Stocks & Commodities V.

4:8 (295-297): Weekly price and volume by Frank Tarkany

Weekly price and volume

by Frank Tarkany

This article is a continuation of Technical Analysis of Stocks & Commodities October 1986 article
"Trading Windows: Daily Price and Volume." Please see that article for a review of the methodology
used here.

T he daily DJIA closing price and NYSE total volume from January 2, 1897 to December 31, 1985
were used to construct a weekly data series. The week's closing price and total volume contained 4,623
data pairs, about 18.65 percent of the original daily data series. This weekly data series was then
investigated for non-random and serial dependent trading windows with an eye to comparing the results
to those from the daily data.

Figures 1, 2, 3, and 4 show the weekly non-random and serial dependent chi-square x2 values for the
DJIA weekly closing price and total NYSE volume from 1897 to 1985. Both the average chi-square value
and the lowest chi-square value are shown for each lag which is plotted here in weeks. The 95 percent
and 99 percent confidence level chi-square values are indicated to facilitate inspection.
These graphs should serve to give you an idea of where the trading windows are. Different traders might
pick different windows. For example, a very conservative trader using Figure 1 might say that after seven
or eight weeks, there's no discernible difference between the chi-square values and that, therefore, seven
weeks is the window in which his research will concentrate. A more aggressive trader might see that
cutoff but argue that a useful window exists out to about 23 weeks.
Be sure to notice the vastly different scales between the volume data in Figures 3 and 4 and the price data
in Figures 1 and 2. Although Figures 3 and 4 have interesting patterns, their chi-square values are so low
as to be insignificant.
To amplify Figure 1, Figure 5 shows the percentage of tests below the 95 percent confidence level at each
lag. The sharp cutoff around 30 weeks suggests a well-defined non-random window. On Figure 1, 30
weeks is the point where average chi-square values approach a value of five which persists through lag
100.

Daily/weekly results summary

Results daily and weekly data are summarized in Figure 8. The numbers in parentheses are the weekly
values equivalent to the cited daily values. The conversion factor for daily/weekly is 5.36334
(24,784/4621). For "no-Saturdays"/weekly, the conversion value is 4.80567 = 22,207/4621. In order to
see where these values cluster, they are shown in Figures 6 and 7.

The striking things about these figures is the consistency within

each set of assumptions and the good clustering.
Figures 6 and 7 should be interpreted carefully since they combine three different types of data (daily,
daily with no Saturdays, and weekly) and use two different chi-square cutoff values: (1) an absolute

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Stocks & Commodities V. 4:8 (295-297): Weekly price and volume by Frank Tarkany

Figure 1: Non-randomness falls strongly until a lag of seven weeks, then falls again after 24 weeks.
Stocks & Commodities V. 4:8 (295-297): Weekly price and volume by Frank Tarkany

Figure 2: Serial dependence is extremely high for a time window of less than ten weeks before losing
significance after 40 weeks.

Figure 3: These extremely low Chi-Square values indicate a random process. The trend in the average
Chi-Square values is probably meaningless. The 95% confidence level Chi-Square value is 14.067 (off
the chart).
Stocks & Commodities V. 4:8 (295-297): Weekly price and volume by Frank Tarkany

Figure 4: Serial dependence in volume drops sharply after the first few weeks and the difference
between average and lowest value (a measure of dispersion) climbs rapidly.
Stocks & Commodities V. 4:8 (295-297): Weekly price and volume by Frank Tarkany

Figure 5:

Figure 6: Dow Jones Industrial Average Non-Random window length vs. percent confidence level. Non
Random windows cluster in well defined groups at the 99% and 99.5 levels.
Stocks & Commodities V. 4:8 (295-297): Weekly price and volume by Frank Tarkany

Figure 7: Dow Jones Industrial Average Serial Dependent window length vs. percent confidence level.
Stocks & Commodities V. 4:8 (295-297): Weekly price and volume by Frank Tarkany

Figure 8:

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Stocks & Commodities V. 4:8 (295-297): Weekly price and volume by Frank Tarkany

cutoff wherein no chi-square value is below the cutoff for the particular confidence level and (2) a
less-strict cutoff wherein the average chi-square value is above the cutoff for the particular confidence
level. I use the first cutoff technique to define a "pure" window and the second to define a "probable"
window.
The striking things about these figures is the consistency within each set of assumptions and the good
clustering, especially at the 99 percent and 99.5 percent confidence levels.

