The purpose of this glossary is to make the language of technical analysis less mysterious. We know that some clients may not be familiar with the use of words such as “divergence” and “consolidation” in connection with the energy market. To be sure, these words do have precise technical meanings. Please note that some of the terms below are not strictly specific to technical analysis, but are still used frequently by traders and technical analysts. Another excellent technical analysis glossary is maintained by StockCharts.com.
For those completely new to technical analysis, we suggest reading the tutorial available at Investopedia.com. Basic informationcan can also be found on the internet, usually for free. There are also many worthwhile books available on the subject of technical analysis. Please see our book list for details.
Accumulation. Process by which an excess supply of an instrument is absorbed
by an expanding demand. Over a period of time, accumulation has a positive effect
on price. Accumulation generally occurs after an extended decline, but can
also occur during an intermediate-term correction of an uptrend, sometimes referred
to as a period of “re-accumulation.”
Alpha. Alpha measures how much better an asset's return has
been than a benchmark (such as the GSCI or SPX) irrespective of Beta (see Beta). It
is that part of a asset's movement that is independent of the benchmark's movement.
Alpha is a function of active management -- it is the return that comes from selection skill. The higher the Alpha, the better.
Angle. Refers to the slope of a price ascent or decent measured on
an arithmetic scale chart. Generally, sharp angles are associated with high
volatility and shallow angles are associated with low volatility.
Apex. Point of intersection of two trendlines; the usual
connotation is that a new trend may evolve as prices approach the apex. A characteristic
feature of the classic “triangle” chart pattern.
Automatic Rally or Reaction. A term coined
by Wyckoff students. It is rally that occurs after a selling (or buying) climax.
A period of base building or stabilization is not required to produce an automatic
rally or reaction, hence the phrase “automatic.”
Average Directional Index or ADX. The ADX indicator
was developed in the late 1970's by Welles Wilder. A strong trend is indicated
by a high and rising ADX, whereas weak and non-trending markets are denoted by low and
falling ADX levels. Note that the ADX does not suggest whether a trend is up or down.
ADX levels below 15 suggests a non-trending market with low volatility, and often signal the beginning of an important trend or chart pattern breakout.
Asymmetric Information. Information that is known to some people
but not to other people. It is one of the primary reasons for studying price
and market action, i.e., technical analysis.
Asymmetric Volatility. Phenomenon in which there exists a higher
volatility in down markets than in up markets. While this is generally true
in equity markets, it is not necessarily true in commodities.
Autocorrelation. Autocorrelation is a correlation coefficient. However, instead of correlation between two different variables, the correlation is between two values of the same variable (i.e., correlation of a variable with itself) over successive time intervals. Sometimes called serial correlation. Range (volatility) shows greater autocorrelation than price changes.
Back and Fill. Another way of referring to consolidation
behavior.
Backwardation. A market situation where prices for future delivery
are lower than the spot price, caused by shortage or tightness of supply. Also
sometimes referred to as an “inverted” market. Backwardation is the opposite
of “contango.”
Base. A period of accumulation. Also called a “bottom” and usually found after a long decline, although short and intermediate-term
bases can also be found within the context of an existing uptrend.
Basis Point. 1/100th of a percent. An interest rate
or a yield of 5% is 50 basis points higher than an interest rate or a yield
of 4.5%.
Bear Market. A long period of time, usually
measured in months or years, when the general trend of the market is down.
Bear Trap. A temporary move to the downside that triggers a
sell signal but does not initiate a new trend, thereby “trapping the bears” before reversing. Also known as a Terminal Shakeout in Wyckoff terminology.
Benchmark. A standard by which an asset's performance can be
measured or judged. Often used as a synonym for Index.
Beta. That part of an asset's movement that is influenced by
an index. A stock with high beta responds strongly to variations in the market,
and a stock with low beta is relatively insensitive to variations in the market.
For example, a stock with beta of 1.5 would be expected to return 1.5% percent
if the market goes up 1 percent and return -1.5% percent if the market falls
-1.0 percent.
Blow Off. The final phase of an uptrend, ending a mark-up phase,
when prices rise very rapidly usually on high volume, leading to a sharp reaction.
See also Climax.
Breakout. When a market's price or volume makes a decisive
move, especially through an area of important resistance or support. Usually
characterized by increasing levels of momentum and volume. Some people use the
terms “breakout” and “breakdown” to further distinguish
between upside and a downside moves. We use the term breakout synonymously for
moves in both directions.
