Friday, February 09, 2007
Technical Indicators
Standard
Error Bands
Created by Jon Anderson,
Standard Error Bands are two moving averages based on standard error levels
above and below the Linear Regression Indicator. As a type of envelope, they
are similar in appearance to Bollinger Bands but are calculated and interpreted
quite differently. While Bollinger Bands are plotted at standard deviation
levels above and below a moving average, Standard Error Bands are plotted at
standard error levels above and below the linear regression plot.
Andersen recommends default
values of "21" for the number of periods, a 3-day simple moving
average for the smoothing, and "2" standard errors. He also notes
that very short time frames tend to produce unreliable results.
Because the spacing between
Standard Error Bands is based on the Standard Error of the security, when the
two bands are close together, it signifies a strong trend. When the two bands
are far apart, prices are more volatile and will tend to fluctuate between the
two bands. If the bands are close and then begin to widen, it may signify that
the trend is weakening and may possibly be due for a reversal...
Read More...
Trading Education
Tutorial
Elliott
Wave Theory
In the 1930s, Ralph Nelson Elliott found that the markets
exhibited certain repeated patterns. His primary research was with stock market
data for the Dow Jones Industrial Average. This research identified patterns or
waves that recur in the markets. Very simply, in the direction of the trend,
expect five waves. Any corrections against the trend are in three waves. Three
wave corrections are lettered as "a, b, c." These patterns can be
seen in long-term as well as in short-term charts. Ideally, smaller patterns
can be identified within bigger patterns. In this sense, Elliott Waves are like
a piece of broccoli, where the smaller piece, if broken off from the bigger
piece, does, in fact, look like the big piece. This information (about smaller
patterns fitting into bigger patterns), coupled with the Fibonacci
relationships between the waves, offers the trader a level of anticipation
and/or prediction when searching for and identifying trading opportunities with
solid reward/risk ratios.
There have been many theories about the origin and the meaning of the patterns
that Elliott discovered, including human behavior and harmony in nature. These
rules, though, as applied to technical analysis of the markets (stocks,
commodities, futures, etc.), can be very useful regardless of their meaning and
origin...
Read
More...
Daily Market Commentary
Updated Thursday, 2/8 for Friday's market.
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Key DOW Levels for 2/9
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P
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Above 12,700
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DN
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Below 12,550
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Drop & Pop...
- Dow drops through support, but recovers to the Close. The index
closed out the day with a 29 point loss, but continues to look very indecisive
at present.
- The NASDAQ and S&P each pushed lower early in the day, but led nice
upside reversals to the Close. Look for the indexes to continue to build out at
highs ahead of the next key breakout move.
Summary
The Dow ended the day with a nice recovery from the session's lows. The index
continues to wind up beneath the key 12,700 level and could eventually approach
a big breakout opportunity soon. Watch 12,700 and 12,550 for big moves.
Read More...
