Richard Lion Russell, 91, of La Jolla, California, passed away on November 21, 2015 from natural causes at his home, surrounded by his family.  Russell was founder and publisher of Dow Theory Letters. To his last day he continued to write his daily opinions and analyses on the stock market. He never skipped his scheduled letter, and after moving to a digital format in 1991, he began writing every market day. His analysis was based on the Dow Theory, which he discovered in the stacks of the NY Public Library in 1958. Russell’s Dow Theory Letters has been the oldest service continuously written by one person in the financial advisory business.  Russell gained wide recognition via a series of over 30 Dow Theory and technical articles that he wrote for Barron’s during the late 1950s through the 1990s. Through Barron’s and via word of mouth, he gained a wide international following. Russell

Editor’s note: this was originally posted at DowTheoryLetters.com and is reprinted here with permission. MAKING MONEY: The most popular piece I’ve published in 40 years of writing these Letters was entitled, “Rich Man, Poor Man.” I have had dozens of requests to run this piece again or for permission to reprint it for various business organizations. Making money entails a lot more than predicting which way the stock or bond markets are heading or trying to figure which stock or fund will double over the next few years. For the great majority of investors, making money requires a plan, self-discipline and desire. I say, “for the great majority of people” because if you’re a Steven Spielberg or a Bill Gates you don’t have to know about the Dow or the markets or about yields or price/earnings ratios. You’re a phenomenon in your own field, and you’re going to make big money as

Launched in 2009, the NAAIM Wagner Award is designed to expand awareness of active investment management techniques and the results of active strategies through the solicitation and publication of research on active management. $10,000 is presented annually for the best paper submitted to the competition. The competition is open to all investment practitioners, academic faculty and doctoral candidates who submit an innovative topic in the area of active investing. This can be either a documented and justified investing approach or an exploration into the validity of active investing. Active investing topics can involve making investment decisions using technical analysis, quantitative analysis, etc. Papers can also address related topics such as position sizing techniques, money management approaches, scaling into and out of trades, exit strategies, etc. The NAAIM Website has a new feature that allows anyone to search for and download (up to 3 at a time) any of the previously-submitted white papers

Technical analysts and the academic community have not always had a close relationship. This situation could be changing and it is likely students are pushing the change. Ralph Acampora, CMT, recently spoke at the University of Denver. Ralph was part of a panel discussion on the history of technical analysis at the school’s Daniels Finance Forum. Louis Llanes, CMT, CFA, joined Ralph on stage at the event which was attended by approximately 100 students, faculty members and local investment professionals. While the speakers addressed the history of technical analysis, it was apparent to most attendees they were also talking about the present. Railroad bubbles that occurred in the late 1800’s, as Ralph pointed out, are very similar to bubbles in internet stocks or real estate that occurred in more recent times. Comments also highlighted the important role technical analysis can hold in risk management and the complementary nature of technical analysis and fundamental

Winners don’t always win Indexing in capital markets has proven to be a popular method to gain broad market participation in a low cost vehicle that tends to outperform active managers net of fees and expenses over the intermediate and long term. Index investments worldwide totaled over $9 trillion in 2014 up from $6.1 trillion two years prior. The majority of these indices are market capitalization weighted. This growth stems from cap-weighted indexes providing a low-cost, low-fee broad market exposure that historically has outperformed the majority of active managers over five-year periods. The cap weighted approach links the price of the security to the portfolio weight. Therefore, all over priced securities become over weighted in the portfolio relative to their future return. The converse is true for underpriced securities becoming under weighted relative to their future stock performance. In simple terms, cap-weighted approach suggests an investor to keep buying more of the winner.

The 2015 Charles H. Dow Award winning paper, Fixing the VIX: An Indicator to Beat Fear by Amber Hestla-Barnhart, demonstrates a market timing technique based on volatility. While the VIX, the CBOE Volatility Index®, might be the most popular volatility measure, its applicability is rather limited. As explained in the paper: VIX is widely known as the “Fear Index” because it often increases when the stock market drops and the fear of further price declines increases. While this concept sounds useful, there are significant limitations to executing trading strategies based on VIX and these limitations make VIX virtually useless for the average investor. Although it is not widely followed, there is a simple volatility indicator available in the public domain that can be used to implement trading strategies based on the concept of VIX. This indicator, the VIX Fix developed by Larry Williams, overcomes the limitations of VIX. This paper will explain the