New Market Timing Techniques: Innovative Studies in Market Rhythm & Price Exhaustion

365 Pages·1997·17.97 MB·English

by  Thomas R. DeMark

New Market
Timing Techniques
Innovative Studies in Market
Rhythm & Price Exhaustion
Thomas R. DeMark
John Wiley & Sons, Inc.
New York • Chichester • Weinheim • Brisbane • Singapore • Toronto
This text is printed on acid-free paper.
Copyright © 1997 by Thomas R. DeMark
Published byJ ohn Wuey & Sons, Inc.
All rights reserved. Published simultaneously in Canada.
Reproduction or translation of any part of this work beyond that permitted by
Section 107 or 108 of the 1976 United States Copyright Act without the permission
of the copyright owner is unlawful. Requests for permission or further information
should be addressed to the Permissions Department, John Wtley & Sons, Inc.
This publication is designed to provide accurate and authoritative information in
regard to the subject matter covered. It is sold with the understanding that the
publisher and author are not engaged in rendering legal, accounting, or other
professional services. If legal advice or other expert assistance is required, the
services of a competent professional person should be sought.
DISCLAIMER
Although both the author and the publisher believe the infortUation, data,
and contents presented are accurate, they neither guarantee their accuracy
and completeness nor assnme any liability. It should not be assnmed that
the methods, techniques, or indicators presented in this book will be prof
itable or that they will not result in losses. Trading involves the risk of loss,
as well as the potential for profit. Past perfortUance is not a guarantee of
future results.
Library ofC ongress Cataloging-in-Publication Data:
DeMark, Thomas R., 1947-
New market timing techniques: innovative studies in market rhythm
& price exhaustion / Thomas R. DeMark.
p. cm.-(Wiley trading advantage)
Includes index.
ISBN 0-471-14978-0 (cloth: aIk. paper)
1. Investment analysis. 2. Stock price forecasting. 3. Financial
instruments-Prices-Forecasting. I. Title. ll. Series.
HG4529.D458 1997
332.63'222---dc21 97-19962
Printed in the United States of America
109876543
To my wife Nancy, who for many years has lived the life of a trader's widow,
for her tolerance, insight, common sense, and encouragement
To my children, TJ., Carrie, Meghan, Rocke, Evan, and Dominic, of whom I am
deeply proud, for their love and respect
To my parents, for their direction, support, and values
To Frank Mersch and Tony Popowich, for their interest in new ideas and market
applications
To Tim Mather, Rick Knox, Ernie Popke, and Matr Storz, for their help, time,
and most of all for their friendship
To Leon Cooperman, for his support of me and my work, as welI as his enduring
friendship throughout the years
To Duane Davis, for his unselfish willingness to contribute his programming and
technical expertise and time
To the management and software pioneers at ADP, Aspen Graphics, Bloomberg,
Bridge, CQG, Dow Jones Markets, GFIC (formerly Knight Ridder), Future
Source, Omega Research, Telerate, and TeleTrac, for their confidence in and
commitment to my indicators and for the recognition of their value and contri
bution to the investment community
To J ason Perl, Anthony Orphanos, BilI Meltzer, J oe Bemardo, Ginger Szala,
Ron Michaelsen, Mark Etzkom, BilI Abrams, J eff Henderson, Dick Pfister, Rex
Wilmore, Chris Evans,John Praetorius, Gibbons Burke, Rick Redmont,John
. May, Stuart Okorofsky, Sam Tennis, Pat Raffalovich, AI Kingon, Courtney
Smith, Mark ElIington, Peter FiedeIholtz, Karen Thomas, George Farley,
Milton Bames, Rob and Scott Madden, Ron WilIiams, Pat Kowalski, Rick
Bensignor, Wayne Babler, Cheryl Polan, Robert Stehlik, LucilIe Kirkpatrick,
Bill Griffith, Ron Insana, Sue Herrera, Richard Saxton, and John Murphy, as
welI as many others, for their interest in my work throughout my career.

