMI)
Rockwell Collins, 194, 196
Rounding tops, 111, 173–174, SG:61, SG:64
RSI. See Relative strength indicator (RSI)
Ruby Tuesday, 205
Runaway gaps, 178–179
Russell 1000, 450–452, SG:135, SG:138
Russell 2000, 450–452, SG:135, SG:138
Russell 3000, 450–452
S
St. Jude Medical, 137
Santa Claus rally, 520
Saucers, 172–174, 379, SG:61, SG:64
Saudi General, 2006-2008 diffusion indicator, 710–712
Schultz, John, 636, 649, SG:188, SG:191
Schumpeter, Joseph, 504–505, SG:151, SG:155
Seasonal breadth momentum, 583–585
Seasonal cycles, 519–524, SG:151–159
days-of-the-week, 522–523
end-of-the-month, 521–522
holiday effect, 523, 524, SG:153, SG:156
Santa Claus rally, 520
seasonal breadth momentum, 583–585
seasonal (diffusion) momentum for stock market, 585–589, SG:170–171, SG:173
time-of-day effect, 523, 524
Seasonal (diffusion) momentum, 585–589, SG:170–171, SG:173
bear market bottoms, 586–588
market peak, 588–589
Seasonal patterns, 519–524
Secondary movement/reaction
bull market intermediate corrections, 51–53, SG:22, SG:25
causes of, 44–46
countercyclical, 45
described, 42, 43, SG:23, SG:26
Dow theory, 31, 32
to identify primary trend reversals, 46–49
Secondary trendlines, 73
Sector rotation, 455–470, SG:139–143
brokers and stock market, 459
business cycle in, 460–461, 464–467, SG:140, SG:143
concept of, 456–461
global equity markets, 462–464
homebuilders/housing starts, 457–459
inflationary/deflationary, 464–467, SG:141, SG:143
Know Sure Thing (KST), 457–459, 464–465, 468
lagging groups, 467–469, 470, SG:139, SG:143
leading groups, 467–468, 469–470
middle groups, 469–470
in peak-and-trough progression, 743, 748
sectors and industry groups, 462, SG:141, SG:143
technical principles, 456, 460
Secular trends, 471–498, SG:145–150
bond market, 472–474, 483–484, 492–495, 496–498
commodity market, 472–474, 480–483, 484, 489–492
decennial cycle, 512
defined, 8
determining direction, 485–489
duration, 8, 474, SG:3, SG:7, SG:145, SG:149
importance of, 8–9, SG:6, SG:8
long (Kondratieff) wave, 471–474, SG:145–146, SG:149, SG:151, SG:155
primary trends versus, 8–9, 475–476, 495–498, SG:147, SG:150
reversals, 485–495, SG:146, SG:150
stock market, 472–482, 485–489, SG:146, SG:149–150
stock selection, 674–677, SG:198, SG:201
technical principles, 474, 478
Sell signals, Special K in generating, 333–334
Selling climax, 104–106, 107, 531–533, 540–543, SG:42, SG:44, SG:46, SG:165, SG:168
Sentiment indicators, 610–634, SG:181–186
advisory services, 613–617, SG:182, SG:185
bond market, 617–620
contrary opinion, 643
fundamental indicators, 477–478, 633–634, SG:183, SG:186
insider trading, 613, 614, 634, SG:181, SG:185
margin debt, 623–628, SG:182, SG:185
Market Vane, 617–619, SG:182, SG:185
momentum as substitute, 611–613, 619–620, SG:182, SG:185
mutual funds, 620–623
option data, 628–632, SG:183, SG:186
reaction to news, 634, SG:183, SG:185
technical principles, 616, 619
17.5-year cycles, 507, 508
Shadows, 342–343
Shiller Price/Earnings (P/E) Ratio, 477–478, 486, 633–634
Shooting stars, 352, 355–357, SG:109, SG:113
Short-term rates
applying technical analysis to, 663–669
discount rate and, 665–666
economic impact, 653–655, SG:193, SG:195
market experience, 1966-2001, 25–28
Short-term traders
defined, 7
in market cycle model, 7
