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JOURNAL OF
TECHNICAL ANALYSIS

Issue 72, Fall 2022
Issue 72, Fall 2022

Editorial Board

Bruce Greig CFA, CMT, CIPM, CAIA

Director of Research, Q3 Asset Management

Chris Kayser, CMT

Ryan Hysmith DBA, CMT

Assistant Professor of Finance, Freed-Hardeman University

Paul Wankmueller, CMT

Director of Business Development, Martin Fund Management

Jerome Hartl, CMT

Vice President, Investments, Wedbush Securities

Eric Grasinger, CFA, CMT

Managing Director, Portfolio Manager, Glenmade
CMT Association, Inc. 25 Broadway, Suite 10-036, New York, New York 10004
www.cmtassociation.org Published by Chartered Market Technician Association, LLC ISSN 2378-7295 (Print) ISSN 2378-7341 (Online)

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.

Letter from the Editor

by Sergio Santamaria, CMT, CFA
Sergio Santamaria, CMT, CFA

Welcome to the 72nd issue of the Journal of Technical Analysis (JoTA), the global leading publication in the field of technical analysis since January 1978. Inflation measured by headline Consumer Price Index (CPI) peaked at 14.8% in the United States in March 1980. In the issue 7th of the Market Technicians Association Journal (the predecessor of the JoTA) published a month earlier (February 1980), Stan Weistein discussed his bullish forecast for equities for the next decade in his “A Contrary Opinion” article. He found that the extreme readings in different sentiment indicators such as allocation to equities vs. bonds, number of secondary offerings and investor sentiment plus favorable relative strength were going to lead to “the best bull market in over a decade” despite of the economic stagflation and poor equity returns of the 1970s. Will history repeat? As Mark Twain famously said “History doesn’t repeat itself, but it often rhymes”. As

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Portfolio Management Using Long-Term Relative Strength and Long-Term Momentum as the Only Criteria

by Troy Trentham, CMT
Troy Trentham, CMT
About the Author | Troy Trentham, CMT

Troy Trentham currently works in operations for LINK Investment Management, which is a Calgary, Alberta based fintech company that specializes in investment management. He has worked in the Canadian financial services sector for the past seven years where he also had positions working on a retail trading floor and in business development.

 

Troy graduated from Mount Allison University in New Brunswick, Canada with a Bachelor of Commerce with a double minor in Economics and Environmental Studies. He was an Academic All-Canadian while at Mount Allison. He attained his CMT designation 2021 and specializes in statistical analysis.

Abstract This paper will examine portfolio returns using long-term relative strength and long-term momentum as the only criteria for investment decisions. It will compare various portfolios using quarterly RSI readings as the sole gauge for long-term relative strength and will use the S&P 500 monthly RSI reading for its long-term momentum parameter. The results suggest that long-term relative strength and the S&P 500 long-term momentum are both useful for investment criteria.   Introduction The academic literature is dominated by fundamental analysis. Fundamental analysis itself is built on a handful of foundational concepts. Seemingly most academics and academic institutions have accepted these concepts and their assumptions as fundamentally true. This, in turn, has affected the belief of most market participants. Many professional market participants aspire to beat passive “buy and hold” investing where investors will buy index funds with low management fees. It is quite challenging to beat indexing over the long term and many

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A Theoretical Case for Technical Analysis: Testing Weak Form Market Efficiency in Pakistan

by Kelly Corbiere, CMT, CFA, CFP
Kelly Corbiere, CMT, CFA, CFP
About the Author | Kelly Corbiere, CMT, CFA, CFP

Kelly Corbiere, CFA, CMT, CFP is a Senior VP and Portfolio Manager at Broadway Bank. She has over 25 years of experience in financial services. Prior to joining Broadway Bank as a Portfolio Manager, she worked as a global equity analyst and prior to that she was an investment manager in a wealth management group for a major U.S. bank. She spent the early part of her career in fixed income.

Kelly holds both a Bachelor of Business Administration in Finance and a Bachelor of Arts in Language and International Trade from Eastern Michigan University. She has a Master of International Management with a concentration in Finance from Thunderbird School of Global Management and is currently pursuing a PhD in International Development through the University of Southern Mississippi. She holds a Post-Graduate Certificate of Accounting from Simpson College and is also a graduate of Texas Trust Schools. Her experience in academia also includes teaching finance and investments courses as an adjunct instructor. In addition, she is currently working on a PhD dissertation in International Economics.

