Technical analysis is a method of stock market research using indicators, charts, and computer programs to track price trends of stocks, bonds, commodities, and market indexes. A technician understands the fundamental values of securities but focuses on the historical behavior of the market, industry groups and individual stocks. The goal is to use their price movements, trends, and patterns to forecast future direction and changes in character. Most of this analysis is based on the fact that the values of stocks reflect what people think they are worth, not what they are really worth.

Technical Indicators are used to generate buy or sell signals when specific buy or sell parameters are met. Cycle analysis; historically repetitive rhythms in price action, can also be helpful in initiating technical trades. The stock market historically moves in identifiable cycles. To be a successful investor, you must be able to determine the current phase of activity. Historical bottoms or cyclic lows are the most common signals that analysts attempt to uncover. These downside support areas are more reliable and take longer to develop than the cyclic highs. Using a long-term, monthly chart of the DOW, it is relatively easy to spot the four-year rhythm. The most recent bottoms occurred in 1990, 1994 & 1998.

In any type of long-term technical analysis, it is important to understand that, market cycles usually precede economic cycles. The many facets of our economy that determine the overall financial health of the nation are anticipated by the emotion of the market. Any study that compares key historical events with the movement of a major index will demonstrate how war, recession, or a presidential election can influence the current cycle.

It is important to become familiar with the common investment indicators used to determine the overall movement of the market and apply this knowledge as a practical part of your trading strategy. Once you understand the basic terms, try to start out with common indicators like stochastics, moving averages and relative strength. There are hundreds of other systems and formulas but these have been around for years and they work very well for beginners. After you are comfortable with your new tools, practice trading with the indicators you are using until your portfolio is profitable on a regular basis.

Technical analysis is a method of stock market research using indicators, charts, and computer programs to track price trends of stocks, bonds, commodities, and market indexes. A technician understands the fundamental values of securities but focuses on the historical behavior of the market, industry groups and individual stocks. The goal is to use their price movements, trends, and patterns to forecast future direction and changes in character. Most of this analysis is based on the fact that the values of stocks reflect what people think they are worth, not what they are really worth.

Technical Indicators are used to generate buy or sell signals when specific buy or sell parameters are met. Cycle analysis; historically repetitive rhythms in price action, can also be helpful in initiating technical trades. The stock market historically moves in identifiable cycles. To be a successful investor, you must be able to determine the current phase of activity. Historical bottoms or cyclic lows are the most common signals that analysts attempt to uncover. These downside support areas are more reliable and take longer to develop than the cyclic highs. Using a long-term, monthly chart of the DOW, it is relatively easy to spot the four-year rhythm. The most recent bottoms occurred in 1990, 1994 & 1998.

In any type of long-term technical analysis, it is important to understand that, market cycles usually precede economic cycles. The many facets of our economy that determine the overall financial health of the nation are anticipated by the emotion of the market. Any study that compares key historical events with the movement of a major index will demonstrate how war, recession, or a presidential election can influence the current cycle.

It is important to become familiar with the common investment indicators used to determine the overall movement of the market and apply this knowledge as a practical part of your trading strategy. Once you understand the basic terms, try to start out with common indicators like stochastics, moving averages and relative strength. There are hundreds of other systems and formulas but these have been around for years and they work very well for beginners. After you are comfortable with your new tools, practice trading with the indicators you are using until your portfolio is profitable on a regular basis.

Index ETF’s

A statistical indicator providing a representation of the valueof the securities which constitute it. Indices often serve asbarometers for a given market or industry and benchmarksagainst which financial or economic performance is measured.
Exchange Traded Fund. A fund that tracks an index, but can be traded like a stock. ETFs always bundle together thesecurities that are in an index; they never track actively managed mutual fund portfolios (because most activelymanaged funds only disclose their holdings a few times a year, so the ETF would not know when to adjust its holdings most of the time). Investors can do just about anything with an ETF that they can do with a normal stock, such as short selling. Because ETFs are traded on stock exchanges, they can be bought and sold at any time during the day (unlike most mutual funds). Their price willfluctuate from moment to moment, just like any other stock’s price, and an investor will need a broker in order topurchase them, which means that he/she will have to pay acommission. On the plus side, ETFs are more tax-efficientthan normal mutual funds, and since they track indexes they have very low operating and transaction costsassociated with them. There are no sales loads orinvestment minimums required to purchase an ETF. The first ETF created was the Standard and Poor’s DepositReceipt (SPDR, pronounced “Spider”) in 1993. SPDRs gave investors an easy way to track the S&P 500 without buying an index fund, and they soon become quite popular.

Index ETF’s

A statistical indicator providing a representation of the valueof the securities which constitute it. Indices often serve asbarometers for a given market or industry and benchmarksagainst which financial or economic performance is measured.
Exchange Traded Fund. A fund that tracks an index, but can be traded like a stock. ETFs always bundle together thesecurities that are in an index; they never track actively managed mutual fund portfolios (because most activelymanaged funds only disclose their holdings a few times a year, so the ETF would not know when to adjust its holdings most of the time). Investors can do just about anything with an ETF that they can do with a normal stock, such as short selling. Because ETFs are traded on stock exchanges, they can be bought and sold at any time during the day (unlike most mutual funds). Their price willfluctuate from moment to moment, just like any other stock’s price, and an investor will need a broker in order topurchase them, which means that he/she will have to pay acommission. On the plus side, ETFs are more tax-efficientthan normal mutual funds, and since they track indexes they have very low operating and transaction costsassociated with them. There are no sales loads orinvestment minimums required to purchase an ETF. The first ETF created was the Standard and Poor’s DepositReceipt (SPDR, pronounced “Spider”) in 1993. SPDRs gave investors an easy way to track the S&P 500 without buying an index fund, and they soon become quite popular.

Bear Funds

Funds that utilize short-selling methods to quickly makeprofits during a bear or declining market. These funds are usually made up of hedge funds and mutual funds. They are actively managed, and short individual stocks or inverse-index funds that short entire indexes. Bear funds revolve around the idea of playing with both sides of the market so that gains in the bear fund offset losses elsewhere in aninvestor’s portfolio. Bear funds are considered tacticalinvestments, but usually end up being lousy long-terminvestments for investors.