Bulge. A sudden expansion of price and/or volume.
Bull Market. A long period of time, usually measured in months
or years, when the general trend of the market is up.
Bull Trap. A temporary move to the upside that triggers a buy
signal but does not initiate a new trend, thereby “trapping the bulls” before reversing. Also known as a Terminal Upthrust in Wyckoff terminology.
^ back to top
Candlesticks. A type of bar chart, developed by the Japanese in the 1700s, in which the price range
between the open and the close is depicted as either a hollow rectangle (if
the close is higher than the open) or a solid rectangle (if the close is lower
than the open).
Chart Pattern or Area Pattern. Geometric patterns
with distinct boundaries that occur in market prices when viewed on a vertical
bar chart. Chart patterns fall into one of several categories of either trend
reversal or trend continuation patterns. Much of the original work on the subject was pioneered in late 1920s
by Richard Schabacker, editor of Forbes.
Churning. Determined hesitation in a trend, usually leading
to a technical rally or a reaction. Volume is normally above average and price
movement is limited. Conceptually, buyers (sellers) are accommodating sellers
(buyers) while requiring little or no concession in price.
Climax. A sudden and usually volatile end to a trend, accompanied
by high volume. Selling and buying climaxes are also usually followed by a period
of stabilization. Climaxes are a form of capitulation, where the fear level
among the last bastion of losing investors is so great, that it finally compels
the simultaneous liquidation of losing positions.
Commitment of Traders Report or COT. The COT
reports provide a breakdown of each Tuesday's open interest for markets in which
20 or more traders hold positions equal to or above the reporting levels established
by the CFTC. The reports are released every Friday at 3:30 p.m. Eastern time.
Confirmation. Occurs when two or more related markets or indicators
extend their trends to new highs (or lows) simultaneously. Confirmation is one
of the bedrock principles of Dow Theory and technical analysis in general. The
opposite of confirmation is “divergence.”
Consolidation (also Congestion). A pause in an ongoing trend characterized by successive
periods of overlapping ranges (quite litterally, excessive crowding within a more or less stable price range). Consolidation patterns often lead to follow through in the
same direction as the preceding price trend once the consolidation ends.
Contango. A market condition in which futures prices are higher
in the distant delivery months.
Continuation Pattern. A category of classical chart pattern
that represent a temporary pause in an existing trend. Examples include flags,
pennants, wedges, diamonds, et al.
Contraction. Decreasing price fluctuations and/or daily ranges
and/or diminishing volume. The reverse of contraction is expansion.
Contrarian. An investor who buys and sells contrary to the
prevailing market sentiment. The idea is that as more people become bullish
or bearish the more the underlying bullish or bearish inputs are already discounted
in the market; the market then corrects as there is no longer any reason for
it to go up or down.
Correction. See Technical Rally or Reaction.
Correlation. A measurement of relationship between two variables. The
correlation coefficient (r) shows if there is any correlation between an asset
and the market. 1.0 is perfect correlation, 0.0 is absolutely no correlation,
and -1.0 is a perfect negative correlation. Studies indicate that a correlation
coefficient below 0.3 has no correlation to the market.
Correlation coefficient. A standardized statistical
measure of the dependence of two random variables, defined as the covariance
divided by the standard deviations of two variables.
Divergence. Occurs when two or more related markets or indicators fail
to extend their trends to new highs (or lows) simultaneously. The opposite of
divergence is “confirmation.”
Distribution. Process by which an excess demand of an instrument is
absorbed by an expanding supply. Over a period of time, distribution has a negative
effect on price. Distribution generally occurs following an extended advance,
but can also occur during an intermediate-term correction in an downtrend, sometimes
referred to as a period of “re-distribution.”
Double Bottom or Double Top. A specific type of classical chart
pattern that represents a potential trend reversal.
^ back to top
Exhaustion. See Climax.
Expansion. A sharp increase in volatility and/or daily price
range. Usually occurs following a period of contraction.
Extended. When a market has advanced or declined to, or in
excess of, its trend parameters. Extended markets are often followed by a period
consolidation and/or mean reversion.
Extension. A price forecast determined by extending the vertical
height of a pattern or price impulse by a fixed ratio. See Target or Objective.
