Full view integrated technical analysis : a systematic approach to active stock market investing

287 Pages·2011·2.03 MB·English

by  Xie

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Full View Integrated

Technical Analysis

A Systematic Approach
to Active Stock Market
Investing
ffirs.indd i 10/6/10 6:52:50 AM
ffirs.indd ii 10/6/10 6:52:50 AM
Full View Integrated

Technical Analysis

A Systematic Approach
to Active Stock Market
Investing
Xin Xie
John Wiley & Sons (Asia) Pte. Ltd.

ffirs.indd iii 10/6/10 6:52:50 AM
Copyright © 2011 John Wiley & Sons (Asia) Pte. Ltd.

Published in 2011 by John Wiley & Sons (Asia) Pte. Ltd.

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Typeset in 10.5/13 pt Palatino Roman by MPS Limited, a Macmillan company
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Contents

Preface ix

1 The Need for a Full View Integrated Approach 1

1.1 The Motivation 1

1.1.1 The Need for a New Paradigm 1

1.1.2 The Answers from FVITA 4

1.2 The Necessity of FVITA 6

1.3 Random Walk? 9

2 Two Basic Elements of Market Dynamics 11

2.1 Oscillators—An Overview 11

2.2 The Oscillator of Choice—Stochastics 19

2.3 Trend Indicator—Moving Average 21

2.4 Trend Indicator—Moving Average Convergence/Divergence 24

2.5 Adaptive Trend Indicators 29

2.5.1 Kaufman’s Adaptive Moving Average 30

2.5.2 Chande’s Variable Index Dynamic Average 31

2.5.3 Mart’s Master Trading Formula 31

2.6 Adaptive Oscillators 33

2.7 Other Tools of Technical Analysis 33

3 Multi-Screen Systems 35

3.1 The Need for Multi-Screen Approaches 35

3.2 Triple Screens 37

3.3 Extended Interval Charts in FVITA—Daily and Up 39

3.4 Intra-Day Interval Charts in FVITA 45

4 Bounded, Interval-Specific Bull and Bear Markets 49

4.1 Interval-Specific Bull and Bear Market I—Concept 49

4.2 Interval-Specific Bull and Bear Market II—Criteria 52

4.3 Interval-Specific Bull and Bear Market III—Limits of

Countermovements 57

4.4 Triple Screen System Under Full View 66

5 Market Turning Points and Duration of Pauses 69

5.1 Support and Resistance 69

5.2 Bollinger Bands 74

5.3 Waves 78

5.4 Turning Points after Eight and R9 Observations 85

5.5 Thrust 86

5.6 Type I, II, and III Pauses 91

v

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vi Contents
6 Trend Reversals vs. Temporary Countertrends 101

6.1 Trend Reversals 101

6.2 Without the Two-Day Chart 108

6.3 Running Space after Trend Reversal 109

6.4 Temporary Countertrends 111

6.5 Straight Pauses 122

6.6 Exception 1: Composite Bottoming-Up

and Composite Topping-Off 128

6.7 Exception 2: Approaching the Turning Point 130

6.8 Relationship between Low- and

High-Order Signals 132

6.9 Trading Strategies on Trend Signals 134

7 Pauses Under Different Market Conditions 141

7.1 Pausing-Down from a Historical New High 142

7.2 Pauses Against Temporary Trends 145

7.3 Trading Strategies for Pauses 151

8 Case Studies 157

8.1 Case 1: The 2007 Financial Market Crisis—DJIA 158

8.2 Case 2: The 2000 High-Tech Bubble and

its Aftermath—DJIA 162

8.2.1 The Formation of the High-Tech Bubble—DJIA 163

8.2.2 The Bursting of the High-Tech Bubble—DJIA 167

8.3 Case 3: The 1990 Bubble and Fall—Topix 172

8.3.1 The Formation of the 1990 Bubble—Topix 172

8.3.2 The Bursting of the Bubble in 1990, I—Topix 177

8.3.3 The Bursting of the Bubble in 1990, II—Topix 183

8.4 Case 4: The 2003 Rebound and 2007 Crash 187

8.4.1 The Rebound in 2003—Topix 187

8.4.2 The Fall after the Crash in 2007—Topix 192

8.5 Case 5: The 2007 Crash—Shanghai Composite Index 195

8.5.1 Market at the Turning Point—Shanghai

Composite Index 2007 195

8.5.2 The Crash of 2007—Shanghai Composite Index 201

9 Random Walk, Efficient Market vs. Market Activism 207

9.1 Efficient Market Hypothesis—The Roots 208

9.2 Efficient Market Hypothesis—The Evidence 212

9.3 EMH, Market Activism and the $100 Bill Story 216

9.4 Flawed Empirical Observations

Against Market Activism 217

9.5 A Fund to Show Effective Market Activision 224

9.6 A Theoretical Argument for Technical Analysis 228

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Contents vii

10 Integrating Macro, Fundamental, Quantitative

and Technical Analysis 237

10.1 The Fragmented State of Market Analysis 237

10.2 Integrating Different Technical Analyses Under FVITA 239

10.3 Macroeconomic Analysis and FVITA 240

10.3.1 Integrated Approach to News Processing 241

10.3.2 Integrated Analysis of Bubbles and Panics 244

10.4 Firm Fundamentals and FVITA 248

10.5 Options and FVITA 249

11 Other Issues 253

11.1 Statistical Analysis 253

11.2 Technical Analysis as Public Knowledge 255

12 Concluding Remarks 259

Glossary 2 61

References 265

Index 267

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