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Open-Ended funds and closed-ended funds can be regarded as two main collective investment instruments. Open-Ended funds (OEFs) are funds which stay open; there is no fixed number of shares and are usually not traded on exchanges (eg: mutual funds). Closed-Ended funds (CEFs) have fixed number of shares and are traded through exchanges just like stocks. Here are the key differences between open-ended and closed-ended funds.

1. Whenever an investor buys shares of open-ended funds the funds asset rise as money is added (equal to the price of shares) to the asset pool, and whenever an investor liquidates shares the funds asset decline as money is taken from the pool of assets. But in closed end funds as buying and selling activities not directly affect funds asset.
2. The value of open-ended funds is equal to their Net Asset Value (NAV). But value of closed-ended funds can deviate from NAV. Positive deviation is named as premium and negative deviation as discount.
3. The expense ratio of open-ended funds is often higher than closed-ended funds. This is because CEFs do not have to deal with regular creation and redemption of shares.
4. As closed ended funds are traded on exchanges, they are bound to obey some rules which make them more transparent to investors, especially to its shareholders.
5. Because of their low expense ratio, CEFs are allowed to invest more in illiquid securities than OEFs.
6. For creating and redeeming shares, open-ended funds are forced to keep some part of their asset as money, where as closed-ended funds can invest all (most) of their asset to build a portfolio of stocks or other securities.
7. In periods of market panic, for rising money in hand, open-ended fund managers can be forced to sell some asset of their portfolio which they want to hold and this can harm the liquidity and balance of the fund. This is not a problem with closed-ended funds as buying and selling activities are between market participants (investors, brokers and market makers) and the fund is not directly involved in it.

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Closed End Funds of CEFs are collective investment instruments which, in many ways, are similar to mutual funds; in fact may consider them as first type of mutual funds. Like mutual funds, CEFs are professionally managed, diversified funds which buy and hold stock and/or bonds and issues their shares to trade publicly. But there are some key differences,

1. Rather than continuously offering shares, closed end funds sell a definite number of shares at one time (through initial public offer). After this the fund is publicly traded on a secondary market (NYSE, Nasdaq, etc.) just like stock.
2. In secondary market, the price of shares is determined by demand and supply and is not usually equal to the underlying value of shares. And the difference in price is called discount (if -ve) or premium (if +ve).
3. Usually there is no share redemption. That is, the CEF firm does not buys-back the shares they sold. But some funds repurchase their shares at specific intervals and these funds are known as interval funds.
4. CEFs are permitted to invest more in illiquid instruments than normal mutual funds. Thus they can be more risky and at times can offer better returns.
5. CEFs usually have low expense ratios than mutual funds as they can save the costs associated with creating and redeeming shares.
6. Many classify CEFs to two different categories as Closed end stock funds (stocks form the majority of CEF portfolio) and Closed end bond funds (bonds form the majority of CEF portfolio).

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Bullish dragonfly doji candlestick is a rare candlestick formation indicating trend-reversal; that is the end of existing downtrend and the start of a new uptrend. It is a patter consisting of single candlestick, a dragonfly doji candlestick, having no (very small) real-body and upper shadow. Bullish dragonfly doji pattern has great similarity to Hanging man or Hangman pattern; the difference is that in hanging man there is small real-body.


Requirements of a bullish dragonfly doji candlestick formation include,

• The pattern should be formed at the end/bottom of a noticeable downtrend.
• There should be a dragonfly doji candlestick having (almost) same opening, high and closing prices, and having a long lower shadow and no upper shadow.
• The pattern is considered more reliable when the lower wick of dragonfly doji candlestick forms a new low.

Bullish dragonfly doji candlestick formation occurs when bears loss control over the trend. Market opens with strong sell-off to bring the prices to new low. But bulls take control of the market at closing hours and are managed to close the market at or near the opening price (which is also the high of the day). This reduces bearish sentiment and many short-traders want to cover their short positions on next trading day; marking the start of a new uptrend.

Bullish dragonfly doji pattern is a moderately reliable pattern and is considered more reliable than bullish hanging man pattern. Reliability of the formation increases with increase in length of lower shadow. Confirmation of trend-reversal is suggested which can be a bullish candlestick, a above gap opening or a higher close on next trading day.

