TSAA Presents                     

Isaac Israel

Relative Strength Patterns in Detail

Thursday July 20

• 4:00 – 6:00 p.m.
• GGU Room 5210
• Map

After having completed a Ph.D. in mathematics at UC Berkeley, Isaac Israel got interested in programming and applied science. A decade ago, Professor Henry Pruden of Golden Gate University, who is a Technical Analysis expert, advised Isaac to build a Virtual Reality software package to visualize the markets. But in order to follow this advice, Isaac had no choice but to study the markets first, and as preparation, he started scrutinizing tens of thousands of charts one by one, year after year. To clarify his thoughts Isaac also wrote a few articles, which may be expanded to become a textbook in the near future, and in this lecture, the findings in his latest articles will be presented.

This lecture is a detailed analysis of Relative Strength, i.e. Price divided by Market Average (not to be confused with Wilder’s Relative Strength Index), which is one of the most important indicators used in William O’ Neil’s publications such as the IBD newspaper. Although the R.S. is well-known, we shall see that it is underutilized. R.S. is mostly used by high momentum growth stock investors, but it can also be used to predict sector and market tops and bottoms, sector rotations in trading ranges, accelerations and decelerations of trends, even hidden accumulation/distribution. It will be shown with historical examples, how R.S. charts predicted the October 1998 Nasdaq bottom from which some special sectors rallied spectacularly into 1999, the March 2000 Nasdaq top, the 2002-2003 market bottom. More recently, R.S. predicted the Russell 2000 and Nasdaq weakness during the first week of May 2006, and in this lecture we shall discuss if the market might stabilize by October 2006 or continue sinking.

 In a lecture given elsewhere in March 2000, Isaac predicted, purely from fundamental analysis, that the markets (especially Nasdaq) would decline well into 2001. In October 2001, he also gave a similar lecture for TSAA, and predicted that the markets would continue declining into 2002 (even though this was again mostly a fundamental analysis lecture, it was permitted by TSAA at that time). But this time Professor Pruden suggested that the July 2006 lecture must be on Technical Analysis, and Isaac will cover the market from the perspective of Relative Strength. Isaac’s visualization software is still far behind schedule, but in this lecture he will compensate by presenting a new Technical Analysis formula he derived, which will improve and facilitate the utilization of Relative Strength.