Trends/charts

This is a very good question.


Trends are, in general,are misunderstood. Markets trend appx. 15% of the time, and trade (T/R) within a range 85% of the time.


Since markets can be viewed on many different time frames, minutes, daily, weekly, monthly and longer, each chart needs to be viewed in its own context.


You can not look at a 15 mim. chart and use it to project a daily chart. This is not to say one will not offer hints as to what the other MIGHT do. IE: a day trader may get an idea as to direction from the weekly, daily chart but should focus on trading the 15 min. chart.


While there is no way to know when a trend will start or end, volume does offer one of the better indicators, this along with higher highs/higher lows can be seen just by looking at a market in an uptrend


You can see this in the DOW chart here: http://chart.bigcharts.com/custom/fool-com/big.chart?sid=22121&time=2yr&freq=1wk&compidx=aaaaa%7E0&ma=0&maval=60&uf=0&lf=1&type=4&mocktick=1&country=US&doChartIV=0&style=1452&size=1&symb=vlccf&rand=3101


Notice the volume level at the tops and bottoms.


But this is only the beginning of technical analysis.


If you would like more information on the subject try this link. It offers an excellent explanation of most of the tools available to traders.

Sorry. here are the links.


Dow

http://quote.fool.com/Chart/chart.asp?osymb=%24indu&osymbols=%24indu%2C%24spx.x%2C%24compx&symbols=%24indu%2C%24spx.x%2C%24compx&currticker=%24INDU&time=5yr&uf=0&compidx=aaaaa%7E0&ma=0&symb=%24indu&freq=1wk&lf=1&comp=&type=16&sid=1643


INFO


http://www.equis.com/free/taaz/inttrends.html

Boy, that Dow chart just won't come over here.:(


Try this one.

LOL...good luck


http://www.pcquote.com/stocks/chart.php?ticker=%24dji&dur=5y&freq=3&type=1&draw_chart=Draw+Chart&vol=1&indicator=8%2C12%2C26%2C9%3B32%2C5%2C3%2C3%3B&startMonth=1&startDay=13&startYear=1997&endMonth=1&endDay=13&endYear=2002

Well my thoughts on trends have been 50/50. I do agree in the hands of experts that have a large bankroll to work with, they are an excellent weapon. Stocks do tend to trend quite a bit, but I also think its a lot like selling naked calls. Trend players generally try to hit the trend for just a few points and then sell out most or all of their position. They miss the home runs. However once in awhile they get hammered when they hit a stock at the wrong time because news hits on it. So they are just like a guy that sells calls, hitting a bunch of singles when a stock doesn't move, but getting hammered the few times it does due to news he didn't expect. With this in mind of course the hope is to avoid the times you get squashed. An expert has a big bankroll that he can play many stocks at once. If you are the average Joe, commissions will kill you. Big players can play ALL the stocks that are charting well and play them fairly strong. Small players have to choose their best while leaving out a bunch that might also follow the chart and if he gets hit badly by a couple at once, he gets all but wiped out and probably gives up. Big players don't have that problem as long as they have a lot of those winners consistently going to offset the few bad losers.

Hi wildbill,


Selling naked calls (or puts), brrrrr, scares me to death. Not a place for the short funded. They say selling premium is where the money is. But it only takes one wrong move, or an unforeseen event, to do some major damage to your account balance.


Most stock players have a bias to the long side, and a tendency to want to wait out a decline. This includes those with money invested in funds (401K). Using the theory 'stocks always go up', most are not even aware what the fund they have owns.


( If you are the average Joe, commissions will kill you.) I agree, add to this the tax implications and it's hard to see how they can make much by year end. As with anything, there are exceptions and it's those stories we hear about.


I put together a look at the DOW over time, hope the links work.


Here is a chart of the DOW from 1920 to 2000. Can you spot the trend?


http://www.sharelynx.net/Charts/USDJIND.gif


If we say the trend started from the spike low in 1988, and ended in 2000 that's 12 years. 1920 to 2000 is 80 years, 15% 0f 80 = 12 years.


If we draw a line from the 1929 high above the 1994 (4000) consolidation (first area of consolidation before it went parabolic) it projects out to the 4600 area.


OK. So now what do we do? Well, there's an old saying. What goes up in a parabolic fashion, will retrace it's move 85%, should it fall thru major support. Support is in the 7800 area. A close below that points to a retracement back to the 5200 area.