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Positive Volume Index or PVI is a market trend indicator. It was introduced together with Negative Volume Index or NVI by Norman Fosback in his book Stock Market Logic. Unlike NVI which track smart money on low-volume days, positive volume index tracks the crowd on high-volume days. PVI only consider the trading days which have higher trading volume than previous days. The formula is,

Where Ct is today’s closing price and Cy is yesterday’s closing price. If yesterday’s trading volume is higher than today’s trading volume, then Zero is added to PVI (yesterday).

Positive volume index is based on the assumption that uninformed and unsophisticated traders are moving the market on high-volume days and informed traders are moving the market on low-volume days. Generally, PVI is represented as one year (255 days) moving average. Thus when current PVI is above its one year MA then the crowd is pushing prices up (bullish trend) and when current PVI is below its one year MA, then crowd is pulling prices down (bearish trend.)

With positive volume index crossing of one-year MA has significant importance. A bullish movement predicted 79% times when an upward crosses occur and bearish movement is predicted 67% times when downward crosses occur.

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Exchange traded funds (ETFs) are very good instruments for long-term investments. They are especially important for investors who do not have much idea to screen the stocks, market timings and trends. Below are some factors which make ETFs good for long-term investments.

1. Diversified trading instruments – with ETFs investors do not want to invest in more than two or three kinds/sectors of instruments. ETFs can be as much as diversified as a big stock exchange.
2. Profiting from stock markets – studies shows that stock markets (in a long-term perspective) offer steady and high portfolio returns than most other financial markets. Estimated annual return is above 10% irrespective of the frequent ups and downs.
3. ETF dividends – just like stocks, ETFs holders are also eligible for dividends. In fact there are many fixed income ETFs which offer monthly dividends.
4. Can use covered calls – ETF holders can write options on their holdings to make additional profits or to hedge the holding risks.
5. ETFs have low expense ratio – ETFs passively tracks market indexes and thus have low expense ratios. This makes them trade just like stocks.
6. Can offer better returns than mutual funds – most mutual funds are underperformers than markets. But most ETFs perform same as markets.

There are a number of types of ETFs available which as a whole is not suitable for long-term trading. There are some highly active ETFs with high expense ratios which try to beat the market rather than going with the market. Thus one should choose the ETFs based on his portfolio goals and risk tolerance.

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According to researches and studies, a major percentage of stock market activities are done by large-cap traders including institutional traders, scalpers and money managers who create a ‘smart money group’. According to CNBC this group of only 4,000 members is responsible for more than 80 percent of total daily stock trading volume. They conduct 50 trades as an average per session. Below are the effects of this type of large-scale trading.

1. They tremendously contribute to the liquidity of stock market.
2. They can start or end price trends (particularly on individual stocks), or can strengthen or weaken existing price trends.
3. They are mainly responsible for creating the support and resistance levels with so much trading volume.
4. They are mainly responsible for long-term steady price movements.
5. Many times they serve as market makers for less-active groups and individual traders.
6. The number and buying/selling activities of these smart money members is a very good indication of the health of the economy and market. Presence of more foreign funds and institutional traders is a very good indication.
7. With large position sizes, they can easily mark their presence on intraday and other charts.

Many traders make use of charts together with specific indicators to find out this smart money activities and try to follow them. Most institutional traders trade on facts and news rather than on rumors and thus following them can often offer better results. More over this smart money group is usually the first to get inside-company news which can affect stock prices.

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Bearish dragonfly doji is a trend-reversal candlestick formation which indicates the end of existing uptrend and the start of a downtrend. It is a single candlestick formed of a dragonfly doji candlestick – which as no real-body and no (or very small) upper shadow. Bearish dragonfly doji is rare and has great similarity to bearish hanging man pattern. The difference is, in hanging man formation the candlestick has a small real-body.


Requirements of a bearish dragonfly doji candlestick includes,

• The pattern should be formed at the top of a significant uptrend.
• There should be a dragonfly doji candlestick having (almost) same opening, high and closing prices, and having a long lower shadow and no upper shadow.
• The pattern is more reliable when the dragonfly doji forms a new high.