Short-term trends. See also Candlestick charts
contrary opinion, 651–652
defined, 6
duration, 6, SG:3, SG:7
Ichimoku cloud charts, 399–400
Know Sure Thing (KST), 317, 321–322, 323–324, 329–333
in market cycle model, 5, 6
relative strength (RS), 417–421
Special K signals, 329–334
in stock selection, 690–692
Sibbet, Jim, 543
Signalert, 297
Silver, 65–66, 642
Simple moving averages (SMAs), 209–225, SG:71, SG:75
advancing, 219–221, SG:72, SG:75
changes in price trend, 212
closing data, 215–216
construction, 209–210
convergence of averages, 221–222, SG:73, SG:75
multiple, 222–224
time delays, 211–212
time span, 216–219
valid crossover, 213–216
Skarlew, Arthur, 219n
Smith, Adam, 648
Smith, Edgar Lawrence, 509–510, 524n, SG:151, SG:155
Smoothing
Bollinger bands, 238–244
directional indicators, 337
price momentum indicators, 276–278
RSI, 286, 288
Snap-On Inc., 535, 536
S&P 500 Stock Index, 433, 434
S&P Airlines, 1995-2001 smoothing trend-deviation indicator, 295, 296
S&P Aluminum Index, 324–325
S&P Capital IQ, 521
S&P Composite ETF, 348, 349, 350, 394, 395, 397, 398
S&P Composite Index, 433–434, 436–439, 448
1835–2012 18-year cycle, 506–507
1840–2012 17.5-year cycles, 507, 508
1870–2012 arithmetic versus logarithmic scale, 81–82
1963–1979 long-term KST, 315–316
1966–2001, 25–28
1970–2012 adjusted discount rate, 669
1975–2012 World ETF, 705–706
1973–1989 resistance trendline, 94–95
1974–1991 KST versus rate of change, 314–315
1978–1988 rates of change, 312
1980–1988 versus commercial paper yield, 734–735
1980–2012 Coppock Indicator, 277, 278
1980–2012 smoothed rate of change, 313
1985–1987 upside/downside volume line, 549
1989–2012 12-month RSI, 284
1995–2011 Special K versus, 327–329
1996–2002 versus price oscillator, 437–438
1997–2001 and three Arms Indicators, 554
1999–2003 retracement moves, 384, 385
2000–2001 two upside/downside volume
oscillators, 551–553
2004–2008 Special K versus, 331
2009–2012 Fibonacci fan lines, 390–391
2010–2011 negative divergences, 307, 309
2010–2011 stochastic time spans, 302, 303
2010–2012 upside/downside volume line, 549, 550
advance/decline lines, 566–573, 575
Coincident Indicator, 748–749
as coincident indicator, SG:141, SG:143
contrary opinion, 640, 644
decennial cycle, 513–514
dividend yield, 478
4-year cycle, 516–517
high-low data, 576–578
Money Flow Indicator, 662
9.2-year cycles, 508, 509
Pinocchio bars, 206, 207
price versus volume momentum, 536, 537
risk versus return rule, 735–736
ROC and, 438–440
seasonal (diffusion) momentum, 585–589
sector comparisons, 456–461
sector rotation, 456–461
sentiment measures, 611–616, 618
short-term interest rates, 658–661
trendlines, 81–82, 94–95
trendlines and, 440–442
two-bar reversal, 199
S&P Domestic Oil Index, 412–413
S&P ETF (SPY), 595–601
S&P Europe ETF, 323
SPDR Dow Jones Industrial Average ETF, 433
Special K (SPK), 325–335, SG:103–104
drawbacks and benefits, 334–335
formulas, 325–326
to identify long-term price movements, 327–329
to identify short-term price movements, 329–334
Know Sure Thing (KST) versus, 329–333, SG:104, SG:106
long-term trend versus, 326–327
technical principles, 333
Speed resistance lines, 386–390
bear retracement, 388
bull retracement, 386–388
rules, 389–390
