The Streetsmart Guide to Timing the Stock Market : When to Buy, Sell, and Sell Short

Preface to the Second Edition xiii Acknowledgments xv CHAPTER 1 THE CASE FOR TIMING 1(14) What to Buy and When to Buy and Sell Looking for Great Stocks Avoid Stocks Going Nowhere! The Great Reality Check Sometimes You Should Sell Stocks and Buy Bonds Indexes Comprise Good, Bad, and Indifferent Six Primary Objectives What You Need CHAPTER 2 DEFINING A BULL MARKET 15(12) Upward Zigzags Use a Line Chart Be Confident in the Trend! W Formations: The Start of a Bull Market Zigzags Apply to All Indicators CHAPTER 3 DEFINING A BEAR MARKET 27(6) Conditions for a Bear Market A Bull Market Dies Hard Downward Zigzags and M Formations: The Start of a Bear Market Nortel in a Bear Market Some Stocks Don't Come Back CHAPTER 4 SIDEWAYS MARKETS 33(4) Endless Chop Conditions for a Trading Range Wal-Mart in a Trading Range CHAPTER 5 VOLUME AND ON-BALANCE VOLUME (OBV): FOLLOW THE MONEY 37(16) The Difference between Persistent and Random Market Action Short Surges May Be Meaningless Volume Can Forecast Price New Applications for OBV Interpreting OBV OBV and Exxon Mobil OBV and Nortel CHAPTER 6 MOVING-AVERAGE CONVERGENCE/DIVERGENCE (MACD) 53(12) Direction and Momentum Using MACD MACD and General Electric MACD on the Weekly Chart MACD and CR Bard Learn to Believe in MACD CHAPTER 7 THE BUILDING BLOCKS FOR CHARTS 65(8) Price Bar Action Always Follow the Footprints CHAPTER 8 PRICE RULES 73(10) When to Pull the Trigger Price Rule Principles Conditions for All Price Rules Price Rules Illustrating the Price Rules CHAPTER 9 MOVING AVERAGES: USE WITH PRICE RULES 83(12) Confirming the Direction Settings for Moving Averages Using Moving Averages Walgreen Co. and the Monthly Moving Averages Buy Off the Monthly Chart Buy Walgreen Off the Weekly Chart Buy Walgreen Off the Daily Chart When You Should Wait to Buy CHAPTER 10 STOCHASTICS—OVERBOUGHT/OVERSOLD INDICATOR: USE WITH MOVING AVERAGES IN A TRENDING MARKET 95(12) When to Buy Low and Sell High Settings for Stochastics How to Use Stochastics Stochastics and the Dow Jones Industrials Stochastics and Apache Corporation Buy Apache from the Weekly and Daily Charts CHAPTER 11 SUPPORT AND RESISTANCE: TRENDLINES, CHANNEL LINES, AND LINEAR RETRACEMENT 107(12) Drawing a Trendline Drawing a Channel Line The Standard & Poor's (S&P) 500 and Linear Retracement on the Monthly Chart Trendlines and Channel Lines on the S&P 500 Weekly Chart Support and Resistance at Historic High and Lows Gaps as Support and Resistance CHAPTER 12 CHART PATTERNS THAT WORK 119(14) The Long-Term Saucer Bottom The Short-Term Saucer Bottom The Trading Range Breakout How Success Starts St. Jude Medical Comes to Life The Head-and-Shoulders Top The Reverse Head-and-Shoulders Pattern Apple Computer Takes Flight The Ascending Triangle CHAPTER 13 MAJOR MARKET TURNS 133(14) Establishing the Conditions The Four-Year Presidential Cycle Sell in May and Go Away Opinion and Contrary Opinion Mutual Funds as a Contrary Indicator Sometimes a Bell Rings Euphoria at Market Tops The New Era Syndrome in 1999-2000 The Top in 1929 CHAPTER 14 WHAT WORKS—A REVIEW AND PROSPECTS FOR THE FUTURE 147(16) Where to Start Looking Some Old Indicators Don't Do What They Used To Technical Alerts That Work Fundamental Factors to Look For Some Concepts for the Future Foreign Stocks CHAPTER 15 HOW TO MANAGE YOUR CAPITAL: RISK VERSUS REWARD 163(12) Don't Invest All at Once Keep Capital in Reserve What Gerald Loeb Did Don't Diversify Too Much! Routine Retracements and More Serious Ones Give Winners Room to Breathe Don't Average Down! Think Positively in a Bull Market Think Defensively in a Bear Market Separate Income from Capital Capital Management Summary CHAPTER 16 ENTRY CHECKLIST: BUY 175(10) Bringing the Signals Together Confirming Indicators Negating Indicators