Bearish dragonfly doji formation occurs when bulls loss control of the existing trend. Market opens with strong sell off by traders to take their profits; and prices decline sharply, below the opening price. But the increased bullish activity at the close of the day helps the market to close at the opening price. This creates a doubt in mind of long traders that the trend is ending and they may be eager to sell off their long positions on next trading day; triggering the start of a new downtrend.

Bearish dragonfly doji is considered as a moderately reliable candlestick formation; it is certainly more reliable than bearish hanging man pattern. Reliability increases with increase in length of lower shadow and prior bullish trend. Most traders wait for confirmation, which can be a bearish candlestick, a lower opening or a lower gap on next trading day.

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Negative Volume Index is considered as a good indicator to find bullish trends. It was introduced together with Positive Volume Index or PVI by Norman Fosback in his book Stock Market Logic. Negative volume index only consider the trading days which have lower trading volume than the previous days. It is calculated as


Where Ct is today’s closing price and Cy is yesterdays closing price. If yesterday’s volume is lesser than today’s volume, then Zero is added to NVI (yesterday).

Negative volume index try to track what smart informed traders are doing. The assumption is that informed traders (as a percentage value) are trading on low volume days and uninformed and inexperienced traders are trading on high volume days. Thus one can better track the market movements if he/she only follow the informed traders.

Usually, negative volume index is represented as one-year moving average (255 days). Fosback claims that there will be 95% chance of a bullish trend if the current NVI is above its one year moving average and will be a 50% chance of bullish trend if the NVI is below one year moving average.

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Exchange traded funds (ETFs) are one group of diversified trading instruments which are getting more and more popular among traders. Investment Company Institute or ICI (ici.org) releases monthly statistics of US registered ETFs.

Latest ICI statistics on ETFs (March 2009) shows that total asset of ETFs is more than $482.02 billion which is $32.32 billion more than February 2009 ($449.67 billion), but is $89.1 billion lesser than March 2008. This is mainly because of the economic recession bringing down the price to new lows. Some other statistics include,

1. The number of all ETFs is 719, and the number seems to consolidate around this 700 area, after a rapid increase in past.
2. The percentage difference between total assets of domestic broad-based ETF and domestic sector-based ETFs is decreasing. Once the difference was 5 times of the sector ETFs assets but is now close to 2 times.
3. Total asset of domestic ETFs is almost 3 times large as international ETF holdings.
4. Value of shares issued is $3.8 billion more than the value of shares redeemed. This means more people have bought ETFs shares than who sold their holding shares.

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The Week Ahead: Thousands of job losses will be threatened at General Motors under the expected announcement by June 1 of the company closing 1100 dealers. Many commercial real estate sites would hit the market with these closings. The NAHB Housing Market Index is released on Monday and April housing starts on Tuesday. The minutes from the Federal Reserve April meeting are due on Wednesday while the leading economic indicators and jobless claims figures come out on Thursday.

Stocks to Watch: American Dairy (ADY) reported a big leap in Q1 earnings as the company is receiving top dollars for premium milk counter products including baby formula and the stock hit an all time high. Wuxi Pharmatech (WX) surged on reported earnings much higher than had been estimated, but the stock could be at resistance in price on a near term basis. OSI Pharmaceutical (OSI) received mixed results in its Tarceva lung cancer drug trial but not to the extent analysts had hoped for.

Special Note: Although the worst week in the last 10 for the market, many believe stocks had gotten too far ahead in sectors such as financials, industrials, and discretionaries which lead the way with some excessive valuations. The Nasdaq is the only major index so far to eclipse its January 1 start. This bears watching as a possible leading indicator for the Dow Industrials and/or S&P 500 to possibly do the same after the current correction completes itself.

Commentary provided by Barry Ward, Registered Principal, NobleTrading.com, Inc.

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Although many financial experts do not admit that stock splits have anything more than just numerical split of price and numbers, many investors consider stock split as a positive event. Often stock splits are accomplished by significant rise in the price of the stocks concerned. There are many reasons for it, and generally they are more emotional than arithmetic.

