Posts filed under “Technical Analysis”

Dow Theory or Buy and Hold?

Reading through the classic textbook, Technical Analysis of Stock Trends, last night I stumbled upon a stunning stat comparing the returns of a strategy using Dow Theory versus buy and hold.

Using Dow Theory buy and sell signals would have turned an initial investment of $100 in 1897 into $492,597.38 by the end of 2010.  This compares to a buy and hold strategy of $25,952.72, which even assumes buying the Dow low at 29.64 and selling at December 2010 close.

Of the 41,444 days from 1897 to 2010, the Dow Theory investor would have been on the sidelines 14,378 days, or 37 percent of the time.  A nice place to be given some of the epic bear markets over the past hundred years.  Imagine watching your portfolio evaporate during the “Hoover drawdown” of 1929-32 with the Dow falling 89 percent.  No thanks!

Even more impressive is the return on trading both sides of the market, both long and short, using the Dow Theory buy and sell signals.   This strategy would have turned the initial $100 investment in 1897 into $2,697,535.01 by the end of 2010.

The data ignores reinvestment and dividends.   Stunning, nonetheless!

Source:    Technical Analysis of Stock Trends

 

sep11_buy-and-hold

Also see:   TheDowTheory.com

 

 

Category: Dividends, Technical Analysis

Shiller P/E Bottoms

Shiller P/E Bottoms Coincide with Major Lows, Downtrend Breaks Precede Rallies Click for ginormous chart Source: Merrill Lynch   Nice chart from Stephen Suttmeier & Co looking at how the Shiller P/E ratio compares to regular P/E at major lows, downtrend breaks, and before rallies: The good news is that secular trading ranges lead to…Read More

Category: Technical Analysis, Valuation

Sell Side Indicator: Wall St’s Improving Optimism

Click to enlarge Source: Merrill Lynch/BoA   This is an interesting chart: Improving Wall Street sentiment is still no where near the levels associated with excessive sentiment. Despite the ongoing rally — or perhaps because of it — we are now all the back to the levels enjoyed at the lows in March 2009. Merrill notes…Read More

Category: Contrary Indicators, Sentiment, Technical Analysis

Year 2 in 4 Year Presidential Cycle

Click to enlarge Source: The Chart Store via All Star Charts   We have not looked at the Presidential Cycle in some time (See this, this and this from 2005). Regardless, it is something that people often fail to contextualize correctly: What the chart above shows is the historical average of the 4 year presidential…Read More

Category: Cycles, Investing, Politics, Technical Analysis

Bull! Rallies Without 20% Corrections

  click for larger table Source: Merrill Lynch Global Research,   Interesting look at bull markets that have gone on without a 20% correction (note this is within the context of a 20%+ cyclical rally). Merrill Lynch’s Global Research team note that 2 prior cyclical bull markets marked a transition from a secular bear market…Read More

Category: Cycles, Markets, Technical Analysis

Chart Attack: Mutual Fund Outflows

I forgot to publish this Bloomberg appearance from last week — here is the last segments, looking at monthly mutual fund outflows on Bloomberg Television’s “Street Smart.”

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Category: Media, Technical Analysis, Video

NASDAQ 100 A-D line At New Highs

Click to enlarge
Chart

 

 

Yesterday, I showed Merrill’s most active A/D line, which had broken out to new highs.

One reader took exception with this, suggesting that its a case of bullish confirmation bias. I disagreed for 2 simple reasons:

-Merrill’s “Chart Talk” has been running the most active A/D chart for years;
-Any index or major technical analytical measure making a new high is newsworthy

I appreciate the insidious nature of various biases in our wetware — and I want readers to keep pushing back on anything that remotely looks like bullish or bearish bias in action.

Ironically, the day after that discussion, Merrill’s Technical Analysis group noted the break out in the A/D line of the Nasdaq 100 — itself at 13 year highs.

To paraphrase Stephen Colbert, sometimes Reality just has a bullish bias . . .

Text from Merrill’s wonks after the jump

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Category: Technical Analysis

Advance Declines Break Out to New Highs

Click to enlarge   From Merrill Lynch’s technical team: The Most Active A-D line breaks to new highs The Most Active Advance-Decline (A-D) line is a market breadth indicator of the daily top 15 most active stocks by share volume in the US. These stocks are generally more liquid with larger market caps where the…Read More

Category: Technical Analysis

Japan versus Gold?

Charts like this make me want to Sell Japan and Buy Gold — at least for a quarter or so.   click for larger chart Source: Josh Brown

Category: Contrary Indicators, Technical Analysis, Trading

Wall Street (Still) Lukewarm on Equities

Click to enlarge     Merrill Lynch continues to point out that the Street remains unenthusiastic about stocks: Sentiment ticks up to highest in 13mos, but still far from bullish The Sell Side Indicator — our measure of Wall Street’s bullishness on stocks — ticked up just slightly in June to 49.8 from 49.6. The…Read More

Category: Sentiment, Technical Analysis