Investing with the Trend: A Rules–based Approach to Money Management

Praise for Investing with the Trend "If you want to take a master class in financial markets, this is the book for you." —Mebane Fisher, CIO, Cambria Funds "Greg Morris is a learned scholar, sharp observer, rational thinker, and successful stock market analyst and investor. All these characteristics are displayed in his new book Investing with the Trend . It is a gem. His understanding and refutation of many Wall Street myths are brilliant; his evaluation of stock market indicators is well-reasoned; and his investment style and risk avoidance methods superb. Anyone, professional or otherwise, interested in a reasoned, fact-supported, comprehensive book on the stock market should own it." —Charles D. Kirkpatrick, CMT, Kirkpatrick & Company, Inc. "Anyone wanting to read about technical analysis should read this book first. It is the benchmark book that all other books on the topic should be compared to." —Peter Mauthe, Investment Banking "If you invest in stocks without first investing in this book, you are a fool. Well written, documented, and practical, Greg's work is an amazing accomplishment, combining knowledge with wisdom. In my library of thousands of market books, there are only a few 'must reads'. This one has earned that honor." —Larry Williams, Trader "The trend is your friend, so make friends with Investing with the Trend . Whether you are emotional or disciplined, a numbers nerd or not, Greg will show you how successful investors let the rules rule." —Sam Stovall, Chief Equity Strategist, S&P Capital IQ

Foreword ix Preface xi Acknowledgments xv Chapter 1 Introduction 1 Part I: Market Fiction, Flaws, and Facts 13 Chapter 2 Fictions Told to Investors 15 Chapter 3 Flaws in Modern Financial Theory 27 Chapter 4 Misuse of Statistics and Other Controversial Practices 51 Chapter 5 The Illusion of Forecasting 57 Chapter 6 The Enemy in the Mirror 71 Chapter 7 Market Facts: Bull and Bear Markets 83 Chapter 8 Market Facts: Valuations, Returns, and Distributions 113 Part II: Market Research 139 Chapter 9 Why Technical Analysis? 141 Chapter 10 Market Trend Analysis 159 Chapter 11 Drawdown Analysis 231 Part III: Rules–Based Money Management 267 Chapter 12 Popular Indicators and Their Uses 269 Chapter 13 Measuring the Market 281 Chapter 14 Security Ranking, Selection, Rules, and Guidelines 319 Chapter 15 Putting It All Together: The “Dancing with the Trend” Model 355 Chapter 16 Putting Trend–Following to Work 391 Chapter 17 Conclusions 399 Appendix A: Passive versus Active Management 409 Appendix B: Trend Analysis Tables 413 Appendix C: Market Breadth 445 Appendix D: Recommended Reading 457 Bibliography 459 About the Author 467 About the Online Resources 469 Index 471

Gregory L. Morris is Chairman of the Investment Committee for Stadion Money Management, LLC, which manages approximately $5.4 billion, and their Chief Technical Analyst. Prior to this role, Morris served as a trustee and advisor to the MurphyMorris ETF Fund and as treasurer and chief executive officer of MurphyMorris Money Management Co. and MurphyMorris.com. He has been a technical market analyst for over forty years, ranging from analysis software development and website analysis and education to money management. Morris is the author of two books, Candlestick Charting Explained and The Complete Guide to Market Breadth Indicators . He has appeared frequently on financial news shows, has lectured on technical analysis worldwide, and has been featured in major magazines. Morris was a U.S. Navy fighter pilot, is a graduate of the Navy Fighter Weapons "Top Gun" School, and holds a degree in aerospace engineering from the University of Texas.