The Visual Investor How to Spot Market Trends

by Murphy, John J.

• ISBN13: 9780470382059
• ISBN10: 0470382058
• Edition: 2nd
• Format: Hardcover
• Copyright: 2009-02-03
• Publisher: Wiley

Summary

The Visual Investor, Second Edition breaks down technical analysis into terms that are accessible to even individual investors. Aimed at the typical investor--such as the average CNBC viewer--this book shows investors how to follow the ups and downs of stock prices by visually comparing the charts, without using formulas or having a necessarily advanced understanding of technical analysis math and jargon. Murphy covers all the fundamentals, from chart types and market indicators to sector analysis and global investing, providing examples and easy-to-read charts so that any reader can become a skilled visual investor.

Author Biography

John J. Murphy is a former technical analyst for CNBC and has over forty years of market experience. He is the face of StockCharts.com, which provides financial information to online investors via technical analysis tools. Murphy has appeared on Bloomberg TV, CNN's Moneyline, Nightly Business Report, and Wall $treet Week with Louis Rukeyser. In 1992, he was given the first award for outstanding contribution to global technical analysis by the International Federation of Technical Analysts, and was the recipient of the 2002 Market Technicians Association Annual Award. In addition to the First Edition of The Visual Investor, he is also author of Intermarket Technical Analysis and Intermarket Analysis, all of which are published by Wiley. He also authored Technical Analysis of the Financial Markets. Murphy has a bachelor of arts in economics and a master of business administration from Fordham University.

