The Janus Factor
Trend Follower's Guide to Market Dialectics
Bloomberg Professional
1. Edition December 2012
192 Pages, Hardcover
Wiley & Sons Ltd
Tap into feedback loops to unravel market trends and discover profitable trading opportunities
The Janus Factor presents an innovative theory that describes how feedback loops determine market behavior. The book clearly shows how the theory can be applied to make trading more profitable. The metaphor of the two-faced god Janus is used to reflect alternating market environments, one dominated by trend followers and the other by contrarian bargain hunters.
In this book, author Gary Anderson puts forth a systematic view of how positive and negative feedback drive capital flows in the stock market and how those flows tend to favor either sector leaders or sector laggards at different times.
* Discusses how to find better performing stocks
* Outlines when and how to use momentum strategies for big profits
* Addresses when and how to use contrarian strategies
* Gary Anderson is the winner of the 2003 Charles H. Dow Award, presented by the Market Technicians Association
Intellectually challenging and highly practical, The Janus Factor offers insight into market behavior and new methods for capturing stock market trends.
Introduction xiii
Acknowledgments xv
CHAPTER 1 Foundations 1
Serendipity 2
The Data Set 5
Reasons and Causes 6
Befuddled 7
Which Way Is Up? 9
CHAPTER 2 The Assignment 13
Measuring Risk: Offense and Defense 14
Picturing Offense and Defense 17
The Benchmark Equivalence Line (BEL) 19
The Trend of Relative Performance 22
CHAPTER 3 Feedback and Capital Flow 27
Feedback 28
Feedback and Capital Flow 31
Calculating Relative Strength 37
The Relative Strength Spread 39
Trend Followers and Contrarians 41
CHAPTER 4 The Janus Factor 45
Structure and Entropy 46
Confidence 47
Is the Market Predictable? 48
Balancing Acts and Paradigm Shifts 54
CHAPTER 5 Seasons of Success 57
The Venturi Effect 58
The Relative Strength Spread and the Performance Spread 61
Group Studies 68
CHAPTER 6 Why Jesse Went Broke 71
The Cotton King 74
1911-1914 75
The Final Years 80
CHAPTER 7 Sheep Dogs and Other Contrarians 83
The Sheep Dog Effect 85
A Contrarian Hedge? 87
The Contrarian Rebound 88
The Contrarian Collapse 92
CHAPTER 8 Situational Awareness 99
Bielema's Choice 101
The Bet 106
Let Us Calculate! 109
CHAPTER 9 The Direction of Momentum 115
Relative Momentum 117
Relative Momentum versus Relative Strength 123
CHAPTER 10 Long Strategies 127
The Critical Moving Average 127
The DOM Strategy 129
Contrarian Threats 130
A Defensive Long Strategy 133
It's a Bull Market, You Know 135
CHAPTER 11 The Complete Strategy 137
Combined Long and Short Strategies 139
The Model Portfolio 141
Execution 143
Appendix 149
About the Author 163
Index 165
"For the past 30 years computers have aided the masses to push a button to become hopeful experts in technical analysis of investment markets. This powerful software revolution has almost single handedly replaced original thinking and innovation in the field of market analysis. I have followed Gary's unique and insightful work for many years. In The Janus Factor Gary describes in wonderful detail his methodology which can be found nowhere else. This work is a one of a kind lesson on what drives markets and profits."--Peter Mauthe, Chief Implementation Officer, Mauldin Companies
