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Disclaimer
This document is provided to you ONLY as a means to support and promote the
community of individuals using products offered by Matheny Enterprises.
Matheny Enterprises makes no claims or guarantees that the information
herein is accurate or can be used by any recipient for the purposes of
investing in any of the worlds financial instruments. The reader, and any
subsequent recipient, hereby agrees to hold Matheny Enterprises, it’s
agents, employees, owners and associates, harmless from any claims or
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Matheny Enterprises. Any information contained here in is reported to the
best of our abilities and factual based on information we obtain from
reliable sources or from our own research. Matheny Enterprises, in no way,
promotes or suggests that individuals should trade futures, commodities,
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conditions stated above and therefore agree to forever hold Matheny
Enterprises, it’s agents, employees, owners and associates, harmless from
any claims or comments made herein.
Matheny Enterprises (ME) Investor E-zine
Issue 01 - Volume 10
July 10, 1998
Questions or Comments : Bmatheny@xxxxxxxx
All Rights Reserved
----[ Matheny Enterprises News & Comments ]---------------------------
“Back in Action”
PFP CD-ROM Announcement
CD ROM versions of the PFP software applications are now available. Order
your’s today.
Existing PFP subscribers pay $15 plus S&H
New Users pay $75 plus S&H for a 4 month trial
- Includes all of the current software applications and support files.
Welcome to all new Pattern Forecaster Plus Users
I hope that all of the individuals who have downloaded the PFP software are
enjoying it’s features and analysis capabilities. If you have any
questions, or require some technical support, please contact me or e-mail
me at Bmatheny@xxxxxxxxx Upgrades are coming as fast as I can develop them.
Use these links to access support, service
& member services for the PFP software.
Pattern Forecaster Plus Resources
- Member or Trial Member Links
Technical Support - http://www.ment.com/frames/ts1.html
Chat Room & Message Board - http://www.ment.com/frames/sw1.html
Resources Page - <http://www.ment.com/frames/rsc.html>
Message Board - <http://www.InsideTheWeb.com/messageboard/mbs.cgi/mb51576>
Users Chat - <http://www.ment.com/frames/MECHAT.html>
Software Archive - <http://www.ment.com/frames/MEform.html>
Comments & Suggestions - <Bmatheny@xxxxxxxx>
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- Quotes
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Commodity Traders Discount On-line Trading - Vantage Commodity Corp.
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Cool Link Of The Week
Money Mentor - A wealth of resources and information for professional
investors
Click here ---------------------- http://www.moneymentor.com
----[ The Markets ]----------------------------------------------
The DOW & the S&P 500
Users have asked me to provide more -how to- with the PFP software to
assist in their success. I agree that this will help and have tried to
briefly go over some of the past few weeks in the DOW below. Most of my
time is devoted to furthering the development of the software applications,
so I intend to concentrate my training on simply the DOW for now. Let’s
see how this works and we’ll take it from here.
Overall, the past few weeks have been as expected. Choppy, trading within
a range and generally bearish. Initially, the correction started as a
stall. Just prior to the beginning of the sell off, the market began to
show signs of weakness (early May). Asia was weighing heavy. The
candlestick libraries of the PFP software and the breakout system (TC/BR)
called the final correction on 4-22-98. Following this quick sell off, the
market again recovered to a new high at 9261 before it again sold off.
This type of trending (within a nearly horizontal range with a signwave
structure) is ideal for candlestick trading. PFP users should set the
technical settings to Short Term and follow the candlestick patterns in
these types of trends. Throughout the top congestion of the DOW, the TC/BR
system will also perform well with clear signals as the market turns. The
is very accurate within accelerating sideways trends.
Traders should also notice the rising support levels caused by this type of
trending. This signals that the market is tightening from the bottom. The
bulls were holding with higher lows on the dips while the bears were
pushing from above. This typically creates a wedge shape with the price
chart. There are several wedge shapes and rules. I will try to dig up
more information on wedges in future issues.
