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This site last updated on 05/12/2008 - Hyperlinks are shown in red
Technical Analysis For Long-Term Investors
There is a vast amount of information on this web site - A free book (243 pages) in pdf format is available for download on the "FREE BOOK" tab - Lots of educational material is available on the "TUTORIAL" tab - A report that covers long-term charts on 204 ETFs is available on the "ETF REPORT" tab - A collection of weekly essays about portfolio management is posted on the "NEWSLETTERS" tab- A copy of the daily report that covers Wall Street analyst's rating changes is included on the "SECOND OPINION" tab - You can sign up for a free trial subscription on the "FREE TRIAL" tab - There are hundreds of case studies about the successful application of these long-term charts on the "CASE HISTORIES" tab.
Take your time and look it over - There is a lot to see.
and
you are welcome to come back as many times as you like.
If you think this site has valuable information for long-term investors
be sure to tell your friends and associates about this site.
You can send them the following link to this site: www.clayallen.com
Discover The Amazing Power Of Point & Figure Charting
I am aware of several university finance professors that use this site as background material in their under-grad and graduate level investments and securities analysis classes and classes in portfolio management .
I haven't been using these long-term point
and figure charts for over 40 years
because they don't work!
I learned from a very bad experience a long time ago
that I needed a defense against
faulty or, even worse, biased Wall Street stock research.
W. Clay Allen CFA
When a Wall Street analyst changes his rating on a stock
Buy - Sell - Hold - Neutral - Outperform - Under-perform - Market outperform - ???
You may want a second opinion before you act - you might be surprised.
"An Independent Second Opinion On Stocks With A Rating Change"
Click on the following link to view the free, daily report.
Technical Perspectives On Analyst's Rating Changes - 05-12-2008
You can print this report, save it, send it to a friend or associate by e-mail by clicking on the FILE button at the upper left of your pdf screen
Special offer from Market Dynamics - A three month free trial subscription
Click on the following link - Free Trial subscription - This research is directed to
individual long-term investors, institutional portfolio managers and stockbrokers.
A new page has been added to this web site and it can be accessed by clicking on the "case histories" tab.
This page covers many case histories on stocks that were reviewed at some time in the past and their technical perspective was then published in a TPARC report along with the Wall Street analyst's change of rating on the stock. The case history covers a chart of the trend of performance at the time of the original TPARC report and a current chart that shows what happened to the stock in the subsequent time period. This provides a "before" and "after" evaluation of the trend perspective published in the original TPARC report. These case histories were chosen because of the dramatic movements after the original TPARC report was sent to subscribers. Some of these declines were absolutely stunning. To those who believe that charts don't work, these case studies are offered as evidence of the power of the Market Dynamics System and the use of relative performance to measure and evaluate performance trends. Portfolio managers do not need to predict future stock prices so much as they need to measure the trend of performance so that they will be able to recognize when the trend changes direction and act accordingly.
The Fog of Randomness
It is absolute folly to deny the randomness of stock price movements. It is more intelligent to develop tools and methods that can effectively remove the randomness and allow the portfolio manager to see through the fog of randomness created by the "Brownian" movements of the market. The Market Dynamics P&F charting system is a very effective tool for dealing with the blur of randomness created by stock price movements and it allows the user to see what is truly going on. This allows the portfolio manager to act on substantive evidence provided by observations of the market and to reduce the costly impact of guesswork produced by, sometimes biased, analysts and to avoid dangerous commitments to fundamental predictions that usually don't work out as hoped.
New case studies will be added continuously to this page over time.
Click on the "case histories" tab
"Winning The Performance Game" by W. Clay Allen CFA
Click on the following link to download the free electronic book
Download free book (243 pages) in .pdf format
Successful investors manage their portfolio
as if it were a business.
Chapter 1 - Manage The Portfolio Like A Business
A portfolio manager is more likely to succeed if he manages the portfolio like a business. The portfolio manager should view the various stock investments in the portfolio as the workers in the business. The business manager organizes and directs the activities of the workers to accomplish the goals of the business.
The business manager does not do the work. He manages the job performance of the workers. Feedback is gathered to provide a basis for evaluating the job performance of the individual workers. This process of gathering feedback should be almost continuous.
