Technical Analysis of Financial Markets

Hardcover: 576 pages

Publisher: Prentice Hall Press; Subsequent edition (January 4, 1999)

Language: English

ISBN-10: 0735200661

ISBN-13: 978-0735200661

This highly academic book covers technical analysis almost in its entirety. It has taken me several weeks and 40 over pages of notes to record down what I have garnered from this text. Murphy has certainly written a great educational text despite it being published a few years back.

The following are the chapters within the book itself and some inadequately brief descriptions:

1. Philosophy of Technical Analysis
• The basics with an argument against fundamental analysis
2. Dow Theory
• The beginning of stock analysis
3. Chart Construction
4. Basics Concepts of Trend
• Trends can be relative at different points of a chart so trend analysis is more of an art than rocket science.
• Volume plays a huge role in trends
5. Major Reversal Patterns
• Pre-requisite is to have prior trend
• Many patterns and can often be misinterpreted
6. Continuation Patterns
• Made up of triangles
• A resting pause in trends
7. Volume and Open Interest
• Volume precedes price
• Increasing volume suggests continuing trend
8. Long Term Charts
• Not for trading purposes
9. Moving Averages
• Best for trending markets and worst for sideways/choppy market
• Use for signaling a change of trend
10. Oscillators and Contrary Opinion
• Best in non-trending markets, especially for end of market moves
11. Point and Figure Charting
• Pure study of price movement
12. Japanese Candlesticks
• Trend must be determined before interpreting Japanese candlesticks
• Has many reversal and continuity patterns
13. Elliot Wave Theory
• Important factors to note are pattern, ratio and time
• Characterized by 5-wave advance and 3-wave decline
• Each Wave is characterized by a smaller wave
14. Time Cycles
• Longer term – more than 2 years
• Intermediate term – 9 to 26 weeks
• Short (trading) term – 4 weeks
15. Computers and Trading Systems
16. Money Management and Trading Tactics
17. Intermarket Analysis
• Cascade effect: Currency affects commodities, which affects bonds, which affects stocks
18. Stock Market Indicators
• The more market averages move together, the stronger the trend
19. Putting it all together
• A checklist is made to systematically analyze the market and to facilitate decision making
20. Appendix
• Advance Technical Indicators
• Market Profile
• The Essentials of Building a Trading System
• Continuous Future Contracts

Anyone who wants a well-rounded picture of technical analysis is highly recommended to read this book. Just be warned that it is not for the leisure-reader or the light-hearted.

The Makings of an Asian Entrepreneur

Paperback: 120 pages

Publisher: Prentice Hall (April 2004)

ISBN-10: 9812446834

ISBN-13: 978-9812446831

Kenny Yap is the executive chairman and managing director of Qian Hu Corporation Ltd, listed on the Singapore Stock Exchange. The family-run fish business is diversified but is most famous for its ornamental fish.

This book proves that a family-run business can be successful if it is well-managed and driven by passion. Kenny mentions the following as the qualities that keep the family business going:

1. Define roles and responsibilities
2. Everyone contributes and works
3. Communicate frequently, both formally and informally
4. Get in-laws out of the picture
5. Passion and drive
6. Passing down of family values and house rules
7. Be strict and firm, yet patient
8. A succession plan that need not include the next generation

Kenny peppers his book with comics and nostalgic photographs. His Chinese sayings give it a truly Asian touch. He mentions about the initial failures and about the balances the business has to make. They include family and work life, profiting and social responsibility, crisis and opportunities embedded in them, the decision to take the business public etc.

He places much importance in

1. Education
2. Networking especially with the government and the community
3. Harnessing the media
4. Being transparent and accountable
5. Giving back to the community

There was much advice given on being an entrepreneur, taking a company public as well as expanding a business abroad. The biggest difference is his opinion on having friends and family in the business. I figure that their success in this is their ability to communicate and work things out.

Finally, Kenny ends off with ‘fishy’ and insightful parallels of business management with different types of ornamental fishes.