Fibonacci Series. The infinite sequence of numbers beginning
1, 1, 2, 3, 5, 8, 13, ... in which each term is the sum of the two terms preceding
it. The ratio of successive Fibonacci terms tends to the Phi ratio, namely (1
+ sqrt 5)/2. The original problem that Fibonacci investigated (in the year 1202)
was about how fast rabbits could breed in ideal circumstances.
Flag. A specific type of classical chart pattern that takes
the shape of a small “flag” and is usually followed by a continuation
of the preceding trend move. Flags are among the most common and reliable of
all continuation patterns.
Forward curve. A graph of forward prices for different maturities.
The “shape” of the curve reflects the current view of the future supply/demand
situation.
Fresh picture. Updated estimation of a stock or market, usually
following recent trading activity or news that has changed the previous look.
Fresh signal. Piece of information leading one to believe a
stock will move in a certain manner.
Gap. When an instrument's range over a given period (usually
a day) does not overlap the range of the previous period. Gaps that occur at
the beginning of a trend are known as breakaway gaps; gaps that reverse a trend
are referred to as exhaustion gaps.
Head and Shoulders or H&S. A specific
type of classical chart pattern that often precedes a trend reversal in a rising
market. Inverse head and shoulders patterns are found at the bottom of a trend,
after a long decline.
Heavy. A market now dominated by sellers, or oversupply, resulting
in falling prices. Sometimes referred to as a “tired” market as well.
Hikkake pattern. A trading
pattern discovered and introduced to the financial community in 2004 by Daniel L. Chesler. The pattern consists of a defined period of volatility contraction followed by a false move which quickly
reverses itself, usually over the next 2-3 consecutive periods (i.e., 2-3 hours, days, weeks,
etc.). Hikkake is a Japanese verb which means “to trap.” See our article section for more information, also see our Wikipedia entry.
Informational efficiency. The speed and accuracy with which
prices reflect new information.
Intermediate-term. A period of time time sufficient to accommodate
fundamental changes in supply/demand balance. Measured in terms of weeks to
months.
Inside Day. A day in which the high is less than the previous
day's high, and the low is greater than the previous day's low, i.e., a day
in which the range is completely encapsulated by the previous day's range. Inside
days represents a pause or a hesitation in trading activity. The concept can
be applied to any time frame (i.e., inside hours, days, weeks, etc.).
Kondratieff Wave. An economic theory of the Soviet economist Kondratieff
stating that the economies of the western world are susceptible to major up-and-down "supercycles" lasting 50 to 60 years.
^ back to top
Law of large numbers. The mean of a random sample approaches the mean
(expected value) of the population as sample size increases.
Liquidation. The phase following distribution, when prices decline rapidly
and with little hesitation.
Liquidity. The capacity of a market to absorb fluctuations
in demand and supply without excessive price disruptions.
Long-term or Primary Trend. A period of time
adequate to permit unfolding of major trends in production, consumption, utility
patterns, etc. Usually measured in terms of years.
MACD. The abbreviation stands for Moving Average Convergence
Divergence indicator, developed by fund manager Gerald Appel. It is the difference between
a fast moving average and a slow moving average. The name originated from the
fact that the fast average is continually converging towards or diverging away
from the slow average. MACD is used primarily for detecting divergences.
Mark Up. Phase following accumulation, when prices advance
rapidly and with little hesitation. Wyckoff probably coined this phrase. Also
'marking up' or 'marking down' used in context of the amount by which a securities
dealer raises or lowers the price of a stock or bond due to changes in demand
and supply.
Mean Reversion. The notion that asset values revert to an average
value or to an equilibrium value. Thus, if an asset's price is above its equilibrium
value the presumption of mean reversion is that the asset's price will eventually
decline to its equilibrium value. Similarly, if the price is below its equilibrium
value the presumption is that the asset's price will eventually rise to its
equilibrium value.
Modeling. The process of creating a depiction of reality, such
as a graph, picture, or mathematical representation.
Momentum. Refers mainly to indicators that depict the change
in an assets's price over some fixed time period. For example, the close of
NYMEX gas futures today versus the price 30 days ago. Momentum is one of the few leading indicators.
Momentum as a market indicator is quite different from momentum as a term in
physics which equals mass times acceleration.