1. Most stock split announcements triggers a positive emotional effect; and as the news is greatly promoted by media, more traders start to trade the stock concerned resulting higher trading volume and often higher prices.
2. The primary reason for stock splits is large increase in price of the stock. What this means is that the company is growing at nice pace and there is less downside risk of investing in them.
3. The companies which split their stocks repeatedly are usually large steadily growing and profiting firms which are leaders of their industry/sector. And the repeated splits keep them favorite for most investors.
4. The lowering of prices as a result of stock splits helps small and individual traders to invest more on these stocks. The sudden occurrence of this ‘affordability’ results in more demand of stock and higher prices.
5. The current holders of the stock can enjoy the pleasure of doubling or tripling their number of shares and it adds more flexibility of buying and selling desired number of shares.

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Bearish gravestone doji is a bearish top reversal pattern, which indicates the beginning of a new downtrend after a noticeable uptrend. This is a two candlestick pattern formed of a bullish (white or colorless) candlestick usually formed at top of an uptrend and a gravestone doji candlestick having (almost) same opening and closing prices and no (very small) lower shadow. Know more about different Doji candlestick patterns.


The requirements of a bearish gravestone doji candlestick formation include:

• The pattern should be formed at the top of a significant uptrend.
• The first day should be a bullish day with a long bullish candlestick preferably closing near the highest price for the day.
• The second day should open with a gap above (exception – forex charts) and should form a gravestone doji; having same opening and closing prices and now lower shadow.

Bearish gravestone doji pattern forms when bulls are unable to sustain the trend. Even though prices open above a gap on second day, bulls are unable to maintain their momentum and the increased bearish activity (at closing hours) causes the price to close at or around opening price. Gravestone doji is the name representing the graves of bulls that died defending their territory.

Bearish gravestone doji is a moderately reliable pattern. The reliability increases with increase in upper shadow of gravestone doji candlestick and with increase in gap between first and second day candlesticks. Confirmation of trend reversal is strongly recommended, which can be a lower opening, or a bearish candlestick on next trading day.

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Speed Resistance Lines or SRL, also known as Speedlines, are tools to find possible support and resistance levels for an existing trend. SRL were developed by Edson Gould and is similar to Fibonacci Fans indicator. Speed resistance lines combine trend lines and percentage retracements to predict support/resistance levels and also measures the speed of a developing trend.


A set of Speedlines consists of three lines originated from same point at left and are extended to the right side. The first line is created by connecting a recent low to a recent high (in an uptrend) and a recent high to a recent low (in a downtrend). Now a vertical line is plotted covering the vertical difference between the low and high. The second and third lines are plotted in a way that they originate from the same point of first line origin and intersect 1/3 and 2/3 levels of the vertical line. Traders can plot more than one set of SRLs on same chart as the trend develops and new highs/lows are formed. Also many traders use 1/2 or 50% lines to find trend changes.

When the price is in somewhere between two of these lines, the upper line is considered as resistance and lower line is considered resistance. If mid line is crossed (from above/below), the new upper and lower lines become support and resistance levels. Generally if prices cross a line, they fall speedily to the next line. Sell signals are generated in an uptrend when the price cross third (lower) line from above; and buy signals are generated in an downtrend when the price cross third (upper) line from below.

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The Week Ahead: Although widespread layoffs persist in construction, manufacturing, retail, and financial services, optimism that the slowing pace of job loss will lead to economic recovery took hold. Look for the trade balance numbers due out on Tuesday and the retail sales figures on Wednesday. The Producer Price Index is released Thursday along with jobless claims while the Consumer Price Index is revealed Friday.

Stocks to Watch: Toyota Motor (TM ) is forecasting an $8.6 billion loss for the year ending March 2010 as the stock rolled over from a recent high. International Rectifier (IRF) revenues dropped by 42% and its Q3 loss widened by a large margin from a year ago as the stock may have reversed a nearly 6 month long rally. Orbital Sciences Corporation (ORB) stock fell hard on word of government cutbacks in its missile defense program. DryShips (DRYS) filed for its third common stock offering in just 6 months creating more earnings dilution for current shareholders.

Special Note: Evidence is building that at least a near term pullback in the major indexes after a 9 week upturn could be in the offing as the more speculative OTC indexes are starting to lag behind the more stable industrials and S&P 500 stocks. But overall the 200 day moving averages could prove to be a magnet for the DOW and S&P 500 before the larger intermediate up trend comes to an end.

Commentary provided by Barry Ward, Registered Principal, NobleTrading.com, Inc.