Rich Dad's Prophecy

Paperback: 304 pages

Publisher: Warner Business Books; Reprint edition (January 2004)

Language: English

ISBN-10: 0446690341

ISBN-13: 978-0446690348

Robert Kiyosaki’s book links the impending US market crash to the nation’s 401(K) law. Within the next 20 years, the law encouraging the current way of preparing for retirement would be unsustainable. As the baby-boomers get older and retire, they would withdraw their investments from the stock market, causing a huge demand deficit and hence causing a crash. Kiyosaki also relates well to the changing demographics with the coming crash.

Kiyosaki urges us to start ‘building our arks’ for the future. His safest bet is on financial education. Paper-assets-diversification is for people who don’t have time to educate themselves financially. But if you are a savvy investor, the way to go is concentration. Concentration amplifies the returns due to the risk but education reduces the risk. The only diversification we should do is education and between asset classes. Kiyosaki also advises us to learn to start small and to build our own businesses.

He challenges our financial assumptions and draws our attention to the CASHFLOW Quadrant.

The trends are predicted to occur in the near future are:

1. Millions will be destitute in their old age.
2. Increasingly expensive medical care
3. Increased terrorism
4. Japan will be on the brink of collapse and depression due to demographics and culture.
5. China will become the largest economy
6. The world population will continue to age.
7. Wall Street obsolescence
8. Decline of the huge corporations

The controls over one’s Ark

1. Self – know your financial status and be educated
2. Emotions – the 3 levels of controlling thought
3. Excuses
4. Vision – lookout for emerging technologies and declining (huge, existing and replaceable) technologies
5. Rules
6. Advisors
7. Time (ultimately self)
8. Destiny

This book is a good read and is simple for any beginner who is interested in embarking on a quest for his/her own ark.

My Story - Lim Goh Tong

Paperback: 188 pages

Publisher: Pelanduk Pubns Sdn Bhd (December 30, 2004)

Language: English

ISBN-10: 9679788598

ISBN-13: 978-9679788594

This book is an inspiring story of one who carved his own destiny in construction, real estate, entertainment and the casino industry. Lim Goh Tong is renowned for many ‘firsts’ in Malaysia and even Malaysia. This biography charts his life-story with touching poignancy and motivates any reader to conquer any life obstacles to achieve what he/she wants.

The chapters records Lim Goh Tong’s life according to his …

Beginnings – birth and background

Formative years in business – life in China then in Malaya

Family

Mining ventures

Construction projects

Most renowned project – Genting Highlands

Diversification – into real estate, entertainment especially Star Cruise

Succession

Most people, who would associate him most with Malaysia’s Genting Highlands, would be pleased and inspired to know that Lim Goh Tong has made many other significant contributions which we cannot dream anyone could achieve in a lifetime.

Master Your Money Type

Hardcover: 366 pages

Publisher: Warner Business Books (January 2, 2006)

ISBN-10: 0446578010

ASIN: B000KJTOOO

Product Dimensions: 9.1 x 6.2 x 1.4 inches

This book gives a good insight into how one’s personality and past are closely linked to our management of finances. Awareness of your money type would make you better understand why some people can be entrepreneurs, investors, employees or gamblers. And such awareness can make you understand that it can be useless forcing yourself to stay in a job you dislike.

Goodman categorizes 6 money types. He identifies our money management style with much of our emotions and deals with them at their roots. The book sheds light on how we view money and how we can better react to these issues.

Most of us are “mix-breeds” between money types so we need not strictly fit ourselves into a particular type.

1. Strivers – Value prestige and having money can give you that. May overspend to build on status. Always seeking to acquire.
2. Ostriches – money-phobic
3. Debt Desperadoes – Gets a high on spending blindly or tend to always land in debt situations. Lack of control in spending.
4. Coasters – Take the easy life for granted. Limits self.
5. High Rollers – High risk takers. Over-confident and idealistic.
6. Squirrels – Values money and is afraid of loss. Live below means. Risk-intolerant.