The DOW broke out of the wedge formation to close at 8963 on 5-26-98 with a
harami line confirmation. This down trend began a substantial bearish
trend. Notice the oscillating white and black candles throughout this
downtrend. If the trending candle (black candles for bearish trends)
continue to close lower, you can generally expect the market to attempt to
move lower.
The short bullish run beginning on 6-4-98 was very short, but still could
have been a profitable trade for some aggressive investors. Again a harami
line started the pattern after the market fell to a support level from
3-31-98. The TC/BR system and the candlesticks would have attempted to
catch this potential turn. But because it was so short and powerful (only
lasting 3 sessions) conservative investors may have entered in too late.
The best thing to do then is trail you stop at each open and use the 3 day
rule. Average the last three sessions low price and lower shadow (or the
lower wick on the candle) in your head. Look at the lows, then look at the
lower wicks, then attempt to average or find a middle level. You can
adjust the final placement of the stop level to adjust for risk levels from
this level. The only thing the 3 day rule will assist in doing is protect
against unwanted losses. Sometimes it may get stopped out within a trend
using this method. But overall it is a good technique.
The other technique is to use the ASL breakout system. The ASL breakout
system is a variation of a of a simple swing technique. I’ve designed the
ASL levels to be combinations of moving averages, exponential and simple,
as well as logic instructions. The idea is that the ASL levels (which you
can view by pressing F5) will expand and contract from the highs and lows
of the price chart when the market enters and exits defined trends. Again
the fault of this technique is when used with very thinly traded markets or
within extreme consolidation. More on this later...
Look into the new documentation with your PFP programs for more help.
Trading Theory Training & Candlestick Theory Training files are now
included with the PFP 2.01c and 1.01 programs. Look them up.
As of now, we are nearing what appears to be the end of another attempt
above 9200. This market may surprise us next week. I expected a weaker
close in the market today and the small doji formation is very interesting.
There is substantial resistance at the 9200 level. The market has
attempted it four time previously and failed. The Dark Cloud Cover pattern
yesterday is really telling the immediate picture in my opinion. The doji
may still be indicating a longer stalling formation though. We might
expect congestion before a breakout attempt.
What this means is that investors should again be watching for that
horizontal short term trending again. A great opportunity for short tern
investors. I still suggest that investors be cautious as the market has
yet to establish a clear, strong support level near today’s close. The
nearest support levels I see are 8950, 8800 and below 8600.
Sometimes a sandwich like pattern forms at these points in time whereas the
market will have extreme one day reversals. Each one will normally higher
or lower than the previous sessions open. They look like extreme
oscillating black and white candles. Be cautious of this pattern and try
to stay aside, unless you are using these techniques on an intra-day basis.
Then have fun and be careful.
Watch for news this weekend and watch for another attempt above 9200. The
doji might just be what may cause the market to attempt it. Those little
suckers are sometimes very accurate. Otherwise, watch for the market to
establish a new lower support level - probably near the 8800 level at
first. Then we’ll see what happens.
Again, these comments are for instructional use only and should not be
understood as ADVICE. Use this information to learn to use the PFP
software more accurately and make your own decisions. I’m just showing you
how to learn all the different techniques within the PFP software.
---- [ Last Issues Comments ]------------
June 1998
This week and last week the DOW began to fall from its highest levels of
the year. Many Bulls are stating “Buy the Dips” while many Bears are
stating “Expect a 10~20 pull-back”. What I see in the market (as a whole)
is extreme volatility and concern. The Fed will eventually have to take
action to keep the economy “in check” and the “Asian Crisis” has been
centring around Japan’s economy (which is “shaky” at best).
Is this the end of the U.S. bull run?? Well, it’s a little too early to
tell yet, but if it is, investors should start relying on strategic
investments again rather than simply buying what everyone else is buying.
The smaller “tech stocks” last week were a prime example of “following the
lemmings off the cliff”. There was still some money to be made in their
moves, but only for the quick and scrupulous investor. Many investors
purchased these companies thinking the bull run would continue in the
fledgling internet companies. It may still continue (some time in the
future), but many of them have fallen more than 50% since the short run
last week.
