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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.
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.
"Winning The Performance Game" by W. Clay Allen CFA
Click on the following link to download the free electronic book
Successful investors manage their portfolio
as if it were 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.
"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
Sample Portfolio Management Letter for Friday 05-02-2008

To view additional portfolio management letters
click on the
My book
Winning The Performance Game -
Managing Stock Portfolios For Top Performance
is now available for purchase at
A preview of a few chapters from the book can be viewed by clicking on the
following link
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."
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.
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.
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
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


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