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Both Life-cycle ETFs and mutual funds are getting now popular among investors, especially those planning for their retirement. Life-cycle exchange traded funds holds many advantages over life-cycle mutual funds and other retirement investment schemes.

Advantages of Trading Life-Cycle ETFs

1. Life-cycle ETFs are single solution for most of your retirement requirements.
2. They combine the best aspects of aggressive and conservative trading strategies; and keep those in balance.
3. Life-cycle ETFs are low-cost investment vehicles, than most other financial products including mutual funds.
4. They themselves are diversified trading instruments which are designed to reduce overall portfolio risks.
5. Life-cycle ETFs offer increased flexibility than most other retirement schemes; you can buy, hold and sell them whenever you want. More over one can choose the most suitable ETF for his retirement goals.

Disadvantages of Trading Life-Cycle ETFs

1. Buy and sell activities include commissions charged by brokerage firms. Thus they are less suitable for dollar cost averaging and similar short-term periodic trading activities.
2. They are less suitable for already diversified portfolios. They are better when one invest most of his portfolio money to one retirement fund.
3. They are not suitable for traders looking for periodic returns from market and for those want to earn their livelihood from their investments.
4. They are new instruments and there is no sufficient performance history. Also they greatly differ in their asset allocation strategies.

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Short-term trading and investing is considered almost opposite trading strategies suiting different types of peoples with different portfolio requirements and money managements. Although one is not considered superior to other, short-term trading has some advantages as it demands quick learning and active trading, better touch with market and economy, better money management and quick decision making. Majority of investors we see around us are poor with their money management, less skilled and are less aware of market movements. There are many things which investors should learn from short-term traders.

1. Trade Planning – Although at first glance we may feel that most short-term traders trade without a plan, there is definitely a trading plan for every successful trader. There are stock, market, brokerage and software preferences, market timings, diversification, etc. with most short-term traders.
2. Technical Analysis – Most investors try to forget it willingly, even the basics like support and resistance levels. Most short-term traders try to test and verify their plans and decisions (and others advices) with charts, indices and formations. In fact, for them doing the right thing and right time is vital for their survival.
3. Risk management – Right position sizing, right stop-losses and right profit-targets according to personal account size. Most investors are poor with their position sizing causing over or under exposure to market risk.
4. Trade Reviews – Short-term traders should review their portfolio on a constant basis to make timely adjustments. For every investor it is a good practice to review their portfolio size, open positions, risk levels, trailing stop losses, etc on a monthly or bimonthly basis.

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Bullish meeting lines is a bullish market reversal pattern indicating the beginning of an uptrend after a downtrend. It is a two candlestick formation, which is somewhat rare, formed of a bearish (black or colored) candlestick and a bullish (white or colorless) candlestick. Bullish meeting lines has a strong resemblance to bullish piercing line pattern; the only difference is that the real-body of second day candlestick does not enter to the real-body of first day candlestick. This difference makes it less reliable than bullish piercing line.


The requirements of bullish meeting lines candlestick pattern are,

• The formation should occur at the end of a significant downtrend.
• The first day should be noticeable with strong bearish activity resulting in a long bearish candlestick.
• On second day there should be a bullish candlestick (often it is shorter than first day candlestick) which opens below a significant gap and closes at or around the closing price of first day candle.

Often, the opening of price below a significant gap tends short traders to close their positions and take profit. Also the increased bullish activity after some bearish days makes bears to loss their confidence resulting in market reversal.

Bullish meeting lines is a moderately reliable candlestick. The reliability increases with the prior downtrend and with increase in trading volume of second day. There is a high chance of false signals and confirmation is necessary which can be an upper close, a bullish candlestick or a gap above opening on third trading day.

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Guppy Multiple Moving Average or GMMA is a technical analysis indicator developed by Daryl Guppy which is used to analyze trends and to identify trend changes. As the name implies it is an indicator based on moving average; exactly two groups of moving averages - short-term moving averages which show short-term trends or trader sentiments and long-term moving averages which show long-term trends – investor sentiments.

Usually the short-term MA group consists of six MAs of 3, 5, 8, 10, 12 and 15 days, and long-term MA group consists of six MAs of 30, 35, 40, 45, 50 and 60 days; all plotted on one chart. The periods and number of MAs of both groups can vary according to trading goals. Generally bullish trend is identified when short-term MAs are above long-term MAs and bearish trend is identified if the scenario is just opposite. Closing in and intersection of two groups of MAs are considered as indicators of tend weakening and trend changes. Similarly convergence and divergence of MAs within a group also can also indicate trend changes.