While the DOW and the S&P exhibit this type of “volatile” market movement,
investors should stay away from the “break-out” systems within the PFP
software (like the TC/BR and the others mentioned in the last E-zine). Use
these types of systems as an “overview” of the markets potential long term
direction. Candlestick will present a better short term interpretation of
the markets potential turning points and allow investors to take better
advantage of these turns.
My analysis shows that the DOW will probably trade between a range of 8650
and 9200 as it attempts to regain its strength. I know this represents a
rather large range, but the most recent support levels below the 8800 level
is just below the 8650 level. Beyond this level, the next support is below
8500. Resistance levels can be found at nearly every pull-back of the DOW.
This would indicate that the three major resistance levels of the DOW
would be near 9200, 9000, 8650 and 8500.
At this point in time, we need to concern ourselves with the 9000 level and
what will happen if the DOW is not able to regain its strength. If the DOW
is not able to breach the 9000 level with a bullish run, then we should
watch for a fall to near 8650 or 8500. Even if the DOW does manage to
close above the 9000 level, in my opinion this does not mean that the DOW
will continue much higher given the recent concerns in the market.
Remember I mentioned earlier about a pattern called “a scouting party”
which scouts above a resistance level to identify the amount of resistance
it meets. This is likely to be the case with the DOW above the 9000 level.
Overall, I still believe the DOW has a very good chance of breaching the
10000 level before the end of this year, but investors should be very
cautious when the markets begin to move like they have recently. One can’t
expect the bull run to last forever and one should not leave themselves
open to unforeseen risk. When the market enters a period of volatile
congestion (like we’ve seen recently), I believe the candlesticks will
present the best opportunity to trade the markets. When the market begins
to regain its strength and trend again (bullish or bearish), then I believe
investors should use the candlestick and the break-out systems which are
designed for trending markets.
We’ll see what happens with the worlds markets over the next few weeks.
It’s likely that the reactions of the Japanese markets and the European
markets will have some play on the DOW and the S&P. Keep your eyes on the
Asian markets as a whole for signs of weakness. Many of these regions have
seen market rebounds that do not necessarily substantiate their economic
conditions.
------ [ Comments about the breakout systems ]---------------------
In the last ME E-zine, we discussed some of the “breakout” techniques that
could be used to help track the US market and help identify turning points.
We discussed three techniques :
The Trending Candle/ Body Reversal System,
Fractal Top & Bottom formations,
and The Adjusted Stop Level Breakout System.
Let’s review some of these techniques to see how well, or poorly, they
worked out.
The TC/BR system:
This system generated a “Neutral Body Reversal” on 3-27-98 which indicates
a potential trend reversal, yet is not instructing the trader to take
action. The term “Neutral” means to liquidate positions and stay out of
the market. Before this signal, the TC/BR system had indicated a bullish
trend and gave opportunities to buy the market on March 6, 10, 16, 19 and
20th. Buying on the 19th or 20th would not have been a great trade, but
the opportunity to buy earlier did exist.
More recently, the TC/BR system generated a buy signal on April 2 with a
“Bullish Trending Candle”. This signal indicates that the TC/BR system is
expecting a bullish trend to continue. We’ll have to see how the system
works out through the rest of next week.
Remember, if the Dow begins to consolidate, the TC/BR system may generate a
couple of incorrect signals. In my opinion, the TC/BR system is very good
for trending markets. If the market begins to congest, the TC/BR system
will continue to generate signals, yet it becomes more risky as breakout
systems do during consolidation periods.
The Fractal Top and Bottom Formations:
The most recent fractal bottom occurred on March 13th with a low of
8592.80. This level would be our support level for the Fractal system. It
may seem like these levels are “WAY OFF” the mark when you consider the DOW
is trading just below the 9000 level. Yet, they can still be of help as a
breakout technique.
The most recent fractal top occurred on March 25th with a high of 8959.24.
