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Technical analysis is a blend of many approaches. Each approach adds something to the analyst's knowledge of the market.

Technical analysis is much like putting together a giant jigsaw puzzle. Each technical tool holds a piece of the puzzle. Market analysis is to combine as many techniques as possible. Each works better in certain market situations. The key is knowing which tools to emphasize in the current situation. That comes with knowledge and experience.

All of these approaches overlap to some extent and complement one another. The day the user sees these interrelation­ships, and is able to view technical analysis as the sum of its parts, is the day that person deserves the title of technical analyst.

Japanese Candlesticks

Japanese candlestick charting and candle pattern analysis are essential tools for making market timing decisions.

One should use Japanese candle patterns in the same manner as any other technical tool or technique; that is, to study the psychology of market participants. Once you become used to seeing your price charts using candlesticks, you may not want to use bar charts again. Japanese candle patterns, used in conjunction with other technical indicators in the filtering concept, will almost always offer a trading signal prior to using other price-based indicators

Elliott Wave Theory

In 1938, a monograph entitled The Wave Principle was the first published reference to what has come to be known as the Elliott Wave Principle.

The monograph was published by Charles J. Collins and was based on the original work presented to him by the founder of the Wave Principle, Ralph Nelson (R.N.) Elliott.

Elliott was very much influenced by the Dow Theory, which has much in common with the Wave Principle. In a 1934 letter to Collins, Elliott mentioned that he had been a subscriber to Robert Rhea's stock market service and was familiar with Rhea's Dow Theory. Elliott goes on to say that the Wave Principle was "a much needed complement to the Dow Theory."

In 1946, just two years before his death, Elliott wrote his definitive work on the Wave Principle, Nature's Law-The Secret of the Universe.

Elliott's ideas might have faded from memory if A. Hamilton Bolton hadn't decided in 1953 to publish the Elliott Wave Supplement to the Bank Credit Analyst, which he did annually for 14 years, until his death in 1967. A.J. Frost took over the Elliott Supplements and collaborated with Robert Prechter in 1978 on the Elliott Wave Principle.

Inter-market Analysis

It discusses the ripple effect that flows from the dollar to commodities to bonds to stocks. Inter-market work also recognizes the existence of global linkages.

What happens in Asia, Europe, and Latin America has an impact on U.S. markets and vice versa. Inter-market analysis sheds light on sector rotation within the stock market. Relative strength analysis is helpful for seeking out asset classes, market sectors, or individual stocks that are likely to outperform the general market. Leading Indicators for the 1990s, Dr. Geoffrey Moore shows how the interaction between commodity prices, bond prices, and stock prices follows a sequential pattern that tracks the business cycle. Dr. Moore substantiates the inter-market rotation within the three asset classes, and argues for their use in economic forecasting.

In doing so, Dr. Moore elevates inter-market work and technical analysis in general into the realm of economic forecasting. Finally, technical analysis can be applied to mutual funds like any other market (with some minor modifications). That being the case, all of the techniques discussed can be applied right on the mutual fund charts themselves. Even better, the lower degree of volatility in mutual fund charts make them excellent vehicles for chart analysis. The Visual Investor, deals more extensively with the subject of sector analysis and trading, and shows how mutual funds can be charted and then used to implement various trading strategies.