Moving Average. Indicator which is overlaid on top of prices
on a chart. Moving averages help smooth noisy data and are also used as a mechanical
method of defining the trend. Positively sloping averages usually denote an
uptrend, while negatively sloping averages usually denote a downtrend. There
are many varieties of moving averages, such as: simple, exponential, triangular,
hamming, adaptive, and others. However the most common, and in our view the
most useful, is the simple moving average, or arithmetic mean, which is calculated
by summing all values (such as the close) and dividing by the number of periods.
Normal distribution. A continuous probability distribution
whose probability density function has a "bell" shape.
Open Interest. In exchange traded derivative markets, the number
of outstanding contracts that are held by market participants at the close of
trading.
Oscillator. The most common type of oscillator plots the distance
between two moving averages (such as the MACD indicator) or between an asset's
price and its moving average. More elaborate constructions (such as RSI) are
also possible. The theory is to identify periods when the distance is stretched
beyond upper (see Overbought) and lower (see Oversold) thresholds, thereby indicating
an asset's vulnerability to correcting or even reversing its trend.
Outside Day. A day in which the high is greater than the previous
day's high, and the low is less than the previous day's low, i.e., a day in
which the range completely encapsulates the previous day's range. Often found at or near turning points in the market.
Outperform. To appreciate at a rate faster than
appreciation of the overall market in a rising market, or to depreciate less
than the overall market in a falling market. A form of relative (as opposed to absolute) performance.
Overbought or Oversold. Refers to a market
which is extended above (or below) its trend parameters. A market which has
moved sharply in one direction over a relatively short period of time, and is
vulnerable to mean reversion.
^ back to top
Panic buying or selling. Rapid, high volume trading in anticipation
of sharply rising or falling prices, usually after unexpected news is released.
Periodicity. The phenomenon whereby prices make repeated peaks and/or
troughs at roughly equal time intervals. Classical chart patterns often display
periodicity.
Perpetual Chart. Is a chart where the front month rolls to
the next contract month on its expiration (roll) date. This is sometimes referred
to as a “nearest futures” perpetual chart. There is no backward
or forward adjustment to prices; only real prices are used, including gaps due
to variations in carry/contango, spreads, etc. Perpetual weekly and monthly
charts are used for long-term trend and pattern analysis.
Phi Ratio. An irrational number (can not be expressed as an
integer or a fraction) although it is always represented as a ratio. Phi is
equal to the ratio of any number in the Fibonacci series to the preceding number
in the same series. For example, 89/55 = 1.618. Phi ratios are used to project
potential future price targets. See “Price Extensions.”
Pivot. Price level established as being significant by market's
failure to penetrate or as being significant when a sudden increase in volume
accompanies the move through the price level.
Point & Figure or P&F. One of the
oldest Western charting techniques, developed in the US about 1880, some fifteen
years before the advent of bar charting. It is a method of charting price action
which completely ignores time; forward progress along the horizontal chart axis
is entirely a function of the specific P&F rules for plotting price changes.
Position. A market commitment; the number of contracts
bought or sold for which no offsetting transaction has been entered into. Also
referred to as an “open position.”
Positive feedback. A strategy whereby buying is triggered by
rising prices and selling is triggered by falling prices (i.e., buying past
winners and selling past losers). Also referred to as “momentum”
and “trend following” strategies.
Puke. Slang for a trader selling a position, usually a losing
position. “When in doubt, puke it out.”
Pullback. See Technical Rally or Reaction.
Quant. Any practitioner of quantitative finance, a wide-ranging discipline that includes, among other things, the pricing of financial instruments, the evaluation of risk, and the search for exploitable patterns in market data.
Rally. Upward tendency in price following a decline that does
not reverse the primary trend. Serves to correct short-term oversold conditions. See
also Technical Rally or Reaction.
Random walk. Theory that price changes from day to day
are accidental or haphazard; changes are independent of each other and have
the same probability distribution. Many believers in the random walk theory
believe that it is impossible to outperform the market consistently without
taking additional risk.
Range. The difference between the high and low of a given period, usually one day, but can refer to any time period including hours, weeks, etc.
Reaction. Downward tendency in price following an advance that
does not reverse the primary trend. Serves to correct short-term overbought conditions.
See also Technical Rally.
Relative Strength. An instrument or group's price performance
compared with a benchmark index or instrument. For example, NYMEX gas futures price divided
by the price of a the GSCI Energy Sub Index. A rising relative strength line means that the NYMEX price is exceeding the performance of the GSCI. This does not imply that the NYMEX gas
price is rising, just that it is rising more (or falling less) than the GSCI.