Stops CHAPTER 17 CASE STUDY: HOW TO BUY 185(20) The Entry Checklist for Whole Foods Market, Inc. (WFMI) Monthly Confirming Indicators Monthly Negating Indicators Weekly Confirming Indicators Weekly Negating Indicators Daily Confirming Indicators Daily Negating Indicators The Stop CHAPTER 18 PROTECT CAPITAL WITH A STOP LOSS 205(10) The Importance of Stops The Psychology of Stops First Loss, Least Loss The Initial Protective Stop (IPS) The Trailing Protective Stop (TPS) Where to Put the Stop Stops for a Runaway Market Be Prepared to Buy Back CHAPTER 19 WHEN TO SELL 215(10) Reasons to Sell If in Doubt, Run Profits but Cut Losses CHAPTER 20 SELLING STOCKS SHORT 225(12) Sell First, Then Buy Short-Sellers Perform a Service Risk and Reward Stocks Not to Sell Short Short Sale Candidates The Short Interest Ratio Short Sale Procedures Short Sale Margins Calculate the Stop Loss Start Short Sales Slowly CHAPTER 21 ENTRY CHECKLIST: SELL SHORT 237(8) Differences Compared with Buying Confirming Indicators Negating Indicators Stops CHAPTER 22 CASE STUDY: SELL SHORT 245(18) General Motors in Decline Monthly Confirming Indicators Monthly Negating Indicators Weekly Confirming Indicators Weekly Negating Indicators Daily Confirming Indicators Daily Negating Indicators Stops CHAPTER 23 INTEREST RATES, INFLATION, AND STOCKS 263(18) Where Interest Rates Come From Interest Rates and the Stock Market How Stocks and Bonds Interact Inflation and Stock Prices Measuring Inflation Recent Bubbles and the Prospect of More The Risks of Easy Money What Could Go Wrong CHAPTER 24 WHAT DOES VALUE REALLY MEAN? 281(14) The Historical Perspective Intrinsic Value, Discounted Value, and Market Value Historical Valuations for the Dow Industrials Investment Trusts in the 1920's Valuations in the 1970's and Early 1980's The Japanese Experience The Value of Real Estate Valuations: 1990 to 2005 Nortel Fools the Value Analysts Valuation Criteria and Normality Values Fail, Except Near the Mean Good News for the Long Run Reversion to the Mean CHAPTER 25 LESSONS FROM THE LONG-TERM HISTORY OF STOCKS 295(14) The Upward Trend Is Very Erratic Long-Term Problems with the Dow The Big Market Swings The Risk of Buying at a Market Top Fashions in the Stock Market Change Xerox Falls Off a Cliff The Lesson of Market Fluctuations CHAPTER 26 WHERE MUTUAL FUNDS FAIL: THE CASE FOR DOING THE JOB YOURSELF 309(16) The Record in a Bear Market The Problem with Financial Planners The Mandate of a Mutual Fund Buying Mutual Funds Is Buying Retail What a Mutual Fund Really Is When a Mutual Fund Is the Market Major Corporations Do the Same Job Proven Management versus Unproven Limits to Diversification Invest for the Long Term versus Churning Mutual Fund Management Fees Vanguard, Low Fees—Axa's Alliance Capital, High Fees Entry and Exit Fees The Need for Liquidity Index Funds Taxes on Mutual Funds Choices Other Than Mutual Funds What to Do If You Own Funds Closed-End Funds: the Best of All Worlds CHAPTER 27 HOW TO USE OPTIONS 325(8) What an Option Is Options for Speculation Professionals and Conservative Investors Sell (Write) Options Professionals Also Sell Put Options The Importance of Timing The Contrary Opinion Approach Sell Naked Options Against the Trend CHAPTER 28 MARKET MYTHS 333(8) The Savings Myth The Myth of Corporate Profits The Myth of Pension Profits The Myth of Corporate Buybacks The Myth of Cost-Free Stock Options The Myth of Defensive Stock The Market Fuel Myth CHAPTER 29 THE WINNING ATTITUDE 341(6) The Psychological Challenge of Success Sins to Avoid CHAPTER 30 CAPITAL SHOULD BE FOREVER 347(8) Make Money and Also Keep It There Are Times to Stand Aside The Paradox of Cash The Best Decisions Are Often Difficult Buy the Strong; Sell the Weak Taking Losses Use Stops Sometimes You Have to Pay Taxes! The Foremost Rule: Preserve Capital! Index 355