A good beginning book to read in discovering self.

The Next Great Bubble Boom - 2005 to 2009

Hardcover: 336 pages

Publisher: Free Press (September 2004)

Language: English

ISBN-10: 0743222997

ISBN-13: 978-0743222990

Harry S. Dent makes a startling yet convincing argument on the current boom we are now experiencing. He draws much of his conclusion based on demographics. Population and age plays a huge role in the economy due to changes in policies and laws to suit people, and the needs of people change across time. The predictions follow closely to Elliot Wave patterns.

Since he mentioned that the boom will persist from 2005 to 2009, a rudimentary research for the past 2 years till now (2007) has confirmed much of his forecasts. Locally speaking, I can safely say that as the region is still hugely dependent on the US economy, Singapore will continue to ride on this boom as well.

There are much lessons I learnt in this book as listed.

1. Buy and Hold is not advisable. Marketing timing reaps more profits.
2. Technology S-curves
1. Greatest growth is spurred by 50% penetration of a major technology (like the Internet in 1990s and in the future broadband
3. Cyclical trends
2. 80-year economic cycles (4 seasons)
• Innovation (1968 to 1980s) – focus on small cap; rising inflation
• Growth (1980s to 2009) – 2 phases on disinflation followed by stable prices; invest in large cap
• Shakeout (2010 to 2022) – focus on bonds; disinflation
• Maturity (2023 to 2048) – 2 phases on inflation followed by stable prices; more gradual economic growth than ‘growth season’.
3. 10-year cycles
4. 4 year presidential cycle
5. Annual seasonal cycle (note that Feb, May and Sept are probably down periods to buy in
4. Boom from 2005-2009
1. 2003-2004 – recovery
2. 2005-2006 – acceleration
3. 2007-2009 – Bubble
5. Bear market from 2010 to 2022
1. 2010 – 2012/14 – deflationary crash
2. 2015 – 2019 – bear rally
3. 2020 – 2022 – 2^nd crash
4. 2023 onwards – Bull market

The author also guides the reading on certain investment strategies on different regions and sectors as well life-planning at the different years.

The book is an interesting read though there are doubts on how much of it are applicable to Singapore. Nevertheless, the US economy is definitely something we ought to look out for.

A Guide to Investment in Stocks and Shares

(Out of print - You probably can get it in the local Singapore Library as I did in the picture)

Paperback: 124 pages

Publisher: Educational Publications Bureau Pte Ltd (1984)

ISBN-10: 9971023539

ISBN-13: 978-9971023539

Wong Yee managed to condense the essentials of stock market trading into this small book. Given that this book has been published 20 years back, it goes to show that there are some age-old advice we should all follow. I summarize them as follows:

o Big players dominate/manipulate the market to profit

o The way to conquer the market is to first conquer your emotions.

o Know when to take profit and when to cut losses

The author also goes on to explain financial statements, charts/trends and some crucial accounting ratios we ought to pay close attention to, like P/E ratio, liquidity and profitability ratios.

I enjoyed the real life examples given of the bear markets in the 1980s and 1990s because they are locally (Singapore) orientated for me to pick up some tabs. Other than that, quite a bit of the information is outdated – the Straits Times Index, Singapore stock market trading system etc.

The most interesting information I garnered was the author’s Bull Market Analysis (bull phase pattern).

• A bull run typically consists of 3 phases of 3 upthrusts each.
• Each phase has a correction after each upthrust; the last being a consolidation.
• A correction is characterised by a dip of at least 20% of the increased gain during the uptrend.
• A consolidation is a huge correction.
• Upthrust 2 is the shortest while upthrust 3 is the longest.
• Upthrusts are characterised by huge activity and high volume.
• A bear raid follows the final upthrust of the 3^rd phase.

Interestingly as well, there is no apparent pattern (unpredictable rebounds and uncertain low points) to a bear raid hence it is not recommended to trade during a bear market.