A similar comparison can be made between related markets (gas and oil, etc.) and
delivery months.
Resistance. Price level where there is a high offer concentration,
enough to temporarily stop or reverse an advance.
Reversal Pattern. A specific type of classical chart
pattern that represents a potential trend reversal. Examples include head and shoulders tops and bottoms, double bottoms, et al.
R square (R2). Square of the correlation coefficient. The proportion
of the variability in one series that can be explained by the variability of
one or more other series a regression model. A measure of the quality of fit.
100% R-square means perfect predictability. Also known as Coefficient of determination.
^ back to top
Seasonality. The phenomenon where the price and the volatility of an
underlying asset predictably rises, falls, or stabilizes during the same time
period each year due to recurring fundamental factors such as production and marketing cycles, weather, etc.
Secondary Test. A term coined by Wyckoff students. It is the
first reaction (rally) following an automatic rally (reaction). A secondary
test on light volume is one sign that the prior, primary trend has been completed.
Secular Trend. Very long-term trends. Secular trends typically
last 5-20 years and are made up of one or more primary trends, conforming to
the standard trend definition rules of a sequence of higher-highs and higher-lows.
In the US stock market, the 1929-1949 period would be an example of a secular
downtrend; 1982-2000 would be an example of a secular uptrend.
Set-up. Specific pre-conditions and patterns used for entering
trades. The set-up becomes an active buy or sell signal once the market trades
at or through a specific trigger price.
Shakeout. A sharp, quick move which forces speculators to liquidate
their positions. Also referred to as a “stop cleaning” move — i.e., a move that is engineered by other players, to take out all resting stop
orders in the market. Once the liquidation is completed, the market usually
forms an important high or low pivot.
Short Selling. Short selling is the selling of a security that the
seller does not own, or any sale that is completed by the delivery of a security
borrowed by the seller. Short selling is a legitimate trading strategy. Short
sellers assume the risk that they will be able to buy the security at a more favorable
price than the price at which they sold short.
Short-term. A price movement measured in hours or days. See also Technical
Rally or Decline.
Signal. A confirmed trade set-up that has been activated by
the market by trading at or through a trigger price.
Simple Moving Average. The mathematical average (mean) of the
underlying instrument over a specified time period. Prices (mainly closing prices)
over this period are added and then divided by the total number of time periods.
Moving averages follow the trend while smoothing price movement.
Sold out market. A long-term condition characterized by persistently
oversold weekly oscillators and low turnover. Sellers have finally run out of
inventory for sale. This is different than an "oversold" market.
Specific risk. The risk which is unique to an individual asset.
It represents the component of an asset's return which is uncorrelated with
general market moves. Specific risk can be diversified away.
Spot market. A commodities market in which goods are
bought and sold immediately for cash. The spot market also includes futures
contracts that expire in the current month. Trades in the spot market are usually
conducted over the counter in the form of phone trading as opposed to on an
organized exchange.
Stabilization. A period of sideways price
action and “base building” prior to a trend reversal. Synonymous
with “accumulation” and “distribution.”
Stochastic. Indicator allegedly developed by George Lane (much controversy exists in technical analysis debating circles over this point) that compares
where a security's price has closed relative to its price range over a specific
time period. Stochastics may be used to identify divergences, as well as short-term overbought and
oversold conditions in strongly trending markets.
Stop Order. An order placed which is not at the current market
price. It becomes a market order once the market touches the specified price.
Buy stop orders are placed above the present market price. Sell stop orders
are placed below the present market price.
Stop Limit Order. Similar to a stop order. Becomes a limit
order once the specified price is touched.
Strong hands. Commercial hedgers and well-financed professional
speculator who are hard to “shake loose” from an established market
posture.
Support. Price level where there is a high demand concentration,
enough to temporarily stop or reverse a decline.
Systematic risk. That component of an instrument or portfolio's
market risk that is correlated with the overall market. According to the capital
asset pricing model (CAPM), the marketplace compensates investors for taking
systematic risk, since it can not be diversified away.
