Dancing with the Trend

Greg Morris
About the author: has been a technical market analyst for over 40 years and is the author of several popular financial analysis books including Candlestick Charting Explained, Investing with the Trend and The Complete Guide to Market Breadth Indicators. Before retiring, he served as the Chief Technical Analyst and Chairman of the Investment Committee for a technical-based money management company with over $5.5 billion under management. Greg has appeared on CNBC, Fox Business, and Bloomberg Television and has also spoken at numerous financial conferences around the world.

Latest Posts

Dancing with the Trend

Pullback Rally Analysis

by Greg Morris

The Pullback Rally Analysis is not a ranking measure but a technique for determining the relative strength of issues by looking at the most recent rally from a previous pullback.  Measure the amount of the pullback in percent, then measure the current rally up to the current date in percent.  The concept is fairly simple, those issues which dropped the least in the pullback, will probably outperform in the following rally.  This concept measures the percentage move during the pullback, the percentage to date of the current rally, and the percentage to date from the beginning Read More 

Dancing with the Trend

Distribution

by Greg Morris

Distribution is the term often referred to as the topping process in the stock market.  Before we go any further I want to say this loud and clear:  I am not calling a top in the market.  As you hopefully know by now I am just a humble trend follower.  Calling tops and bottoms in the market is generally left to the market timers and those who never trade; only analyze.  Distribution got its name from the fact that stocks are being distributed from the smart hands to the not-so-smart hands; or so I have heard.  These are nasty periods in the market; very Read More 

Dancing with the Trend

Building a Rules-Based Trend Following Model - 10

by Greg Morris

I’m going to change the focus for a while; for my own sanity and probably for yours.  We have talked about a weight of the evidence approach and some of the indicators used in that approach.  This approach tells us when to invest in the market and how much; it also tells us what stop loss percentages to use.  We will cover the weight of the evidence levels and how the stops are determined along with buy rules later.   So now we know when to invest and how much, but we haven’t talked about what to buy or how much.  For the past 15 years I have only bought Read More 

Dancing with the Trend

Building a Rules-Based Trend Following Model - 9

by Greg Morris

One of my trend following indicators was created because I felt that there were some issues with market breadth that needed attention.  For example, the Friday after Thanksgiving.  The market is only open a few hours and trading volume is very light.  There are price changes but nothing exceptional.  However, there is always a full complement of breadth data no matter how long the market is open.  It was my feeling that it would be nice to be able to ignore breadth data when daily volume is down, and/or the market wasn’t open for a full day.  Hence, a breadth Read More 

Dancing with the Trend

Article Summaries: 12/2017 - 4/2018

by Greg Morris

Periodically I write an article that reviews the past few months of articles.  Why on Earth would I do this?  Primarily for two reasons.  One is that many new readers are involved and often they do not go back and look at the past articles.  Two is that my articles are rarely tied to anything that is happening in the markets.  Generally, they are about experiences I have had as a technical analyst for 45 years; the good, the bad, and the ugly.  Hence, they have shelf life (well, certainly in my mind they do).  You can click on the headers for a link Read More 

Dancing with the Trend

Building a Rules-Based Trend Following Model - 8

by Greg Morris

Another price-based measure I use in my weight of the evidence is called Adaptive Trend.  This was modeled after an indicator from the Bloomberg service called Trender.  Adaptive Trend identifies price swings based on the daily trading range.  It uses Average True Range (ATR), exponential smoothing, and standard deviation as inputs. The resulting indicator is a trend-following approach not unlike some Parabolic Studies.  In an uptrend, a support line will appear below the price. A sell signal is generated when price closes below the support line. In a downtrend, a Read More 

Dancing with the Trend

General Comments on Trend Following

by Greg Morris

Since there are many new readers, I thought an overview on trend following might be appropriate.  As I have stated often, I use a market analysis methodology called trend following.  Sometimes it should be called trend continuation. Why?  My trend analysis works on the thoroughly researched concept that once a trend is identified, it has a reasonable probability to continue.  I know that is the case because most of the time markets are trending markets and I see no reason to adopt a different strategy during a period of mean reverting, such as we have experienced Read More 

Dancing with the Trend

Aftcasting

by Greg Morris

Wall Street is loaded with experts who make forecasts on the future market direction and market level many times a day.  If you see a rather serious technical analyst on television, you can count on the talking head interviewer to ask him/her where the market is going.  They must comply, or they won’t be asked back.  The networks know their viewers want to hear forecasts.  Years ago, I was on Fox Business and the talking head (won’t mention her name) said I see you like technology because it is in your portfolio.  I responded that I did not particularly like Read More 

Dancing with the Trend

Building a Rules-Based Trend Following Model - 7

by Greg Morris

This article is a follow up of the previous one in this series - Building a Rules-Based Trend Following Model - 6.  Table A is an example of the detailed research behind each of the various indicators used in the weight of the evidence.  This example uses over 30 years of data; however, it should be run over many different periods to find consistency.  Table A is the performance data for the Price Long indicator. Table A While the calculation of all the various measures of an indicator’s ability to work over a vast number Read More 

Dancing with the Trend

Building a Rules-Based Trend Following Model - 6

by Greg Morris

It is time to start getting into the measures/indicators to be used in the model.  Note: When I was presenting at the big wire houses, I used the term measures as seemed to be easier for advisors to understand.  Now, dealing primarily with technical analysts, indicators seems more appropriate. At some point I'll pick one and stick with it; just remember they refer to the same thing.  We will start with Price-based indicators/measures.  Price-based means that the indicator is measuring movement in price instruments; whether it be from an index such as the Nasdaq Read More 

Subscribe to Dancing with the Trend to be notified whenever a new post is added to this blog!