Analysis of results
In Part 1, I concluded that daily DJIA closing price changes possessed a probable non-random, pure serial
dependent trading window of 173 days (35.99) weeks. Inspection of Figures 6 and 7 illustrate this. The
non-random, probable, no Saturdays window for the 95 percent level is 274 days and the serial
dependent, pure no-Saturdays window is 173 days.
Figures 6 and 7 also show that serial dependent windows tend to extend just beyond where probable,
non-random windows cut off. That is, serial dependent windows are generally longer than the
non-random windows.
When compared to daily results, the weekly price windows tend to increase the pure window length
while decreasing its probable length. For example, in Figure 6, the weekly pure trading window (B) is
longer than the daily pure trading window (A), but the weekly probable trading window (D) is shorter
than the daily probable trading window (C). This effect is slight in the serially dependent windows, but
more pronounced in the pure non-random windows. Apparently, the weekly series filters out a large
amount of the randomness in the daily data.
A well-defined serially-dependent, pure window exists in the weekly data at all three confidence levels
with values of 187.72 days, 193.08 days, and 198.44 days.
In Part 1, I found an 11-day window in the serially dependent, NYSE daily data. This is supported by a
10.7 day window in the serially dependent, NYSE weekly data. The weekly results also confirmed the
daily results that total volume changes are random.

Trading zones
From this mass of data and the various cutoffs I've described, I've induced short (to 10 weeks), medium
(10-30 weeks), and long (30-50 weeks) trading zones.
I like to think of the short zone as having pure, non-random and serially dependent characteristics. Within
this 51-day (10 week) short zone, exists the purest span of 32 days (6 weeks) wherein all chi-square
values are above the cutoff for the 99 percent confidence level. From five to ten weeks there are eight
significant non-random trading windows and all the pure serially dependent trading windows. This
clustering of windows indicates to me that the 5-10 week span is a significant trading window span.
The medium zone contains pure/probable non-random and purely serial dependent windows. It is
anchored at its end at 30 weeks where, from 30-33 weeks (160-176 days), there are clustered 12
significant trading windows.
The long zone consists mostly of probable serial dependent trading windows. From 35-37 weeks there are
six significant windows.

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Stocks & Commodities V. 4:8 (295-297): Weekly price and volume by Frank Tarkany

Conclusions
The weekly trading windows are about the same as the dailies. The weekly data series reduces
randomness found in the daily series.
A non-random data series increases the probability that the data series possesses serial dependencies.
Daily and weekly NYSE volume changes are random. However, a serially dependent, six-day window
exists at the 99 percent confidence level. A serially dependent, two-week window exists at the 95 percent
confidence level.
A non-random, serially dependent, 32-day trading window exists in the daily and weekly DJIA price data
at the 99 percent confidence level. The serially dependent window extends out to 167 days in both the
weekly and daily data at the 99 percent confidence level. Finally, in the weekly data, the serially
dependent window exists to 188-198 days at the 99.5 percent to 95 percent confidence levels.
Possibly useful trading windows may be as large as 343 days.
Frank Tarkany has worked for the last 20 years in computer software applications, mainly in the military
weapons systems and scientific fields. Frank's GALAXY software company sells a daily (from 1897 to
present) DJIA closing price and NYSE total volume database. Detailed tables for this article are
available for $10 from GALAXY, P.O. Box 22072, San Diego, CA 92122, (619) 452-1072.

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