Contents
Trademarks xi
Foreword xiii
Acknowledgments xvii
Introduction xix
Chapter 1 Oscillators 1
TO ROC ITM and TO ROC ((TM 8
TO REITM-Standard and Alternate 23
TO OeMarker™ I and" 29
TO PluralityTM 34
Chapter 2 TD Sequential™ 40
Setup 43
Setup Cancellations 48
Setup Qualifiers 54
Recycling 67
Intersection 78
viii Contents
Countdown 79
Execution Settings 92
Implementation 98
Chapter 3 TO Combo™ 118
Execution Settings 123
Implementation 129
Chapter 4 TO lines™ 160
TD Breakout Quafifiers™ 167
Execution Settings 1 72
Chapter 5 TO Retracements 180
TD Relative Retracement™ 180
TD Absolute RetracementTM 200
TD Arc™ 208
Chapter 6 Price Breakouts 213
TD REBOTM 213
TD SpringTM 219
TD LVTM 222
TD Point Reversal™ 225
TD Double TD PointTM 230
TD TrapTM 231
TD Open ™ 238
TD CLOPTM and TD CLOPWINTM 240
Chapter 7 TO Moving Averages 244
TD Moving Average JTM 244
TD Moving Average JlTM 246
Contents ix
Chapter 8 Market Timing and Market
Systems Development 250
TDT] 252
TD Carrie 253
TD Meghan 254
TD Rocke 255
Chapter 9 TD Triangulation ™
and TD Propulsion ™ 257
TD Triangulation 258
TD Propulsion 265
Chapter 10 Additional Indicators and Ideas
for System Development 269
TD Trend (TDT)TM 269
TD Pivot™ 271
TD DiffTM 275
TD Pressure™ 279
Chapter 11 Methods to Calculate
Price Objectives 284
TD Trend Factors ™ 284
TD Channel ITM 292
TD Channel JlTM 292
TD Channel IIJTM 293
Chapter 12 Market Myths and Misconceptions 297
Point and Figure 297
Confusion Regarding Graphic Presentation
of Overbought and Oversold Oscillators 298
Short-, Intermediate-, and Long-Term Definitions 299
x Contents
New Highs, New Lows 299
Price Reversals 300
Price Gaps and Price Laps 301
TD One Tick One Time Rule™ 301
Strong versus Weak Markets 303
A Broker or a Market Commentator Predicts a Buyout 303
Elliott Wave Analysis Is Definitive When
Identifying Market Tops and Bottoms 304
It Is Impossible to Make Daily
Price Projections for Markets 304
Price Patterns Do Not Repeat Themselves 307
Only the Option Writers
Make Money Trading Options 308
Wait for the Closing Price to
Enter a Suspected Price Breakout 309
It's Impossible to Anticipate Trend Changes 309
Trading Price Breakouts Is a Simple
Way to Participate in Market Trends 310
Once an Entry Technique Is Tested
and Perfected, Trading Success Will Follow 311
Chapter 13 Money Management 312
Chapter 14 Conclusion 316
Appendix TO Indicator™ Settings 321
Index 333
Trademarks
All of the following indicators are registered trademarks and protected by
U.S. Trademark Law. Any unauthorized use without the express written per
mission of Market Studies Inc. or Tom DeMark is a violation of the law.
TD Absolute Retracement TD Duration Analysis TD Propulsion
TD Alternative Oscillator TDD-Wave TD Range Expansion
TDArc TDExit 1 Index (I'D REI)
TD Breakout Qualifiers TD Fibonacci Intraday TD Range Expansion
TD Came (I'DC) Indicator BreakOut (I'D REBO)
TD Channel I, IT, ill TD Final Filter TD Range Projection
TDCLOP TDGap TD Relative Retracement
TDCLOPWIN TDLV TD Rocke (I'DR)
TDCombo TDLines TD ROC I, IT (I'D Rate
TD Combo Reinforce- TDLineGap of Change)
ment TD Magnet Price TD Sequential
TD Countdown TD Meghan (I'DM) TD Sequential Reinforce-
TD Critical Price TD Moving Average I, IT ment
TD Critical Qualifier TD One Tick One Time TD Setup Trend (I'DST)
TD Daily Range Projec- Rule TD Spring
tion TDOpen TD Stop Reverse
TDDeadZone TD Pivot TD Supply Line
TD Demand Line TD Plurality TD Termination Count
TD DeMarker I, IT TDPoint TDTJ(I'DTJ)
TD Diff TD Point Reversal TDTrap
TD Dollar-Weighted TD "Power of Nine" TD Trend (I'DT)
Put/Call Ratio TD Pressure TD Trend Factor
TD Double Price Range TD Price Flip Trend TD Triangulation
TD Double Retracement TD Price Oscillator Qual TD Two Day Stop
TD Double TD Point ifier (I'DPOQ)