The business manager defines what is acceptable job performance. When the job performance of a worker sinks to an unacceptable level the worker must be terminated. A new, more capable worker is then hired as a replacement. The work force of the business is constantly refreshed and kept oriented toward the goals of the business.
The job performance of a worker in prior periods should not be allowed to unduly influence the evaluation of job performance in the most recent period. It is also recommended that the business manager not become too close or “chummy” with the workers because that might retard the ability to address the problem of poor job performance by the worker in the future—ditto for stocks.
It should be remembered that it is the job performance of the worker that is being evaluated and criticized, not the abilities of the business (i.e. portfolio) manager. However, many portfolio managers become very defensive when stocks they have selected perform poorly. This defensive attitude seems misplaced and often gets in the way of an objective appraisal of the job performance by that worker (i.e. stock). All reasonable portfolio managers will admit that not all stock investments will work out as hoped and the feedback monitor is a direct method for dealing with disappointing investments.
The controlling rule in the business of investment management is to expect the unexpected. It is best to plan for surprise. A positive surprise will take care of itself and requires no action. The negative surprise is what triggers the feedback mechanism and sets the stage for remedial action.
The performance feedback process usually provides an early indication that something is developing in the wrong direction. It is usually a mistake to stubbornly maintain confidence in a prediction when the evidence from the market suggests that the prediction is suspect. Predictions must be continually tested and their “hoped-for” validity verified.
The performance feedback approach allows the portfolio to adjust and adapt to changing conditions while the fundamental inputs are still in flux. Once this approach has been adopted, it is a simple matter to develop the tools to implement a job performance feedback system.
“Men must be taught
as if you taught them not,
and things unknown
proposed as things forgot.”
The Essay on Criticism
by
Alexander Pope
The following information explains how Market Dynamics works.
Good investment performance is not accidental.
Bad investment performance is not accidental either!
A persistent uptrend of relative performance that is shown by major winners in the stock market is not an accident. Likewise, a persistent downtrend that is shown by major losers in the stock market is not an accident either. The day-to-day movements of relative performance will usually be partially random and noisy, but the primary trend will show through if you know how to look for it. It is the primary long-term trend of relative performance that should be of most interest to portfolio managers.
If the stock doesn't trend, then why bother? The majority of stocks ( probably 60% of all stocks) are in trading ranges most of the time and therefore do not exhibit strong trends in either direction. The failure to produce a trend is strong evidence that the investment potential of that stock is limited. It is very difficult to achieve outstanding investment performance with a range-bound stock. However, Wall Street analysts are continuously rating trading range stocks as a long-term buy because they do not bother to check the trend of performance when they prepare their investment ratings.
If the trend of relative performance is down ( about 20% of all stocks) then it doesn't matter what the analyst's rating is, because it is showing a persistent downtrend. A simple rule, If the other buyers of that stock have been losing money, you will probably share that experience by losing money as well. Avoid stocks that show persistent down trends. When they get to be cheap enough to buy, they will stop going down.
We have just concluded that probably 80% of all stocks are not worth purchasing as a long-term investment. The remaining 20% of all stocks are stocks that share a common attribute, they are showing a persistent trend of strong relative performance. In other words, to produce good performance, the portfolio manager needs to focus on stocks that show good relative performance. Good investment performance is the product of observations of relative performance as it occurs, not some theoretical prediction of what future performance "ought" to be. Wall Street seems to be addicted to predictions of the future but these predictions are often notoriously wrong.
The TPARC report will reveal the stock's true trend of performance when an analyst changes his rating on a stock. When an analyst says "buy" and the trend of relative performance is straight down, it is usually best to wait for the down trend to reverse before buying the stock. Don't ever buy a stock without checking the true trend of relative performance as shown on the long-term charts of relative performance!
It can save you some big bucks!
Winning THE PERFORMANCE Game
Discover The Amazing Power Of
Point & Figure Charting
Comments from current users of the TPARC report:
"The TPARC report is a highlight of my day. It forces me to look at issues that are not in my daily inventory. I have also picked up some great ideas from this report. I feel that it is very valuable to me in its current form."
Mr. S
"I read this every day. Can't miss. I hope you continue."
Sam S.
