The Janus Factor Trend Follower's Guide to Market Dialectics

by Anderson, Gary Edwin

• ISBN13: 9781118087077
• ISBN10: 1118087070
• Edition: 1st
• Format: Hardcover
• Copyright: 2012-11-28
• Publisher: Bloomberg Press

Summary

The Janus Factor will offer a theory about how feedback loops explain market behavior and how the theory can be used to trade more profitably. Janus was the Roman god of gates and doors and was represented by two opposing faces, suggesting the two-sided nature of things. Gary Anderson uses the metaphor of Janus to explain the dual nature of markets and how the market vacillates between two different market environments; trend following and contrarian. He develops a systematic view of how positive and negative feedback loops drive capital flows in the stock market and how those flows tend to favor either sector leading or sector laggards at different points in time. Winner of the 2003 Charles H. Dow Award from the Market Technicians Association for a paper on the subject, Anderson's work is both intellectually challenging and highly practical. Readers will gain new insights into market behavior and new tactics for interpreting stock market trends.

Author Biography

Gary Edwin Anderson is a principal od Anderson & Leo, providing stock market consulting and advisory services to an international clientele of professional asset managers, including banks, mutual funds, hedge funds, and financial advisors. A well-known technical analyst, Anderson won the 2003 Charles H. Dow Award from the Market Technicians Association for his paper on feedback loops in the stock market, Anderson’s work has been featured in Barron’s, and he has been published in Technical Analysis of Stocks & Commodities. In addition, he publishes a weekly commentary, Equity Portfolio Manager, and is the primary author of Trader’s Boot Camp (tradersbootcamp.com), an online educational services.  

 

Table of Contents

The Janus Factor vii

Introduction xiii

Acknowledgments xv

CHAPTER 1 Foundations 1

Serendipity 2

The Data Set 5

Reasons and Causes 6

Befuddled 7

Which Way Is Up? 9

CHAPTER 2 The Assignment 13

Measuring Risk: Offense and Defense 14

Picturing Offense and Defense 17

The Benchmark Equivalence Line (BEL) 19

The Trend of Relative Performance 22

CHAPTER 3 Feedback and Capital Flow 27

Feedback 28

Feedback and Capital Flow 31

Calculating Relative Strength 37

The Relative Strength Spread 39

Trend Followers and Contrarians 41

CHAPTER 4 The Janus Factor 45

Structure and Entropy 46

Confidence 47

Is the Market Predictable? 48

Balancing Acts and Paradigm Shifts 54

CHAPTER 5 Seasons of Success 57

The Venturi Effect 58

The Relative Strength Spread and the Performance Spread 61

Group Studies 68

CHAPTER 6 Why Jesse Went Broke 71

The Cotton King 74

1911-1914 75

The Final Years 80

CHAPTER 7 Sheep Dogs and Other Contrarians 83

The Sheep Dog Effect 85

A Contrarian Hedge? 87

The Contrarian Rebound 88

The Contrarian Collapse 92

CHAPTER 8 Situational Awareness 99

Bielema's Choice 101

The Bet 106

Let Us Calculate! 109

CHAPTER 9 The Direction of Momentum 115

Relative Momentum 117

Relative Momentum versus Relative Strength 123

CHAPTER 10 Long Strategies 127

The Critical Moving Average 127

The DOM Strategy 129

Contrarian Threats 130

A Defensive Long Strategy 133

It's a Bull Market, You Know 135

CHAPTER 11 The Complete Strategy 137

Combined Long and Short Strategies 139

The Model Portfolio 141

Execution 143

Appendix 149

About the Author 163

Index 165