Classic Computer Magazine Archive CREATIVE COMPUTING VOL. 9, NO. 2 / FEBRUARY 1983 / PAGE 18

Technical analysis tool for investors. (evaluation) Dennis Costarakis.

Investors and traders take note! Here is an easy to use technical analysis tool. The just released Dow Jones market Analyzer by RTR Software, Inc. and Dow Jones & Company, Inc. is an easy to use, menu driven, technical analysis and charting program. (Charting refers to the graphing of securities prices. Technical analysis uses numerical analysis and/or graphic analysis of securities prices, price changes, and trading volume.)

At the outset, let me state that this program does not and and will not tell you when to buy or sell securities. The Dow Jones Market Analyzer is a tool for the investor or trader to use in the analysis of securities price action, and in particular to improve the timing of purchases and sales of securities.

Technical analysis relies heavily on the recognition of certain securities price action or patterns as a means of determining when to buy and sell. There is a long standing contrvoversy among investors and analysts as to the validity of technical analysis. Many of those who rely solely on fundamental data, i.e. the analysis of balance sheet data and sales and earnings projections, regard technical analysis as just so much witchcraft.

So many people rely on technical analysis, however, that to some degree at least, we probably invoke self-fulfilling prophecies. As an example, consider Bristol-Myers. Bristol-Myers stock could not get pas a price of 42 for more than ten years until August of 1980. When the stock finally broke through the 42 level, previously considered a strong "resistance" level, many chartists and technical analysts recognized this as a significant event and rushed in to buy the stock. Bristol-Myers has not been below 42 since, and was at 73 in early November 1982.

The main problem an individual investor has with technical analysis is the amount of time and effort required to perform this analysis. This is where the Dow Jones Market Analyzer shines. It relieves the investor of the tedium and effort required to conduct the analysis. The program even has an automatic mode that enables you to pre-set any sequence of charting and analyses you desire for your stocks, thus saving you many keystrokes. A pause feature allows you to perform additional analysis during the auto run mode.

The Dow Jones Market Analyzer comes in an attractive gray vinyl 8" x 9" loose leaf binder. Four disks are provided: a master, a backup, a data disk, and a temporary work disk. A one year warranty against defects is included. After one year, disks can be replaced for $30 each. There is a handy plastic reference card with the keystroke commands and page references. A menu map is also provided (Figure 1) that shows all the menus and how they are linked.

Purchase of the Dow Jones Market analyzer includes a subscription to the Dow Jones New/Retrieval service and one hour of free time. The program can also be used by manually inputting all data. However, I can't believe anyone would manually input data once they see how efficiently and rapidly the auto dial, log on, retrieval of data, and phone hangup work. Getting Started

The introduction to the manual is actually a teaser for the program and the information retrival service. The next section, titled Getting Started, starts off by telling you how to get your free password and the Fact Finder (which contains local access phone numbers, stock and bond symbols, and information about the retrieval service). Commonly used terms are also defined here--a very thoughtful addition. Both the master and backup progrm disks are copy-protected, but must be used without a write protect tab.

After power up the firt time, you are instructed to perform the system setup. This consists of storing the following information: number of disk drives, printer slot, modern type and slot, password, and stored telephone number(s) for Tymnet and Telenet.

A sample session follows that takes you step-by-step through a typical session, including setting up the data disk. I would recommend using three stocks initially. Three is enough to exercise the program sufficiently without using up too much computer time and your time as your learn the system. The sample session takes you through automatic data retrieval as well as manual data entry.

Two points must be noted at this time. 1) Believe it or not, the Dow Jones News/Retrieval service does not provide any market index information. That's right. You can't even get the Dow Jones Industrial averages; they must be stored manually if you want to use the information. 2) Error handling is not as I would have it. The manual point out that due to program space limitations only error message numbers are displaced when errors are detected. You must then look up the type of error in the manual. If that's not bad enough, and I can live with that, the screen is erased whenever an error is detected, erasing forever any and all work you may have had on the screen.

The first few times it happened, I uttered several epithets. There must be a better way, I thought. The saving grace is that once you get familiar with the program, and particularly when using the auto run feature, errors are not very likely to occur.

The program is menu driven, which makes it a joy to use. (I am partial to one keystroke menu driven programs.) The Data Maintenance Section allows you to place historical data on disk, updates the data disk with current quotes, prints hard copy of data information from disk, lists stock names and parameters on disks and allows for corrections, displays stock data on a disk and allows for corrections, creates a new data disk, deletes a stock, alphabetizes a stock list, drops outdated information, combines data from several disks, and adjusts for stocks splits. It also has a feature for multiple-day quote updates which is ideal for use after a vacation when you need to update ten or twenty day's data.