An Independent Second Opinion
for
Independent Investors
The TPARC Report
Technical Perspectives on Analyst's Rating Changes
Professional, Long-term, Point & Figure Analysis
of Relative Strength Trends
The Buzz About Stocks
There is a constant buzz on Wall Street about stocks - buy this - sell that - hold this one etc. Much of this chatter about stocks is generated by Wall Street analysts when they issue or change their investment opinions about a stock. Rating changes are broadcast over the brokerage firm's squawk box and the brokerage's commission salesmen solicit orders from their customers when a rating is changed. The financial news media repeat the analyst's opinions and may even interview the analyst or the company's management to highlight the rating change. Reports are mailed to investors and many sites on the Internet pick up the rating changes and list them on various web pages. All this activity contributes to the buzz and a sense of excitement that surrounds the stock.
Market Dynamics now includes a
special pdf document that reports on the long-term trend of relative performance
for stocks that have received a change of investment opinion by an analyst. Many
times the investor needs to know that the direction of the long-term trend of
performance does not agree with the analyst's opinion. This trend analysis
represents an Independent Second Opinion - for Independent Investors about the advisability of
following the recommendation of an analyst on a specific stock. This daily report can be
viewed from this web site by clicking on the following link ( it is updated
daily). Be sure to return to this web site (click on the
back arrow 
on your browser to return to this
web site) for more information about using
point and figure charts of relative performance to manage portfolios for better
performance - a free trial subscription is available.
Your feedback would be most appreciated - just send me an e-mail.
You will need Acrobat Viewer to view the document.
You can download a free version of Acrobat Viewer from www.adobe.com
Click on the following link to view the report.
Technical Perspectives On Analyst's Rating Changes - 05-12-2008
"You cannot manage, what you do not measure."
Peter Drucker
What is Alpha?
Alpha is the excess return from a stock investment -
over and above the return from the market
In order to improve alpha, you must measure alpha.
Stock charting should not be used to predict future stock prices but to measure Alpha.
Stocks with persistently high Alphas did
not randomly produce those high Alphas.
High positive Alphas do not happen by accident.
Bad Alphas do not happen by accident either,
something fundamental caused it!
Portfolios should be managed on the basis of real-time Alpha
what is - not what ought to be.
Sometimes investors wish that they could get a second opinion on a stock they are thinking of buying. An independent opinion from someone who is not trying to sell them a stock. The Market Dynamics Service now provides just such a second opinion.
Click the Second Opinion button to jump to that page
This site was last updated on 05/12/2008
Why do 80% of institutionally managed portfolios
fail to outperform the market?
It is definitely not because the market is efficient.
It is definitely not because stock prices are random.
There are many reasons why portfolios fail to perform as desired.
I call them the "enemies" of good performance.
The "enemies" of good performance include:
-
Complacency
-
Indecision
-
The strong tendency to become overly committed to a stock
-
A belief that the market is wrong
-
Bargain hunting - The desire to buy stocks that are going down
-
The psychological need to go along with the crowd
-
Institutional and organizational rigidity
-
Failure to apply independent thinking
-
Failure to measure a stock's market performance - Alpha
-
Failure to make one's own decisions
-
Denial of investment mistakes
-
Groupthink
-
Confusion between participation and prediction
The unintended result is:
A willingness to hold stocks with bad alphas.
The simple explanation for bad performance is that too many stocks are held in the portfolio that under-perform. The various "enemies of good performance" can be the reasons given for holding bad stocks, but the simple fact is that bad stocks are held long enough to drag the overall portfolio performance down. Experience shows that long-term investors are far too complacent about holding stocks that under-perform. They also fail to measure and track the market performance of stocks held in the portfolio. They don't bother to gather the data that would conclusively identify the poorly performing stocks in the portfolio.
Market Dynamics is an investment service that specifically identifies stocks that are under-performing. If you are interested in improving your investment performance, the Market Dynamics Software has been designed for you. This system was developed by a professional investment manager with over 35 years of experience working with institutional portfolio managers. This system was designed for use by active managers such as hedge funds, mutual funds and independent investment advisory firms that are determined to achieve better investment performance. Complacent, long-term investors such as bank trust departments will probably not be able to use Market Dynamics effectively.
