Equity Research

e-yield has developed a highly accurate methodology for stock market analysis based on extensive research of stock market behaviour. The philosophy behind e-yield’s research is what matters most when forecasting the stock market in the short term, is not a detailed fundamental analysis of the market, but the ability to read current price action correctly to accurately anticipate the next turn. 

E-yield is concerned with the answers to key questions of who, when and where. Investors need to know who is in charge of the market at any given moment, whether it is the buyers or the sellers who have the upper hand.  In addition they must know where prices are heading and when the trend is likely to be reversed.  e-yield provides this crucial information and allows its clients to readily interpret market trends. Anyone receiving e-yield’s reports has a high probability of success in the stock market.

Innovation in stock market timing techniques

The key to success is timing. With e-yield’s analysis you can profit from both rising and falling prices. Every day there are numerous short term and medium term trading opportunities. You can either buy for a quick profit or profit from falling prices by going short. Thierry Laduguie has developed specific tools to take advantage of these markets.

In 2003 Thierry Laduguie developed the Wave Matrix to time individual stocks. In 2005 he created a unique sentiment indicator the Bullish Trend Indicator (BTI) to identify trends in the UK equity market, and a timing indicator called Top 20 Differential indicator which is used to identify intermediate tops/bottoms. Both these tools are unique and should be used in conjunction with the Elliott Wave analysis contained in e-yield’s research.

Elliott Wave Principle

The Wave Principle is a detailed description of how groups of people behave. It reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific and measurable patterns. One of the easiest places to see this phenomenon at work is in the financial markets, where changing investor psychology is recorded in the form of price movements. If you can identify repeating patterns in prices, and figure out where in those repeating patterns we are today, then you can predict where we are going in the future. The Elliott Wave Principle is named for its discoverer, Ralph Nelson Elliott. Mr. Elliott completed the bulk of his work on the Principle in the 1930s and 1940s.

The Wave Matrix is used to identify stocks in the process of reversing or stocks that are about to start a move.  It measures the percentage overbought or oversold at the end of an Elliott wave. When prices accelerate, the differential of the Wave Matrix reaches a defined limit, at which point prices decelerate and reverse.

Imperial Chemical (ICI)

The limits for ICI are:

-10% and +10% in a trend

-5% and +5% in a counter trend

So, when the differential of the Wave Matrix fell below -8% in the downtrend [(5),(B)] the stock reversed.  Turns were recorded on 25 February (-8%), 22 March (-10%), 16 April (-8%) and 17 May (-12%).  Each bottom occurred when the differential reached its limit of -10%.

Power of the Bullish Trend Indicator (BTI)

The BTI is a unique sentiment indicator measuring investors' sentiment and thus telling us whether investors are bullish or bearish at a specific time regardless of the state of the fundamental news.  This is very important because when investors are in a bullish mood there is a high probability that any market decline will be followed by a fresh advance.

The above chart is that of the FTSE 100.  Note that each decline was accompanied by a rising BTI, a clear indication that investors were becoming increasingly bullish (the only exception occurred during January when both the FTSE 100 and BTI fell).  Investors viewed each decline as an opportunity to buy and therefore the BTI accurately predicted a rising market.

An analysis of corporate and economic news during August 2004 confirmed that the overall news was negative, yet the stock market was at the start of a major advance. The BTI clearly indicated that despite poor fundamentals, sentiment was positive.

Every day we analyse the impact of corporate and economic news on the FTSE 100.  A daily news value is calculated, which is a function of how good or how bad the economic and corporate news is.  Knowing how investors react to this news gives us, and can give you, the edge in making investment decisions.

34-day BTI

The 34-day BTI is a unique sentiment indicator, which measures the state of the market, bullish or bearish. This information is vital in allowing our clients to make predictions about prices given market trends.  When the FTSE makes new highs but the 34-day BTI fails to rise with the market, it tells us that sentiment is changing. For example, during the period 6 January 2006 - 3 April 2006, e-yield's 34-day BTI detected a receding bullish mood amongst investors. E-yield's analysis revealed that investors were losing confidence in the advance and the prediction was confirmed, when on 11 April 2006 the BTI, an indicator measuring short term sentiment, turned down. 

Top 20 Differential

The Top 20 Differential detects short term overbought/oversold levels in the market. The following table was published on 28 November 2005:

The Top 20 Differential (2.5%) was near the upper limit of 3%. This indicated that the big caps were approaching a resistance area in their respective Elliott wave patterns. In an uptrend the FTSE tend to reverse when the Top 20 Differential is near 3% and in a downtrend when the indicator is near -3%.