Spider Consumer Staples ETF (XLP), 465, 466, 595–597
Spider Metal and Mining ETF, 417–418
Spider Technology ETF, 260, 261
Spinning top, 343–344
Spreads, relative strength (RS), 402, 421–422
Stambaugh, R., 523n
Stanley Works, 410, 411, 533–534
Stars (Hoshi), 351–354
doji, 353–355
evening, 350, 353
morning, 351, 352
shooting, 352, 355–357, SG:109, SG:113
Stochastic indicators, 300–301, SG:94, SG:96
calculation, 300–301
crossovers, 303, 304, 309
divergence failure, 303, 305, 306
divergences, 303, 304, 309
extremes, 305
hinges, 307, 308
overbought/oversold levels, 301
price momentum, SG:83, SG:89
reverse divergences, 305, 306, 307
RSI versus, 301
slowed, 302–303, 307–310
as substitute for KST, 324–325, SG:99, SG:105
theory, 300
Stock Market Barometer, The (Hamilton), 30
Stock Market Cycles (Hirsch), 518, 520, 521
Stock Market Indicators (Gordon), 437
Stock markets
in business cycle, 20–23, SG:9, SG:10, SG:13
contrary opinion, 649–651
debt and, 657–660
decennial pattern, 509–514
discount rate and, 666–669
4-year/Kitchin/41-month cycle, 501, 504, 505, 514–517, SG:151, SG:152, SG:155, SG:156, SG:203, SG:207
historical perspective, 486–488
interest rates and, 657–662, SG:193–194, SG:195
international. See International stock markets
margin debt. See Margin debt
market experience, 1966-2001, 25–28
primary trends, 475–476
seasonal patterns, 519–524
secular trends, 472–482, 485–489, SG:146, SG:149–150
sentiment indicators, 611–616, 618, 620–628
stock selection. See Stock selection
trend reversals, 485–489
volume indicators, 547–555
See also Dow theory; Market indexes; Peak-and-trough progression
Stock selection, 673–693, SG:197–202
at bear market low, 682–687
during change in cycle, 687–690
major price patterns (long bases), 677–680
in primary bull market, 681–682
secular approach, 674–677, SG:198, SG:201
short-term analysis in, 690–692
Stock Traders Almanac, 522
Stovall, Sam, 521, SG:153, SG:156
Substitutes
Know Sure Thing (KST), 324–325, SG:99–100, SG:105
for momentum, 611–613, 619–620, SG:182, SG:185
in spreads, 421
Sugar, 59, 61
Summation, principle of, 504, SG:152, SG:155
Sun Banks Trust, 288
Support and resistance zones, 55–69, SG:27–31
at round numbers, 58, SG:28, SG:31
Bollinger bands, 238–244
determining potential support/resistance points, 58–66
dynamic levels of support and resistance, 59–60, SG:36, SG:37, SG:40
emotional points for potential support/resistance levels, 60–61, SG:28, SG:31
envelopes, 233–238
Ichimoku cloud charts, 396–399
nature of resistance zones, 55–56, SG:27–28, SG:31
nature of support zones, 55–56, SG:27–28, SG:31
previous highs and lows, 58
price objectives, 126
probable significance of, 66–69
proportionate moves, 62–64, SG:28, SG:31
retracements, 65–66, SG:30, SG:31
technical principles of support/resistance analysis, 56–57, SG:27–30, SG:31
transitional phase, 117–118
Support level, 118
Symmetrical triangles, 158–159
T
T. Rowe Price, 531–532
Tarde, Gabriel, 635
Technical analysis
applying principles of, 3–4, SG:4–5, SG:7
applying to contrary opinion, 649–651
applying to long-term rates, 670–672
applying to short-term rates, 663–669
defined, 3, 9
of international stock markets. See International stock markets
in peak-and-trough progression, 743–745, 749
role of, 24–25
in stock selection. See Stock selection