Keep one eye on the Sept.01 low of 7926, if we take that out we could be on the way. If we draw a line from the 1988 spike high above the area of

consolidation in 1996 (5700), it projects out to the 8000 area. Using that spike high area (4000) and the 2000 high (11775) a 50% pull back is 7887.


For the near term, 10,500 is the number to watch on the high side, clear that and we get another leg up, 9500 on the low side give us the T/R.


Here is a yearly chart of the DOW, so easy to see it looking back.


http://chart.bigcharts.com/custom/fool-com/big.chart?sid=1643&time=10yr&freq=1yr&compidx=aaaaa%7E0&ma=0&maval=60&uf=0&lf=1&type=4&mocktick=1&country=US&doChartIV=0&style=1452&size=1&symb=$indu&rand=711


Here you can see the 7800 support area, going back to 1997.


http://chart.bigcharts.com/custom/fool-com/big.chart?sid=1643&time=10yr&freq=3mo&compidx=aaaaa%7E0&ma=0&maval=60&uf=0&lf=1&type=4&mocktick=1&country=US&doChartIV=0&style=1452&size=1&symb=$indu&rand=8901


The trouble with long range projections like this is were talking about 30 DOW stocks, not only are they weighted, they get changed. Fun to watch, tough to trade. Microsoft and Intel were added to the DOW in 1999, how much did that add to the last leg up?


as Keynes put it, "The market can stay irrational longer than you can remain solvent."


SteveB

I believe that Intel and Microsoft were added to the Dow because it wasn't performing as well as S&P and NASDAQ.I have a very jaded view I admit it.With the addittion of those stocks to the DOW

it now became easier for "them" to sell you stocks in general.

What planet are you on?


The general line, so far as trend following, is that you will lose money on three out of four trade, make maybe one homerun in every 12 trades, and cut your losses - with the trend - the second it goes against you!


How can you get wrecked when news goes against you when you are the one using the stop order? A trend follower is the first one out!


Maybe you are thinking of counter-trend scalpers - meaning they exit counter-trend - seeing as selling small winners and holding big losers is thw only way you can skew your wins/losses around to more wins but bigger losses. But anyone fast enough to scalp pops is going to be the last person getting caught in news.


Frankly, what you described sounds more like the counter-trend idiot at channelingstocks.com.


leroy

Good quote there, just like the theory that luck evens out over time. You have a once in a lifetime losing streak you have to handle, it could start tomorrow and crush you quickly, or it could start 20 years from now when you have been running well and it just brings you back to where you should have been. You never know and it takes an awful long time to find out. The one thing I would tend to look at in your arguments is two things. Fundamentally people have changed. A lot more money that was saved in other places before is now in the market. People would have to go back to that mentality to make your long term low numbers make sense. Not that it couldn't possibly happen, but highly unlikely. Second is the fact that these are market indices. Markets are so rich in diversity, its hard to say a market should follow a certain pattern. Up and down bias, yes, but to the degree of hitting certain prices I don't think its that strong a correlation. Individual stocks will see this pattern because people buy and sell them, but relatively little money is out there buying and selling the market itself.

right through your stop loss.


Stop losses work most of the time in limiting your losses unless there is like a 50% gap down on overnight news.

Personally, I seldom trade markets that don't trade 24 hours. i.e S&P futures,bonds and currencies unless I am net long options.

wildbill


Thanks for your statement ( but relatively little money is out there buying and selling the market itself.)it got me thinking.


Here's what I found.


From a 12/31/01 BIS report:

(According to preliminary data, the aggregate stock of contracts outstanding stood at nearly $100 trillion at end-June 2001, 38% higher than three years ago.


Meanwhile, equity-linked contracts expanded by 52%, to $2 trillion, while commodity contracts grew by 33%, to $674 billion. These market segments remain much smaller than those for interest rate and foreign exchange contracts.)


According to the Wilshire 5000, which tracks 6700 public companies, the Total Market Capitalization is $13.4 trillion.


That gives us 15% for equity-linked contracts. Interesting.

-----------------------------------

(Fundamentally people have changed.)


I agree.


They are much more comfortable going into debt in order to acquire 'things'. It would also appear they are very happy with no, or very little, equity in their homes. A falling stock market and falling real estate prices would be a recipe for disaster.


I'm not really a doom and gloomer (well, maybe a little...lol) but I do like to look over the fence and see what might be headed our way.


Time will tell.