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Presented by
Martin J. Pring
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Three Points to Take Home.
1. Prices are determined by psychology,
people’s attitude to the emerging fundamentals
not the fundamentals themselves.
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Real Earnings are not Correlated to Stock Prices (1870-2013)
4
CPI Adjusted
Deflated US StockS&P Composite
Prices
Shiller P/E
??
Definition of Technical Analysis:
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In technical analysis we are dealing
in probabilities, never certainties.
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The hopes and fears of all market
participants are reflected in one thing ….the
price !!
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Technical analysis assumes that prices
move in trends.
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Trends have a tendency to perpetuate
because...
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Prices in any freely traded market are
determined by the attitude of all market
participants to the underlying fundamentals.
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“A trend is a trend is a trend.”
Always assume
the prevailing trend is in existence.
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There is no known technique for
determining the duration and exact
magnitude of a price move.
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It doesn’t matter what time frame you
are following...
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The only difference is…
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It doesn’t matter what security you are
following...
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Trends
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What is a trend?
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Market Cycle Model
Short-term trend
2 to 6 weeks
Intermediate trend
6 weeks to 9 months
Primary trend
9 months to 2 years
3-4-years
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Market Cycle Model
Short-term trend
2-6-
weeks
Now Becomes….
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Intraday Market Cycle Model
Short-term trend
4-12
hours
Intermediate trend
4-12 days
Primary trend
2-6 weeks
Psychology and Momentum
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Keycorp
Keycorp
Earnings
Earnings up
Keycorp
Keycorp
Price down
Earnings up
Earnings
Earnings up
Ebay
Price sideways to down
Ebay
Earnings Up
Ebay Earnings
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Calculating a Price Oscillator
S&P Composite
13-week moving average.
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* Source Investors Intelligence.com
Stock Sentiment vs Stock Momentum
S&P momentum
Bullish
advisors
momentum
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Bond Sentiment vs Bond Momentum
Govt Bond Prices)
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. . . means that the price
will very likely rally.
Oversold in a
bull market . . .
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. . . probably means
the top of the rally.
Overbought in a
bear market . . .
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Followed by a
trading range
Overbought in
a bull market
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Followed by a trading range
Oversold in a
bear market
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Doesn’t necessarily
result in much of a rally
Oversold in a
bear market
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GoldmanSachs
Goldman SachsCommodity
CommodityIndex
Index
Bull trend
Bear trend
Extreme overbought is a
Bear trend bull market characteristic
30-day ROC
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GoldmanSachs
Goldman SachsCommodity
CommodityIndex
Index
Extreme overbought is a
bull market characteristic
30-day ROC
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Psychology and One and Two Bar Price
Patterns
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Outside bars
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Outside bar
Encompasses
trading range of
previous bar and
then some!!
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Close should be in the
upper part of the range.
Encompasses trading
range of previous bar
and then some!!
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Measuring the Significance of Outside Bars
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Bank of India Daily
Bank of India
Outside bar
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Two Bar Reversals
Sharp rally
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Closes near the high
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Second bar opens
near the high
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Resistance zone The lower
the
resistance
zone the
better.
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CRB Composite
Two bar reversal
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Look at Different Time Frames
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December 2006 British Pound IMM
10-minute bar
False breakout
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December 2006 British Pound IMM
Hourly bar
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December 2006 Dow
30-minute bar
Not much of a
reversal signal.
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December 2006 Dow
Hourly bar
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December Australian Dollar 2006
10-minute bar
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December Australian Dollar 2006
Hourly bar
Instant confirmation
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December Australian Dollar 2006
Outside bar
Outside bar
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Partial Checklist for Identifying a Stock Market
Peak
• Strong economy
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S&P versus Bond Yield Momentum
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Sector Momentum Position August 31 2013
Inflation/Deflation Ratio)
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World Stocks versus Long-term Momentum
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S&P versus the Economy
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The End
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