MIND OF THE MARKET AVERAGE

Kingsley Jones

DISCLAIMER
This presentation is for educational purposes only and contains a summary of topical research for students and practitioners of Technical Analysis. Examples included are to illustrate salient points of a method and do not constitute recommendations. No account is taken of the personal financial situation of the reader and you should always consult with a qualified financial advisor before assuming any position in the financial markets. The method described is research in progress.

AGENDA
FUNDAMENTALS OF SENTIMENT • Origins of our approach to sentiment • The Mind of the Market Average (MOMA) • Historical Examples in Bull & Bear Markets • Simple Strategies and Cost Basis Theory • Current Readings and Opportunities

MIND OF THE FUNDAMENTALIST
MOMENTUM

VALUATION

EXPECTED PROFITS

PROFIT RISK

MIND OF THE MARKET
Bull Market Heaven
Euphoria
Greed Lock

Bubble

Climbing the Wall of Worry Anxiety Confidence

Greed Fear

Hope

Disbelief

Greed

Taking the Elevator to Hell

Panic

Denial

Depression

Fear Lock

Despair

Bear Market Hell

COST BASIS THEORY & MOMA
“Unrealised profits and losses of investors in stocks drive investor sentiment.”

Vs. Valuation
http://www.scribd.com/doc/106197091/Cost-Basis-Theory-and-MOMA

Sentiment

MIND OF MARKET AVERAGE
Estimated Cost Basis MTW US Equity - MANITOWOC COMPANY INC
VWAP 60 CB (VWAP) P&L 80% 60% 50 40% 40 20% Price 30 0% -20% 20 -40% 10 -60% 0 28-Feb-01 -80% 28-Feb-11 P&L

28-Feb-03

28-Feb-05

28-Feb-07

28-Feb-09

SUPPORT & RESISTANCE
Traditional Price Chart
6.0%

Volume-at-Price Chart
11.20
5.0%

18 16

Price

14 12 10 8 28-Jan-10

% Volume

4.0% 3.0% 2.0% 1.0% 0.0% 8.00

8.90

28-Apr-10

28-Jul-10

28-Oct-10

28-Jan-11

10.00

12.00

14.00

16.00

18.00

Time

Price

Key price levels act as support when reached from above and resistance when met from below

Investors are far more likely to have their cost of entry level at prices where large volume traded in the recent past

MOMA UPDATE RULE
Old Average Cost Basis
6.0% 6.0%

New Average Cost Basis
11.20
5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 8.00

11.20
5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 8.00

% Volume

8.90

% Volume

8.90

Volume Traded at Higher Price

10.00

12.00

14.00

16.00

18.00

10.00

12.00

14.00

16.00

18.00

Price

Price

The Average Cost Basis is near the centre of the Volume at Price distribution

When new trading occurs the Average Cost Basis moves toward the new prices

TYPICAL BULL & BEAR CYCLES

TYPICAL PROFIT & LOSS RANGE

SECULAR BULL MARKET

SECULAR BEAR MARKET

CURRENT READINGS

CURRENT READINGS

CURRENT READINGS

DOW SENTIMENT ANALYSIS

CVX BREAKS OUT

HPQ BREAKS DOWN

THE BALANCED STRATEGIST
Optimism Pays
Bull Market Heaven
MOMENTUM

Thinking Pays

Herding Pays

VALUATION

Bear Market Hell

EXPECTED PROFITS

PROFIT RISK

Pessimism Pays

ABOUT JEVONS GLOBAL
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+61 2 8221 8823 kingsley.jones@jevonsglobal.com
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