We then come to the Individual chart Section. The menu allows you to chart data for a stock on a standard bar chart with volume, charts bar charts on a semi-log scale chart, lists the symbols of the stocks from the disk in use, changes data disks, and constructs and saves a sequence of commands which can be automatically executed (Auto Run). Creating Charts

The heart of the Market Analyzer begins with the section titled Flashing Caret Mode. Once you have constructed your bar chart (Figure 2), you can begin to perform various forms of analysis such as simple moving averages, weighted moving averages, and exponential moving averages, and display and print the numerical version of the moving average. Figure 3 is the numerical table of a 12-day moving average, and Figure 4 is the 12-day moving average plotted on the bar chart.

All charts and tables were printed on an IDS 460-G printer with a Grappler printer interface. Straight lines, including horizontal lines, linear least-squares fit, trend lines, parallel lines, and speed resistance lines can also be plotted. Figure 5 is an example of a least squares fit. Scales can also be changed vertically, charts extended, and time periods changed. Oscillators and moving averages of oscillators can be plotted, too. You can also erase and line or moving average you have plotted--a very handy feature.

Figure 6 shows the bar chart for Digital Equipment Corporation and a 12-day exponential moving average plotted over it. At the bottom is an oscillator chart constructed by subtracting the value of the 12-day exponential moving averages from the daily closing price of the stock. Figure 7 shows how several plots can be conbined. A 5-day and 12-day exponential moving average is plotted over the bar chart of Digitial equipment Corporation. the oscillator represents the difference between the 5-day and 12-day exponential moving average. The theory is to buy when the oscillator goes from under to over the horizontal line, and to sell when the oscillator goes below the horizontal. This type of analysis works relatively well during strong market movements up or down such as we experienced in the second half of 1982.

this technique casues excess trading when a stock moves sideways and will result in losses during such movement. When using technical analysis, provision must be made to eliminate or avoid sideways moving markets.

Figure 8 shows a chart with a 12-day exponential moving average and an indicator chart below. The indicator is a cumulative volume indicator with a 12-day simple moving average of the indicator plotted on it. Figure 9 shows a semi-log chart of Digital Equipment with a trendline plotted.

In addition to the cumulative volume indicator shown on Figure 8, the program can also plot negative and positive volume indicators, volume line chart, price volume trend, and daily volume indicators. You can also furnish your own indicator by using the User Jump Routine. You can actually provide your own subroutine to be plotted. The User Jump Routine is also used to enable your printer is also used to enable your printer to plot the charts shown here, providing your printer is capable of graphics.

If you plan to print many charts, I recommend you obtain a printer buffer to store the chart while it is being printed so you can use the computer while the printer is printing the charts. Most printers take several minutes to print these charts. Several User Jump Routines are provided in the manual for the Silentype, Trendcom 200 and for any printer using a Grappler interface. With an IDS printer I recommend you change line 31000 to read:


The manual does not have the PRINT statement in line 31000. Without it, the input query spans two lines. With it, it is all on line 23 on the screen.

The program also allows for comparison charting. If you have a color monitor, you can plot two to five stocks relative to a $100 purchase in each stock at the same time. Figure 10 shows how MER performed relative to DEC when $100 was invested in each on 7-30-82. Relative strength charts can be plotted also.

Any chart plotted on the screen can be saved to disk for later plotting. This is useful for those who use software to drive their printer in the graphics mode.

An added feature of the program is the Dow Jones E Z Terminal mode which allows you to retrieve news information and other data from the Dow Jones News/Retrieval service. This very nice feature allows you to keep up with news and earnings reports about companies in which you have an interest.

Brief discussions and examples of the various principles and techniques used in the program are also provided. These are necessarily brief discussions (The whole manual is 101 pages including the index) and should be used only as an introduction to each of the technical analysis methods mentioned. A suggested reading list is also provided (12 books). Most, if not all, should be available at larger libraries. Most are still in print. Caveats

If you plan to use this program and manually input data, buy a key pad, you'll need it.

Remember that the Dow Jones database does not adjust for stock splits. If you see a large gap or hole in the chart, check to see if there was a split.

On comparison charts, the legend is not completely printed. You will have to make a note at to which plot is which stock. You will also need a color monitor if you plan to compare more than two or three stocks.

Error messages cause to lose all plots on the screen. I found I needed to keep notes on what I was doing. There is one quick. The temporary work disk has to be put into drive 1. If you accidentally put it into drive 2, you'll get an error message and lose your work on the screen. It got me several times. The data disks go into drive 2. Only the temporary work disk goes into drive 1. Don't ask me why. Just be careful.

All in all, the Dow Jones Market Analyzer is a powerful and useful program for any investor who wants to improve the timing of his purchases and sales. I have not come across a program with these capabilities at this price. Most are more expensive. Serious investors should definitely have a plotting/technical analysis program to assist in their analysis of stocks. The Dow Jones Market Analyzer certainly fills the bill.

Products: Dow Jones Market Analyzer (Computer program)