Advantages of using Guppy multiple moving average include effective trend analysis, adaptation to a variety of trading tactics (short-term and long term), effective analysis of dips and spikes, and better understanding of trend strength. Disadvantages of GMMA include lesser effectiveness in generating MA crossover signals and it is not suitable for all stocks, especially non-trending stocks.

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Life-cycle exchange traded funds (ETFs), also known as target-date ETFs, are diversified and periodically adjusted funds which are one-stop retirement savings vehicles. Like life-cycle mutual funds, life-cycle ETFs are funds of funds; they track other ETFs. There are also some life-cycle ETFs which directly invest in stocks and bonds. They come with a target date, which can be identified from there name; for example an ETF having 2020 in its name is for investors who are expected to retire at 2020.

Life-cycle ETFs follow a pre-determined asset allocation strategy. Most of them start with an aggressive asset allocation strategy by allocating the greater portfolio portion to stocks and ETFs tracking specific sectors or stock exchanges and allocating lesser portion to fixed-income ETFs. With time they become conservative and allocate major portfolio portion to fixed-income ETFs and bonds. In other words, they first looks to maximize returns and then to conserve those returns. Most life-cycle ETFs perform this shift, from aggressive to conservative, on yearly basis.

Life-cycle exchange traded funds act as single low cost and passively managed instruments for the target dates; and they are getting increasingly popular among investors. The main thing to consider when choosing them is their asset allocation strategy. Different funds follow different strategies and it is better to choose those with most satisfies your investment goals. Also closely follow their starting, current and ending strategies and compare them with other similar funds. One of the major advantages of ETFs is that we can buy and sell them any time we like, even intraday.

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The Week Ahead: The bankruptcy of Chrysler will lead to several more plant closures and a motion to sell the company to Fiat. General Motors will watch this process as a model for its possible reorganization. Construction spending numbers for March are due on Monday. The "Stress Test" results for banks detailing potential losses and whether they can absorb losses will be released on Thursday. In addition, chain store sales and the jobless claims numbers come out.

Stocks to Watch: General Cable (BGC) beat earnings estimates by a wide margin in its Q1 results sending its stock to a 6 month high. Dean Foods (DF) beat last years earnings handily but plans a 22.5 million common share offering that potentially dilutes current shares. Shares of PerkinElmer (PKI) surged again on higher than anticipated Q1 earnings even though they were flat from a year ago. Mettler Toledo (MTD) which makes precision scales reached its 200 moving average price after beating Q1 estimates.

Special Note: As reports for the first quarter earnings season rap up this month, investors may want to take note that although most companies are beating reduced analysts estimates, the comparisons to last years earnings and business environment are substantially lower in many cases because of the current recession. Many stocks are 6 months off their price lows and look to be completing upward corrections in the second quarter.

Commentary provided by Barry Ward, Registered Principal,

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From the renaming of Education IRA to Coverdell Education Savings Account (ESA) in 2002, they are considered as a very attractive investment option. Most people compare Coverdell ESAs with 529 plan. Coverdell ESA holds many advantages and limitations.

Advantages of Coverdell ESA

1. It helps parents to set up a savings account for their children’s educational expenses. This also can include certain elementary and secondary school expenses.
2. The withdrawals are tax free for qualified expenses. Many K-12 expenses are included in qualified expenses.
3. Withdrawals are not reported as parent or student income if it is tax-free.
4. The annual contribution limit was raised to $2000 from $500 in 2002.
5. Accounts can be transferred to relatives.

Limitations of Coverdell ESA

1. There is both age and contribution limits. Annual contribution limit is $2000, contributions cannot be done after the child reaches age 18 and withdrawals are susceptible for tax and penalties once the beneficiary reaches age 30.
2. The financial firms handling ESAs charge maintenance fees, which can significantly reduce the return, because of the low annual contribution limit.
3. The parents lack some degree of control over ESA accounts, because the savings cannot be refund back to the parents’ account. It is distributed to the child.
4. Many benefits associated with Coverdell ESA may expire after 2010, unless congress extends those.

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