See also Automated trading systems
Technical Analysis of Stock Trends (Edwards and Magee), 55, 177
TED Spread, 422
Ten-day A/D oscillator, 572–573
Ten-week A/D oscillator, 571–572
Thirty-day A/D oscillator, 572–573
Three black crows (Sanba Garasu), 357, 358
3 percent crossover rule, moving average, 213, SG:72, SG:75
3 percent rule, 129
Three-step rule, for buying breakaway gaps, 176, 177
Three-step-and-stumble rule, 666–667, SG:194, SG:196
Throwback, 79
Tides and the Affairs of Men (Smith), 509–510
Time delays, moving average, 211–212
Time frames/spans
envelope, 233
Ichimoku cloud charts, 396
Know Sure Thing (KST), 311–325
moving average, 216–219, 228–232, SG:72, SG:73, SG:75
price momentum, 251–252
relative strength indicator (RSI), 281–284, SG:92, SG:93, SG:95
seasonal breadth momentum, 585
stochastics, 302, 303
between stock market peaks and troughs, 759
trend, 3–4, SG:5, SG:7
See also Cycles; Seasonal patterns
Time-of-day effect, 523,
524
Tobin Q Ratio, 478
Top-down approach, 673, SG:198, SG:201
Tops
characteristics of primary market peaks, 743–747
determining price patterns, 157–158
double, 149–152, SG:50, SG:54, SG:56, SG:58
head and shoulders, 138–142, 368–369, SG:53, SG:58, SG:99, SG:105
orthodox broadening, 155, 157
point and figure chart, 279
recession-associated top (RAT), 742
rectangle, 125–126
rounding, 111, 173–174, SG:61, SG:64
top/bottom reversals, 115, 116
triple, 149, 151
Tower tops and bottoms, 361–362
Trading ranges, 476
moving average, 216, 217, 224
reversals, 117
Trading systems. See Automated trading systems
Transitional phase, 115–119, SG:49, SG:55
resistance area, 117–118
reversal on a dime, 115, 116
top/bottom reversals, 115, 116
trading range reversal, 117
Treasury bonds, combining oscillator with moving average, 724–728
Trench warfare, 118–119, 560–561
Trend channels, 90–91, SG:35, SG:40
Trend-deviation indicators, 292–300, SG:94, SG:95
MACD, 296–300, SG:94, SG:96
moving average (MA), 293, 295–296
trendline construction, 294–295
Trendlines, 70–96, SG:33–40
angle of ascent or descent, 86–87, SG:37, SG:40
bar versus line or close-only charts, 73–74
closing price line chart, 375
consolidation or continuation pattern, 74–78, SG:33, SG:39
constructing, 70–73, 294–295, SG:33–34, SG:39
down trendlines, 70, 72
exhaustion, 92–95, SG:36, SG:40
extended, 79–80
length of line, 86, SG:37, SG:40
logarithmic (ratio) versus arithmetic scales, 81–85
market indexes and, 440–442
measuring implication, 87–89
moving average, 213, SG:72, SG:75
number of times touched or approached, 86, SG:37, SG:40
point and figure chart, 381–382
price momentum violations, 269–272, SG:86, SG:90
primary, 72–73
reversal pattern, 74–78, SG:33, SG:34, SG:37, SG:39, SG:40
RS violations, 407–409, 410
RSI violations, 285–288
secondary, 73
secular trends, 488–489, 491–492
significance of, 86–87
support and resistance, 59–60, SG:36, SG:37, SG:40
technical principles, 71, 73, 78, 79, 87
trend channels, 90–91, SG:35, SG:40
trend-deviation indicators, 292–300
up trendlines, 70, 71, SG:35, SG:40
See also Price formations and specific price formations
Trends, 383–400, SG:3–8
characteristics, SG:9, SG:13
defined, 4
Dow theory, 33–35
duration, 4, SG:3, SG:7
Technical Analysis Explained Page 58