^ back to top
Target or Objective. A price forecast determined by
extending the vertical height of a price pattern or price impulse by a fixed
ratio. The classic method uses 100% of the vertical pattern height. Phi ratio
extensions (1.618, 2.618, etc.) are also used. Other methods include targets based on the upper
and lower boundaries of trend channels, point and figure projections (known as
a “p&f count”) and significant support or resistance areas.
Technical Rally or Reaction. A usually short-term
price move resulting from conditions within the market itself rather than fundamental
supply/demand factors. Also referred to variously as: pullback, retracement,
correction.
Term Structure. The value of a variable at different time increments,
for example the term structure of interest rates is the yield curve. Also referred to as a the forward curve.
Test or Testing. Consolidation behavior with
expectation that an important support (or resistance) level will hold. A test
is passed if prices do not go below the support or resistance level, and the
test is failed if prices go on to new lows or highs.
Trading book. Under bank regulations, a portion of a bank's
balance sheet set side for trading activities.
Trading Range. The interval between the highest and lowest price for
a given market, over a specific period (days, weeks, etc.). Prices move within
a range where the bottom represents demand and the top represents supply forces.
Trend. Persistent directional price movement. Uptrends are
characterized by higher highs and higher lows, and downtrends by lower lows
and lower highs.
Trendline. A diagonal line created by connecting a series of
points on a chart and represents the slope of price movement. Penetration of
a trendline may indicate a diminishing trend.
Trend Channel. Two parallel trendlines that contain most of
the price action over a given period of time. In essence, a diagonally sloping
trading range that implies an uptrend or downtrend.
Triangle. A specific type of classical chart pattern that appears
in the shape of a geometric triangle with converging upper and lower boundaries.
Triangles can act as either continuation or reversal patterns. Triangles depict,
perhaps better than any other classical chart pattern, an area of price equilibrium
where buying and selling pressure are roughly equal.
Trigger. A pre-determined price at which a buy or sell signal
becomes activated. Trigger prices are usually a function of nearby support or
resistance levels as well as volatility conditions.
^ back to top
Underlying. The variable on which a futures, option or other derivative
contract is based.
Volatility. In general, the extent of the fluctuations (up
or down) in an asset's price over the course of one year. Usually measured by
the statistical measure of standard deviation.
Volume. Total trading activity in a futures contract,
measured in the number of contracts, for a specific time period. Volume
has a tendency to expand and contract in tandem with range. Healthy price trends are normally characterized by rising volume.
Weak Hands. Poorly capitalized public traders who can be expected
to exit their positions in the face of adverse price movements. Usually small
public retail traders.
Wedge. A specific classical chart pattern characterized by
rising tops and rising bottoms in an uptrend, or declining tops and declining
bottoms in a downtrend. A less common variant is the “running wedge” in which these definitions are reversed. Wedges usually lead to trend reversals.
Wyckoff, Richard D. Along with Charles Dow, considered one
of the grandfathers of Western technical analysis. Trader, broker and prolific
writer, Wyckoff began his career on Wall Street in the late 1870s. In 1907 he
launched a monthly publication called The Ticker, which later merged
into The Magazine of Wall Street. In 1910, he produced arguably the
best book ever written on the subject of tape reading, Studies in Tape Reading.
Wyckoff was personally aquatinted with many of the well known operators of his
day, including J.P. Morgan, Livermore, Keene, and Gann. Wyckoff's teachings
distilled and codified the “best practices” of these operators.
In 1931 he founded a school which later became the Stock Market Institute.
Wyckoff / Stock Market Institute
13601 N. 19th Avenue, Suite 1
Phoenix, AZ 85029
(602) 942-5581
Yield Curve. A graphic representation of the interest rate structure in a particular country or bond
market. The yield curve is the connecting line between short-term interest rates
and bond yields. A steep yield curve is a situation in which short-term rates
are significantly lower than bond yields. If a central bank decides to raise
short-term rates, in most cases to prevent inflation, and bond yields stay the
same, then the yield curve flattens. In general raising short-term rates reduces
fears of inflation, so that bond yields decline. The yield
curve has an impressive
record as a leading indicator of economic conditions, alerting investors
to an imminent recession or signaling an economic upturn. A sharply upward sloping,
or steep yield curve, has often preceded an economic upturn, whereas a flat yield
curve frequently signals an economic slowdown. An inverted yield curve can be
a harbinger of recession.
Z score. Statistical measure that quantifies the distance (measured
in standard deviations) a data point is from the mean of a data set.