Technical Model

The technical model is a multilayered model that uses a variety of technical analysis tools and disciplines.  I've found out over the years that no technical analysis approach is infallible, thus the multilayered approach.  Many years ago, a mentor told me that trading stocks is like prosecuting a case;  You're unlikely to win with just one piece of circumstantial evidence.  Hence, my technical approach relies on extracting meaningful evidence from multiple sources or repositories for the purpose of bolstering my analysis (my 'case').  The more evidence the better.  Every technical analysis tool and discipline listed below is a repository containing valuable clues.  Extracting this evidence is the art and science. 

Many chart technicians suffer from what's known as the law of the instrument, otherwise known as the law of the hammer, Maslow 's hammer (or gavel), or the golden hammer.  It's a cognitive bias that involves an over-reliance on a single tool.  "If you have a hammer, everything looks like a nail."  Hence, it's practically impossible to analyze a stock or index objectively with just one tool no matter how simple or complex this tool happens to be.  Elliott Wave Theory practitioners fail just as often as trend line technicians, or chart and candlestick pattern proponents, etc.

The technical model is never used in a vacuum, or to make BUY and SELL decisions.  It's part of a holistic decision-making framework dubbed the TriModel Framework.  Learn more about it by visiting the TriModel Framework page.

 Auction market theory.

 Pattern identification (classic chart and candlestick patterns, Elliott Wave, Fibonacci harmonic patterns).

 Trend, cycle, momentum, and volume analysis.

 Exhaustion analysis (Tom DeMark Sequential and Combo indicators).

 Volatility analysis.

 Intermarket analysis.

 Stocks vs. bonds analysis.

 Breadth analysis.

 Options market analysis (put/call ratio, order flow).