The DOW recently broke this level and has continued to close above this
level. This would indicate that a resistance level is at 8959.24 and the
DOW has broken this level. If it can stay above this level, we should
expect a continued rise in price activity. If it falls back below this
level, a new fractal top will probably be formed and we’ll have two
resistance levels to reference for future trading.
The Adjusted Stop Level Breakout System (ASL):
The ASL system reacts a bit quicker than the other two systems. In some
cases the ASL system and the TC/BR system react at the same time (which
helps confirm one another).
The ASL system went short on March 5, 13 and 27th. It went long on March
10, 16 and April 2. Using the opposite ASL price level as a protective
stop level, this system would have generated moderate profits during this
time frame.
Currently, the ASL system is indicating a potential bullish trend in the DOW.
NOW. LETS LOOK AT THE CANDLESTICK SIGNALS...
March 5 : An Engulfing Bearish Confirmation signal indicated a bearish
trend reversal.
March 9 : A White Inside-Out Up Confirmation signal indicated a bullish
trend reversal.
March 13: An Incomplete Dark Cloud Cover Confirmation signal indicated a
bearish trend reversal.
March 17: Another White Inside-Out Up Confirmation signal indicated a
bullish trend reversal.
March 26: Another Incomplete Dark Cloud Cover Confirmation signal indicated
a bearish trend reversal.
March 31: Yet another White Inside-Out Up Confirmation signal indicated a
bullish trend reversal.
April 1: An Inverted Hammer Confirmation signal indicated a bullish trend
reversal.
Notice how similar candlestick signals continue to form within the DOW.
This is very common. Sometimes, nearly identical candlestick patterns will
form with a market (like character traits). Investors can use this
information to help predict potential price moves.
Closing thoughts:
Notice how the 3 of these 4 trading techniques generated signals on nearly
the same dates. In some cases, one technique generated a signal prior to
the others, but the systems work “hand in hand” in most cases. The
Candlestick technique is typically the “shortest” term system. While the
others tend to keep you in the market a little longer and include a little
bit more risk.
One thing I have not mentioned as of yet is the WEEKLY CHART. I can’t
stress enough how important the WEEKLY CHART is to investors. The benefits
derived from viewing the weekly chart are:
1. Much clearer trend definition.
2. Much clearer definition of support and resistance levels.
3. Much easier to identify cycles in the market.
4. Clear confirmation of major trend reversals.
5. The ability to quickly view the markets major trend and thus trade with
the trend.
6. All of the above techniques can be applied to the weekly chart as well.
7. Even short term traders can benefit from the information on the weekly
chart.
8. More advantages as I think of them.
-----------------[ It’s Your Money
]-------------------------------------------------
Use your best judgement and research your investments. Visit the web site
of the exchanges before you invest directly within another country and
understand the laws. Remember, it’s your money.
For more information about the Asian markets and the resources available to
you, visit our RESOURCES page and visit “The STAR” newspaper on-line. They
include daily closing prices for most of the Asian markets and other
informative resources.
CLICK HERE TO VISIT : http://www.ment.com/frames/rsc.html
--------------[ Links and other FREE things
]------------------------------------------
Magazines and Publications
Futures Magazine : http://www.futuresmag.com
Technical Analysis of Stocks and Commodities Magazine : http://www.traders.com
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Traders Catalog & Resource Guide : http://www.moneymentor.com
Historical Data Providers
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Primate Data Services : http://www.primate.com
Worden Brothers (TC2000) : http://www.TC2000.com
Alpha Microsystems : http://www.Stockvue.com
QUOTE.COM : http://www.quote.com
FutureLink : http://www.FutureLink.com
ON-Line Futures Trading
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Vantage Commodity Corp : http://www.vantagecorp.com
Trading Theory & Educational Sites
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FREE Things
Alpha Microsystems STOCKVUE software : http://www.Stockvue.com
Dr. Websters Amazing Free Stuff : http://www.thefreesite.com
Brad Matheny
Matheny Enterprises - Dana Point, Ca 92629 USA
(949) 240-6977 Phone - (949) 248-8747 Fax
<http://www.ment.com>
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