Analysis methodology

Analysis methodology

Our analysis methodology is rooted in the identification of successive peaks and troughs that can be part of a same trend, to conclude on its direction. This is the application of Charles Dow theory.
This trend following method is sided with two contrarian methods.

We analyse long term cycles of the American economy. We apply the analysis methodology developed by Tony Plummer in his book “Forecasting Financial Markets”. This method builds on the works by Nicholas Kondratyev, Clement Juglar, Joseph Kitchin, Joseph Schumpeter. It sharpens their conclusions. It allows to develop our own view, independent from the consensus and bank analysts, about the health and dynamism of the American economy.

Finally, we use proprietary methods to assess market sentiment. They are based on implicit volatility, put/call ratios and open interests in option contracts. Those elements help us pinpoint the periods when the market is too consensual. This is precisely when it will become hard to for a trend to develop further.

There are three different trends

Une tendance peut être haussière (positive), baissière (négative), ou plate (neutre).

A bullish trend is defined by two successive higher peaks and troughs belonging to the time frame.
A bearish trend is defined by two successive lower peaks and troughs belonging to the time frame.
All other combinations are flat, also called consolidations or trading ranges.

Time horizons

There are several simultaneous trends on an asset. They differ in their timeframe. Some last for a few hours, others last for several years. We distinguish three trends: intraday, short term and medium term.

Intraday trends are identified on charts representing 60-minute bars. Those trends last for several trading hours or days. For example, a 20-hour trend will spread over 3 days or more if a week-end is included.

Short-term trends are identified on charts representing daily bars. Those trends last for several trading weeks. For example, a 15-day trend will spread over 3 calendar weeks or more.

Medium term trends are identified on charts representing weekly bars. Those trends last for several months. For example, a 30-week trend will spread over 8 months.

Invalidation level

The invalidation level of a trend is the level that changes the trend from bullish to flat, or from bearish to flat. It always appears as a thick line. It is called major support in a bullish trend, and major resistance in a bearish trend.

Analysis universe

Our universe if analysis includes 30 different equity indices worldwide, as well as some index futures, 9 government bond futures, 22 currency pairs, 16 commodity futures.
On the equity side, we offer regular analysis on:

  • At least 100 US large stocks
  • All Stoxx 200 components outside of Scandinavia
  • All French SRD stocks
  • All FTSE 100 components
  • All AEX 25 components
  • All IBEX 35 components
  • A selection of the largest Italian stocks
  • A selection of the largest Belgian stocks

Nota bene: We offer several subscription types, yours may not include all those assets.

Update frequency

Intraday analyses : our « intraday » analyses are updated every morning, and according to market volatility, up to four or five times a day if movements are very fast.
Short-term analyses: we update those analyses at least every fortnight, and on the day after the target or the invalidation level has been passed.
Medium-term analyses: we update those analyses every three months on average. You may request an update whenever you need it.

Nota bene: We offer several subscription types, yours may not include all different time frames.

Vocabulary

Support
Price level that should cause a bullish reaction to falling prices, at least for a few time periods.
Resistance
Price level that should cause a bearish reaction to rising prices, at least for a few time periods.
Invalidation level
Support level that will interrupt the bullish trend if broken, or resistance level that will interrupt a bearish trend if passed. The invalidation level is considered triggered by a close above/below the level at the end of the bar period (end of the day for a daily bar-chart, end of the hour for an hourly bar-chart). It may be triggered during the time period without prejudicing the trend.
Stop-loss
The stop-loss is very similar the invalidation level, but it is part of an investment recommendation, not an analysis. It is slightly different from the invalidation to avoid being trespassed during the period. It should not be too far away either in order to be activated fast enough in case of real trend reversal.
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