Our beliefs shape our behavior and our performance
If you believe that the market is efficient, then Market Dynamics is not for you. If you believe and are committed to a "fundamentals only" approach to portfolio management, then Market Dynamics is not for you. If you believe that the short-term randomness of stock price fluctuations can eliminate the possibility of successfully beating the market, then Market Dynamics is not for you.
However, if you are seriously committed to improving your investment performance then Market Dynamics will help you achieve that goal.
What is Market Dynamics ?
Market Dynamics is a complete, stand-alone, long-term, point and figure charting system for relative strength. It consists of a software program that resides on the user's PC and it is updated daily with files sent to the subscriber via an e-mail. This allows the user to review the long-term relative performance charts on his/her computer as he/she reviews portfolios and selects stocks for investment. A proprietary charting feature called the Performance Alarm highlights stocks that are showing poor performance and the chart turns bright red when the Performance Alarm turns on. This service covers over 4000 individual stocks, industry groups and market averages. The author prepares screens of stocks with certain attractive chart patterns and these screens are updated daily to help users identify good investments. Additional reports covering a daily report on the Technical Perspective on Analyst's Rating Changes and a daily report on Stock Investment Ratings are also a regular feature of Market Dynamics. This is a complete, stand-alone technical investment management system for independent investment advisors. This is a tool designed to help independent investment advisors produce better investment performance. It includes a complete tutorial on the effective application of point and figure charting of relative performance in managing long-term investment portfolios. The system is extremely fast and easy to use.
Free Trial Subscription for three months:
Hedge fund managers (equity long/short strategy)
Investment advisors
Mutual fund portfolio managers
Individual Long-term Investors
A free three month trial subscription for institutional portfolio managers can be started by clicking on the following link. I will need your mailing address in order to send you the CD with the software system (software for PCs - Windows 95 and up). The CD includes the Market Dynamics software as well as five years of weekly portfolio management newsletters and the Market Dynamics Tutorial.
Free e-Book
The free trial includes a free copy of my new book (243 pages) in e-book format that is on the CD:
Winning The Performance Game -
Managing stock portfolios for top performance.
by
W. Clay Allen CFA
The book is available in paperback at www.amazon.com
Special offer of the Market Dynamics Service
Click on the following link - Free Trial subscription
Sample Portfolio Management Letter for Friday 05-02-2008
To view additional portfolio management letters
click on the
Newsletters Button
My book
Winning The Performance Game -
Managing Stock Portfolios For Top Performance
is now available for purchase at
www.amazon.com
A preview of a few chapters from the book can be viewed by clicking on the following link
Book preview
Market Dynamics Tutorial
A free e-book by W. Clay Allen CFA with an extensive tutorial (over 300 pages) about point and figure charting is available for free download. The book can be downloaded one chapter at a time by clicking on a link to the pdf document and saving the document. This e-book tutorial provides a complete introduction to the use of point and figure charting of relative performance and portfolio management.
Chapter one is titled "Technical Analysis For Long-Term Investors."
click this link to go to the tutorial page
A special page contains an essay about "managing the portfolio like a business." This page has an important insight about effective portfolio management and managing for performance.
click this link to jump to the Investing page
A new daily report has been developed to communicate long-term technical buy-sell-hold numerical ratings on stocks. 1,2,3 are sell ratings, 8,9,10 are buy ratings 4,5,6 are neutral ratings from slightly negative to slightly positive. A 7 rating is close to a buy but should be interpreted as a strong hold rating that could move up to a buy. The stocks that are covered in the report are stocks that have had a rating requested by a Market Dynamics user. 25 stocks per day are covered in the report. These ratings are designed to help investors decide which stocks to sell (or not buy) and which stocks to buy ( or not sell). A sample of the report can be viewed by clicking on the following link. Subscribers to the Market Dynamics Service can submit requests for a rating on a stock and it will be covered in the Stock Rating Report.
Market Dynamics Stock Rating Service
A new page has been added to the web site that provides a
brief description of the reports that are regularly supplied with the
Market Dynamics system.
Click on the following link to view the description of the reports
Market Dynamics Reports
This entire web site is copyright 2000-2008
by W. Clay Allen CFA - All rights are reserved
Use the following links to jump to various topics within this web site.
Send an e-mail to mailto:clayallen@msn.com