Table of Contents

Preface	p. xv
Acknowledgments	p. xix
Introduction	p. 1
What Has Changed?	p. 1
Fand Categories	p. 2
Global Funds	p. 2
Investors Need to Be Informed	p. 3
Benfits of Visual Investing	p. 3
Structure of the Book	p. 3
What Is Visual Investing?	p. 5
Why Market Analysis?	p. 5
The Trend Is to Blend	p. 6
What's in a Name?	p. 6
Why Study the Market?	p. 7
Chartists Are Cheaters	p. 7
It's Always Just Supply and Demand	p. 7
Charts Are Just Faster	p. 8
Charts Do Look Ahead	p. 8
Pictures Don't Lie	p. 9
Picture Anything You Want	p. 9
The Market's Always Right	p. 9
It's All About Trend	p. 10
Isn't past Always Prologue?	p. 10
Timing is Everything	p. 13
Summary	p. 13
The Trend Is Your Frlend	p. 15
What Is a Trend?	p. 15
Support and Resistance Levels	p. 18
Role Reversal	p. 18
Short Versus Long Term	p. 18
Daily, Weekly, and Monthly Charts	p. 25
Recent Versus Distant Distant Past?	p. 28
Trendllines	p. 28
Channel Lines	p. 31
Retracing Our steps by One. Third, One-Half, and Two Thirds	p. 34
Weekly Reversals	p. 38
Summary	p. 38
Pictures That Tell a Story	p. 41
Chart Types	p. 41
Time Choices	p. 46
Scaling	p. 46
Volume Analysis	p. 50
Chart Patterns	p. 52
Measuring Techinques	p. 61
Even the Fed Is Charting	p. 65
The Triangle	p. 65
Polnt-and-Figure Charts	p. 66
Chart Pattern Recognition Software	p. 70
Indicatiors	p. 73
Your Best Friend in a Trend	p. 75
Two Classes of Indicators	p. 75
The Moving Average	p. 76
The Simple Average	p. 76
Weighting the Average or Smoothing it?	p. 77
Moving Average Lengths	p. 77
Moving Average Combinations	p. 78
Summary	p. 95
Is Overbought or Oversold?	p. 97
Measuring Overbought and Oversold Conditions	p. 97
Divergentum	p. 97
Momentum	p. 99
Welles Wilder's Relative Strength Index	p. 100
The Stochastics Oscillator	p. 110
Combine RSI and Stochastics	p. 113
Summary	p. 119
How Lo Have the Best of Both Worlds	p. 121
MACD Constrction	p. 121
MACD as Trend-Following Indicator	p. 123
MACD as an Oscilator	p. 123
MACD Divergences	p. 125
How to Blend Dally and Weekly Signals	p. 125
How to Make MACD Even Batter-The Histogram	p. 128
Be Sure to Watch Monthly Signals	p. 130
How to Know Which Indicators to Use	p. 130
The Average Directional Movement (ADX) Line	p. 133
Summary	p. 1335
Linkago	p. 137
Market Linkage	p. 139
The Asset Allocation Process	p. 140
The Relative Strength Ratlo	p. 142
2002 Shift from Paper to Hard Assets	p. 142
Commodlty/Bond Ratio also Turned up	p. 144
Turns in the Bond/Stock Ratio	p. 144
2007 Ratio Shifts Back to Bonds	p. 147
Bonds Rise as Stocks Falp	p. 147
Falling U.S. Rates Hurt the Dollar	p. 147
Falling Dollar Pushes Gold to Record High	p. 150
Commodity-Related Stocks	p. 153
Foreign Stocks Are Linked to the Dollar	p. 153
Commodity Exporters Get Bigger Boost	p. 156
Global Decoupling is a Myth	p. 156
Rislng Yen Threatens Global Stocks	p. 158
Review of 2004 Intermarket Book	p. 159
Summary	p. 161
Market Breadth	p. 163
Measuring Market Breadth with NYSE AD Line	p. 163
NYSE AD Line Violates Moving Average Lines	p. 163
Advance-Decline Shows Negative Divergence	p. 164
Where the Negative Divergences Were Located	p. 164
Retail Stocks Start to Underperform During 2007	p. 166
Retailers and Homebuilders Were Linked	p. 171
Consumers are also squeezed by Rising Oil	p. 173
Dow Theory	p. 173
Transports Don't Confirm Industrial High	p. 175
Percent of NYSE Stock above 200-Day Average	p. 175
NYSE Bullish Percent Index	p. 179
Point-and Figure Version of BPI	p. 181
Summary	p. 182
Relative Strength and Rotation	p. 183
Uses of Relative Strength	p. 183
Top-Down Analysis	p. 186
Relative Strength versus Absolute Performance	p. 187
Using Relative Strength between Stocks	p. 190
Comparing Gold Stocks to Gold	p. 190
How to Spot New Market Leaders	p. 193
Where the Money Came from	p. 193
Spotting Rotation Back into Large Caps	p. 196
Trend Changes Are Easy to Spot	p. 198
Rotation within Market Sectors	p. 198
Chinese Stocks Lose Leadership Role	p. 200
Summary	p. 202
Mutual Funds and Exchange Traded Funds	p. 205
Sectors and Industry Groups	p. 207
Difference between Sectors and Industry Groups	p. 208
Performance Charts	p. 209
Sector Carpets	p. 211
Using Market Carpet to Find Stock Leaders	p. 212
Industry Group Leader	p. 213
Sector Trends Need to Be Monitored	p. 214
Information on Sectors and Industry Groups	p. 214
Spotting Natural Gas Leadership	p. 215
Natural Gas Components	p. 215
CBOE Volatility (VIX) Index	p. 217
Summary	p. 221
Mutual Funds	p. 227
What Works on Mutual Funds	p. 228
Open- versus Closed-End Funds	p. 228
Charting Adjustments on Open-End Funds	p. 228
Blending Fundamental and Technical Funds	p. 229
Relatlve Strength Analysis	p. 229
Traditional and Nontraditional Mutual Funds	p. 229
Keep It Simple	p. 230
200-Day Moving Average and Housing	p. 230
Natural Gas Breakout	p. 232
Consumer Discretionary Broakdown	p. 232
Bear Crossing Sinks Chips	p. 235
Negative ROC Hurts Technology	p. 235
Consumer Staples Hold Up Okay	p. 235
Retail Ratio Plunges	p. 235
Energizing a Portfolio	p. 240
Latin America Leads	p. 240
Real Estate Is Glonbal	p. 240
Profunds Rising Rates Fund	p. 244
Profunds Falling U.S. Dollar Fund	p. 244
Commodity Mutual Funds	p. 247
Inverse Stock Funds	p. 247
Summary	p. 240
Exchange-Traded Funds	p. 251
ETFs versus Mutual Funds	p. 252
Using ETFs to Hedge	p. 253
Using a Bear ETF	p. 253
Trading the Nasdaq 100	p. 253
Using Sector ETFs	p. 255
Inverse Sector ETFs	p. 258
Using Technology as a Market Indicator	p. 260
Commodity ETFs	p. 263
Foreign Currency ETFs	p. 263
Bond ETFs	p. 267
International ETFs	p. 269
Summary	p. 275
Conclusion	p. 279
Why It's Called Visual Inversting	p. 279
The Media Will Always Tell You Why Later	p. 279
Media Views Keep Shifting	p. 280
Visual Analysis Is More User Frjendly	p. 280
Keep It Simple	p. 280
Visual Tools Are Universal	p. 281
The Stock Market Leads the Economy	p. 281
Prices Lead the Fundaments	p. 282
Sector Investing	p. 282
Exchange-Traded Funds	p. 283
A Year After the 2007 Top	p. 283
Warning Signs were Clearly Visible	p. 284
Getting Started	p. 285
Find a Good Web Slte	p. 285
Use the Readers Choice Awards	p. 285
StockCharts.com	p. 286
ChartSchool	p. 286
Online Bookstore	p. 287
Investor's Business Daily	p. 288
Stock Scans	p. 288
Bullish Percent Indexes	p. 289
DecisionPoint.com	p. 294
McClellan Breadth Indicators	p. 294
Japanese Candlesticks	p. 295
Candlestick Patterns	p. 297
Bullish Engulfing Patterns	p. 298
Stock Scan Candlestick Patterns	p. 300
Recommended Reading	p. 300
Point-and-Figure Charting	p. 301
Triple and Quadruple Signals	p. 302
How to Vary P&F Charts for Sensltlvity	p. 304
There's No Doubt about P&F Singnals	p. 305
Recommended Reading	p. 306
Index	p. 307
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