Tenorio Research Market Analysis: Price, time, Sentiment, Geopolitics

Elliott | Gann | Kondratieff | Time Segment Analysis | Technical Analysis | Sentiment | Charting |

Tenorio Research Market Analysis

Introduction to Technical Analysis

Technical analysis consists of any number of mathematical approaches to analyzing price, volume, open interest (for futures and options), and such stock market data as advances and declines, etc.

We'll look at a number of these as we go forward, but for now I would highly recommend "Technical Analysis of the Futures Markets" by Jophn J. Murphy. An excellent source for this and many other investment books is Traders Press.

Several Metastock Indicators We Use

The Money Flow Index (MFI) attempts to measure the strength of money flowing in and out of a security. It is closely related to the Relative Strength Index (RSI); however, the Money Flow Index accounts for volume action. The RSI incorporates price action only.

Money flow (not the Money Flow Index) is calculated by determining the average price for the day and then comparing this figure to the previous day's average price. If today's average price is greater, it is considered positive money flow. If today's average price is less, it is considered negative money flow. Money flow for a specific day is calculated by multiplying the average price by the volume.

Money flow = Voume x Average Price

Positive Money Flow is the sum of the positive money flow over the specified number of periods. Negative Money Flow is the sum of the negative money flow over the specified number of periods.

Money Ratio = Positive Money Flow/Negative Money Flow

Finally, the Money Flow Index is calculated using the following formula:

Money Flow Index = 100 - {100/(1 + Money Ratio)}

The Inertia indicator was developed by Donald Dorsey. It was originally introduced in the September 1995 issue of Technical Analysis of Stocks and Commodities magazine. It is an outgrowth of Dorsey’s Relative Volatility Index.

Dorsey chose the name “Inertia” because of his definition of a trend. He asserts that a trend is simply the “outward result of inertia.” It takes significantly more energy for a market to reverse direction than to continue along the same path. Therefore a trend is a measurement of market inertia.

In physics, Inertia is defined in terms of mass and direction of motion. Using technical analysis to analyze security prices, the direction of motion is easily defined. However, mass is not so easily defined. Dorsey asserts that “volatility” may be the simplest and most accurate measurement of inertia. This theory led him to use the Relative Volatility Index (RVI) as the basis for a trend indicator.

Inertia is simply a smoothed RVI. The smoothing mechanism is a Linear Regression indicator. The RVI helps measure the general direction of volatility. Dorsey found that by smoothing the RVI, a good long-term trend indicator resulted.

The Ease of Movement indicator was developed by Richard W. Arms, Jr., best known for the popular Arms Index and the Equivolume charting method. The Ease of Movement indicator is a product of the Equivolume charting method. The Ease of Movement indicator provides one value (for each time period) representing the price and volume for that period. It calculates the ease at which prices are moving. The larger the price move and the lighter the volume, the easier the movement.

The raw Ease of Movement value is usually smoothed with a moving average.

Also see Charting on the masthead for s discussion of the WinMidas charting indictor/method.