Time is an important but often neglected factor in technical analysis. It’s not only important to determine which way the market will go and by how much it will move but also to examine when this will happen. One way to answer the last question is by looking at time cycles. Cycles are determined by the period and amplitude. The period represents the time that passes between two consecutive wave troughs (bottoms) and is meant to be constant. The amplitude represents the height of the wave. The Principle of Proportionality states that cycles with longer periods (lengths) should have proportionally wider amplitudes. In the world of financial markets a great quantity of cycles exist. In the following notes I will examine the so called “4 year cycle”, or “Presidential Cycle”. The idea behind this cycle is, that government will actively seek to influence the economic cycle in such a way that

At the May seminar, Jeff Parent introduces the concept of relative strength and then builds upon that concept to develop a framework for identifying the strongest stocks. In simplest terms, relative strength (RS) compares the change in value of one price against another over the same time frame. In common use, the relative strengths of a stock is compared to the value of all other stocks in the market, and each value is assigned a percentile rank to aid in comparison. This is one of the cornerstones of William O’Neil’s CAN SLIM strategy, and RS rankings are one of the features of Investor’s Business Daily. In this strategy, only stocks with a RS value greater than 80, on a scale of 1 to 99, are considered as candidates for purchase. O’Neil does not disclose how he calculates RS. James O’Shaughnessy provided quantitative evidence that RS works in What Works on Wall

Ralph is a founding member of the MTA. At the recent seminar in New York, he presented an overview of the basics of technical analysis. This article summarizes that presentation. The full presentation can be downloaded from the MTA web site. The entire study of all aspects of technical analysis is based upon three logical assumptions: The stock market is a discounter: Price movement precedes the actual event. There is a constant battle between sellers and buyers that quantifies the forces of supply and demand. This results in market activity known as accumulation (when buyers create demand for the limited supply) or distribution (when sellers create an excess supply). The amount of buying or selling activity over a designated period of time indicates the magnitude of upside or downside potential, a concept referred to as relativity. Major buying (base building) precedes a major advance; a minor top (distribution) foreshadows a minor decline, and vice

The stock of Newmont Mining bottomed on May 16th this year and proceeded higher, forming an inverted Head & Shoulder pattern. It has successfully broken above its neckline and come back to test it. Before completing the inverted H&S formation, NEM had already broken above the downtrend line drawn from the March top, tested it and resumed its way higher. As shown in the bottom clip of Figure 1, the RSI stood up to its reputation of being a leading indicator as it also developed an inverted Head & Shoulders pattern and broke its neckline well in advance of price. The indicator also demonstrated a bullish divergence with the price. At the moment, the RSI is above its rising uptrend line and shows yet no sign of a possible top. The horizontal lines on the right side of Figure 1 show the potential targets, the line at 43 being a projection based