Grad Call Summary 8-14-08

In tonight’s grad call, we looked at ‘Performance Charts’ on www.stockcharts.com.  The great advantage to performance charts is that they allow us to examine relationships between market variables…ie: Gold and Oil.  This examination from a technical level allows us to break through analyst hype and political rhetoric while understanding how to profit from different market relationships. 

Let’s say we want to see if the price of gold and oil are correlated.  To do this, we need the ticker symbols for gold and oil.  Most major industry tickers can be found on the market summary page found on the left hand side of www.stockcharts.com.  To set up the chart, we first need to create a chart for one of the variables…in this case I will chart GLD for gold first.  Once that chart is up, we need to scroll to the bottom of the chart and set it as follows below in the picture.

Notice how the ‘TYPE’ was changed to ‘Performance’.  No overlay were added and the indicators are ‘Price Performance’ indicators with GLD being the 1^st variable and USO for oil being the 2^nd.  This setup will create the following chart.

    

By creating these charts, we can better understand market relationships and make more effective trades accordingly.  The website, www.bloomberg.com does and excellent job in commenting on many global relationships and helping to understand why they exist.  Having the reasons and the technical confirmation is a great addition to any trader’s skills.

Happy Trades,

Jeff