Striving to further the profession with diverse opportunities in continuing education, advocacy, ethics awareness, and networking.
The Journal of Technical Analysis is published by the Chartered Market Technicians Association, LLC, 25 Broadway, Suite 10-036, New York, NY 10004.New York, NY 10006. Its purpose is to promote the investigation and analysis of the price and volume activities of the world’s financial markets. The Journal of Technical Analysis is distributed to individuals (both academic and practicitioner) and libraries in the United States, Canada, and several other countries in Europe and Asia. Journal of Technical Analysis is copyrighted by the CMT Association and registered with the Library of Congress. All rights are reserved.
As the new chair of the Editorial Committee, it is an immense pleasure to present the 70th issue of the Journal of Technical Analysis (JOTA). Continuing the exceptional work accomplished by prior editorial teams, the new JOTA editorial board will focus on producing a journal that advances the knowledge and understanding of the practice of technical analysis through the publication of well-crafted, high-quality papers in all areas of technical analysis and behavioral finance. While former MTA members were the natural audience when the journal was released in 1978, nowadays the readership reaches far beyond the CMT Association and includes both practitioners and academics worldwide. This special edition contains the four most recent Charles H. Dow Award winning papers. First, Charles Bilello and Michael A. Gayed, previous winners in 2014 with “An Intermarket Approach to Beta Rotation: The Strategy, Signal and Power of Utilities,” discuss how a low volatility equity market environment
To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.
Abstract Using leverage to magnify performance is an idea that has enticed investors and traders throughout history. The critical question of when to employ leverage and when to reduce risk, though, is not often addressed. We establish that volatility is the enemy of leverage and that streaks in performance tend to be beneficial to using margin. The conditions under which higher returns would be achieved from using leverage, then, are low volatility environments that are more likely to experience consecutive positive returns. We find that Moving Averages are an effective way to identify such environments in a systematic fashion. When the broad U.S. equity market is above its Moving Average, stocks tend to exhibit lower than average volatility going forward, higher daily average performance, and longer streaks of positive returns. When below its Moving Average, the opposite tends to be true, as volatility tends to rise, average daily returns are lower,
To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.
Abstract Investors and traders typically use the Relative Strength Index (RSI) to identify turning points in security prices. This strategy, however, discounts the true nature of the indicator and limits its potential. An RSI breakdown reveals that its power lies in its ability to identify consistent uptrends with strong momentum. Some practitioners use RSI ranges to identify existing trends and RSI extremes to signal momentum shifts. These approaches, however, do not quantify how long RSI should hold its range, how regularly RSI should reach a momentum milestone and, most importantly, if RSI range and momentum indications have predictive value. The goal of this paper is to systematically test RSI range and momentum signals using stocks in the S&P 500. Moreover, this paper will show that the RSI range alone is inadequate because it does not always capture upside momentum. The RSI range measures trend consistency well, but a momentum component is needed
To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.
Abstract The empirical aim of this paper is motivated by the anecdotal belief among the professional and non-professional investment community that a “low” reading in the CBOE Volatility Index (VIX) or large decline alone are ample reasons to believe that volatility will spike in the near future. While the Volatility Index can be a useful tool for investors and traders, it is often misinterpreted and poorly used. This paper will demonstrate that the dispersion of the Volatility Index acts as a better predictor of its future VIX spikes. Introduction According to the United Kingdom’s National Oceanography Centre, tsunami waves can be as much as 125 miles in length and have resulted in some of the deadliest natural disasters in history. Fortunately, scientists have discovered warning signs of these massive waves, which are believed to be caused by shifts in the earth’s tectonic plates. One of the visible signs of a forthcoming tsunami is the
To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.
Abstract Before Facebook, Twitter, and Snapchat, there was the New York Stock Exchange. The 20th Century NYSE trading floor was one of the world’s most important early social networks. Social networks and social media-based investing have become commonplace today. Many investment strategies even seek to use investor sentiment from these platforms to determine the future direction of a security’s price. While a generation of investors thinks that this is new, investors have been actively managing money using market sentiment for decades. This paper introduces a unique and innovative indicator that measures the depth of sentiment of today’s virtual crowd of traders and investors for a security using readily available trading volume. It is called Normalized Relative Volume (NRV) and will help active managers generate alpha through security selection and portfolio weighting. The 20th Century NYSE floor was structured as an auction market that brought buyers and sellers together to determine the fair
To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.
Since the dawn of investing, practitioners understood the value of contrarianism. All too often, emotions, not fundamentals, become the driving force in stock and cause dislocations. Extremes in sentiment – whether that be excessive optimism or pessimism – have been associated with market dislocations such as the housing bubble, Bitcoin’s behavior in 2017, and the stock market crash of 1987 (known as Black Monday). For those willing to buck the herded animal spirits associated with investors’ mentality during extreme events, there are profits, and often very large profits, to be had. Technical analysts, many of whom are contrarian by nature, understand this and have endeavored to identify periods of panic and capitulation in an effort to buy securities at deeply discounted prices. In the Far East, candlestick charting tried to identify panic over three-hundred years ago. In the early 1900s, Richard Wyckoff had helped coin the phrase “selling climax” while
To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.
Abstract Passive management over the last years has attracted greater attention than active management. Bloomberg reports that, only in the first half of 2017, flows out of active into passive funds reached nearly $500 billion compared to almost $300 billion in 2016. This migration, encouraged by the spread of ETFs, concerns not only retail investors but also institutions and financial advisers. This paper aims to demonstrate how the allocation of a portfolio designed for passive management can represent the foundation of an actively managed portfolio through a non-discretionary quantitative strategy that can outperform the market. ETFs can be seen as one of the most successful financial innovations in the last decades: they have allowed investors to diversify their investments in more affordable ways.1 Once the asset classes and ETFs have been selected, the investor has to choose between active or passive portfolio management. Some academics argue that investors should adopt passive management
To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.
Abstract Fundamental and Technical analysis are often thought of as separate, competing ideologies. We regard this world view as short-sighted. Our research shows that combining fundamental and technical analysis in a quantitative, rules-based framework leads to greatly improved performance. Furthermore, combining known factors whether of the fundamental or technical variety offers significant benefits and leads to market-beating performance over the last 16+ years. Introduction Factor investing has taken the investment management industry by storm. In this paper, we show that traditional factor investing can be greatly enhanced by combining factors in an intelligent way. More specifically, combining fundamental factors with technical factors leads to large increases in performance. These different disciplines, fundamental and technical analysis, have rarely been combined throughout history. Fundamental investors often view technical analysis with a large degree of skepticism. Technicians are often of the opinion that “price is the only thing that pays.” Technicians believe that making investment decisions based
To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.