Trend Forecasting with Technical Analysis: Unleashing the Hidden Power of Intermarket Analysis to Beat the Market
Book Details
- Author: Louis B. Mendelsohn
- Categories: Technical Analysis, Intermarket Analysis, Trading Systems
Quick Summary
Louis Mendelsohn argues that single-market technical analysis is insufficient in globally interconnected markets, presenting intermarket analysis tools and his VantagePoint software methodology as the next evolutionary step in technical analysis for forecasting market trends.
Detailed Summary
"Trend Forecasting with Technical Analysis" by Louis B. Mendelsohn, with a foreword by John J. Murphy, published by Marketplace Books in 2000, advocates for a paradigm shift in technical analysis from single-market to intermarket methodologies. Mendelsohn, the president of Market Technologies Corporation and developer of VantagePoint Intermarket Analysis Software, argues that traditional technical analysis, which examines each market in isolation, fails to capture the critical interrelationships between global financial markets.
The book's central thesis is that in an era of global financial integration, price movements in one market are significantly influenced by movements in related markets -- equities by bonds, bonds by currencies, currencies by commodities, and so forth. Mendelsohn contends that these intermarket relationships provide leading indicator information that pure single-market analysis cannot capture, and that exploiting this information provides a meaningful forecasting edge.
Mendelsohn traces the evolution of technical analysis from its origins in single-market charting through the development of computerized technical analysis in the late 20th century, arguing that intermarket analysis tools represent the natural next step. He references the work of John Murphy, whose books on intermarket analysis provided the theoretical foundation, and extends it into practical forecasting methodology.
The book discusses the application of neural network technology and artificial intelligence methods to quantify intermarket relationships and generate forecasts. VantagePoint, Mendelsohn's proprietary software, uses neural networks trained on intermarket data to predict short-term price direction with what Mendelsohn claims is significantly higher accuracy than traditional single-market indicators.
The text covers specific intermarket relationships across major market groups: the S&P 500, Nasdaq, Nikkei, FTSE 100, various Treasury instruments, currencies (Dollar, Yen, Euro), and commodity indexes. Mendelsohn provides examples of how monitoring these relationships improves trend forecasting and entry timing across stocks, futures, and forex markets.
