Charles D. Kirkpatrick II - Time the Markets: Using Technical Analysis to Interpret Economic Data, Revised Edition

Using Technical Analysis to Interpret Economic Data, Revised Edition

Charles D. Kirkpatrick, II, CMT

Vice President, Publisher: Tim Moore
Associate Publisher and Director of Marketing: Amy Neidlinger
Executive Editor: Jim Boyd
Editorial Assistant: Pamela Boland
Operations Specialist: Jodi Kemper
Senior Marketing Manager: Julie Phifer
Assistant Marketing Manager: Megan Graue
Cover Designer: Alan Clements
Managing Editor: Kristy Hart
Project Editors: Lori Lyons and Jess DeGabriele
Copy Editor: Cheri Clark
Proofreader: Language Logistics, Christal White
Indexer: Erika Millen
Senior Compositor: Gloria Schurick
Manufacturing Buyer: Dan Uhrig

2012 by Charles D. Kirkpatrick, II
Pearson Education, Inc.
Publishing as FT Press
Upper Saddle River, New Jersey 07458

This book is sold with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, or other professional services or advice by publishing this book. Each individual situation is unique. Thus, if legal or financial advice or other expert assistance is required in a specific situation, the services of a competent professional should be sought to ensure that the situation has been evaluated carefully and appropriately. The author and the publisher disclaim any liability, loss, or risk resulting directly or indirectly, from the use or application of any of the contents of this book.

FT Press offers excellent discounts on this book when ordered in quantity for bulk purchases or special sales. For more information, please contact U.S. Corporate and Government Sales, 1-800-382-3419, .

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All rights reserved. No part of this book may be reproduced, in any form or by any means, without permission in writing from the publisher.

Printed in the United States of America

First Printing December 2011

ISBN-10: 0-13-293193-1
ISBN-13: 978-0-13-293193-9

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Library of Congress Cataloging-in-Publication Data:

Kirkpatrick, Charles D.
Time the markets : using technical analysis to interpret economic data / Charles D.
Kirkpatrick II. Rev. ed.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-13-293193-9 (hbk. : alk. paper)
1. Technical analysis (Investment analysis) 2. Investment analysis. 3. Investments.
I. Title.
HG4529.K5645 2012b
332.632042dc23
2011044607

On a project such as this book, two requirements are necessary: contemplative seclusion and the basics of life: sleep, food, and something to pat. My dear wife, Ellie, and our furry animals kept me secure, satisfied, and hidden. For that, I am intensely grateful. Ellie deflected potential disturbances, not to mention providing timely sustenance; our goofy golden retriever, Posie, kept my feet warm during the cold Maine winter nights; and Frisbee, our long-haired, reject cat from the Colorado humane society, slept on my papers and accepted my occasional strokes of her fur. To them I dedicate this book.

In projects like this book, the Internet and ones computer become your best friends. They provide information, complete complicated calculations, and remain alive 24 hours of the day. I am a night owl and prefer the quiet and calm of late nights and early mornings. I have a relatively small office at home that looks over the ocean during the day but could be anywhere at night. To me, this is the perfect work environment.

Working late at night means that email becomes the primary method of communication. Through such give and take over the wires, many people familiar with the work I was doing assisted me. They helped considerably in the books organization and application. Special thanks I owe to Tom McClellan (www.mcoscillator.com) and Jason Goepfert (www.sentimenttrader.com) for their willingness to provide their historical data. Tom also reviewed the manuscript for me and made numerous helpful suggestions and changes to my fractured prose. Also helpful were Investors Intelligence (www.investorsintelligence.com), the Economist magazine (www.economist.com), and the Commodities Research Bureau (www.crbtrader.com). While I didnt use all their data, they were very willing to assist and were especially generous with their knowledge of economic statistics.

The primary methodology used in the book is called walk-forward optimization. This technique is relatively new to the securities business and technical analysis specifically, and is not widely known or understood. I, too, was a novice when I began. I am especially grateful for help with it from Rob Hanna (quantifiableedges.blogspot.com), Bob Fulks of Pleasant Bay Capital Management, Wouter Oosthuizen of the Grail optimization system (now an integral part of TradeStation analysis software), and Berkhard Eichberger of the Diamond Back Testing with Walk Forward Manager system from Professional Software Solutions.

No book is the sole effort of the author. Many competent people at FT Press, most of whom I have never met, are responsible for the multiple aspects of publishing this book. I thank those with whom I have had direct contactJim Boyd, Kristy Hart, Jess DeGabriele, Lori Lyons, and Cheri Clarkand those who are hidden in the corporate structure somewhere for whatever excellent work they do to get this project completed and on the shelves.

Finally, as the dedication explains, I could not have finished this project without the help and encouragement from my dear wife, Ellie, and our furry household creatures.

Charlie Kirkpatrick
Kittery, Maine
October 24, 2011

Charles D. Kirkpatrick, II, CMT, is president of Kirkpatrick & Company, Inc., a technical analysis research firm that publishes the Market Strategist investment newsletter. During his professional career, he was an institutional salesman, technical analyst, portfolio manager, hedge fund general partner, securities trading firm owner, option trader, floor trader, lecturer at universities, expert witness at security trials, small business owner, charitable foundation organizer and officer, and combat-decorated officer in Vietnam.

A past instructor in finance at the School of Business Administration, Fort Lewis College, Durango, Colorado, and recently Adjunct Professor of Finance at Brandeis Universitys International Business School, he is the only two-time winner of the Market Technicians Associations prestigious Charles H. Dow Award for research in technical analysis and winner of the Market Technicians Association 2008 Annual Award for outstanding contributions to the field of technical analysis.

He is a Chartered Market Technician (CMT), a past member of the board of directors of the Market Technicians Association, and past editor of the Journal of Technical Analysis. He is a past member and vice president of the board of the Market Technicians Association Educational Foundation and is currently a member of the American Association of Professional Technicians (AAPTA).

In addition to more than ten published articles on aspects of the stock and bond markets, he coauthored Technical Analysis: The Complete Resource for Financial Market Technicians, the primary textbook for the CMT program and for university graduate courses in technical analysis, and he authored Beat the Market, a book on relative strength stock selection. A graduate of Phillips Exeter Academy, Harvard College (AB), and the Wharton School of the University of Pennsylvania (MBA), he lives in Maine with his wife of almost 50 years.