Kelly has served as the Chair of the CFA Societies of Texas (which has over 3,000 members) and is an active board member of several other professional and charitable boards. She is also a Rotarian, an avid volunteer, and a frequent host parent to exchange students from around the world. Kelly has earned both the Chartered Financial Analyst (CFA) and Chartered Market Technician (CMT) designations and is also a CERTIFIED FINANCIAL PLANNER ™ professional. She has completed everything except the experience requirement toward the Certified Public Accountant (CPA) designation. Kelly speaks Spanish fluently, as well as some Danish and French.

Abstract The dearth of empirical studies substantiating the merits of technical analysis limits the legitimacy of the field. This study seeks to address that by offering evidence that Pakistan does not conform to the assumptions of weak form efficiency and therefore offers opportunities to generate abnormal returns using historical data such as that employed by technical analysts. Results of three versions of the runs test, the Augmented Dickey Fuller test, the Phillips Perron test, and an autoregressive model of order one, point to a lack of randomness, and thus a lack of weak form efficiency, over the two periods studied.   Introduction This study employs parametric and non-parametric tests to assess whether Pakistan’s KSE-100 Index is weak form efficient. Eugene Fama (1965, 1970) posited via the Efficient Market Hypothesis (EMH) that stock prices are unpredictable. The weak form of Fama’s EMH implies that stock prices include all past information. When that is the case,

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Are The Streets Still Smart? Evaluating Swing Trading Strategies in Modern Markets

by Davide Pandini, PhD, CMT, MFTA, CSTA
Davide Pandini, PhD, CMT, MFTA, CSTA
About the Author | Davide Pandini, PhD, CMT, MFTA, CSTA

Davide Pandini holds a PhD in Electrical and Computer Engineering from Carnegie Mellon University, Pittsburgh, USA.

He was a research intern at Philips Research Labs. in Eindhoven, the Netherlands, and at Digital Equipment Corp., Western Research Labs. in Palo Alto, CA. He joined STMicroelectronics in Agrate Brianza, Italy, in 1995, where he is a Technical Director and a Fellow of ST Technical Staff.

Dr. Pandini has authored and coauthored more than fifty papers in international journals and conference proceedings and served on the program committee of several premiere international conferences. He received the STMicroelectronics Corporate STAR Gold Award in 2008 and 2020, and the Corporate STRIVE Gold Award in 2022, for R&D excellence.

Since June 2015, Dr. Pandini is the Chairman of the ST Italy Technical Staff Steering Committee.

In the field of Technical Analysis, Dr. Pandini holds the Chartered Market Technician (CMT) designation from the CMT Association, is a MFTA (Master of Financial Technical Analysis) holder of IFTA (International Federation of Technical Analysts), and he is a Professional Member of SIAT (Societa’ Italiana Analisi Tecnica). In 2021 Dr. Pandini was the recipient of the prestigious XII SIAT Technical Analyst Award in the Open category. He was a speaker at SIAT Trading Campus in May 2022, and at the Investing and Trading Forum in June 2022.

Dr. Pandini served as Volunteer at the Universal Exhibition Expo2015 – Feeding the Planet, Energy for Life – in Milano, Italy.

Abstract In 1995 Larry Connors and Linda Bradford Raschke published a book titled: “Street Smarts: High Probability Short-Term Trading Strategies” that soon became a reference milestone for many generations of traders. The book presented multiple strategies inherently discretionary and mostly focused on equities and futures. The strategies were based on three simple swing trading concepts: retracements, pattern breakouts, and climax reversals, which are among the fundamental pillars of Technical Analysis, and by which support and resistance levels are formed. Although several traders have used these strategies for many years, following some structural changes in the markets, and an increasingly adoption of mechanical trading systems, the strategies of Street Smarts lately ended up on a sidetrack, and were no longer considered as mainstream by an increasing number of technical analysts and systematic traders. In this work, some of the most popular strategies described in Street Smarts are reviewed. Moreover, an exhaustive backtesting on

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The Tyche system: Application Of Physics For Stock Price Prediction

by Jayesh Chandra Gupta
Jayesh Chandra Gupta
About the Author | Jayesh Chandra Gupta

Jayesh Chandra Gupta is an Equity Product Specialist at Nomura International Wealth Management. His work involves recommending stock and structured product ideas, covering global equities (US,Europe, Japan, China, SEA), to Nomura Wealth Management Team. He is an MBA from Indian Institute of Foreign Trade, New Delhi and holds a B.Tech in Mechanical Engineering from Indian Institute of Technology, Mandi. He has also completed –The Henley Executive Hedge Fund Programme and is currently studying MSc in Financial Engineering from World Quant University.

Jayesh was introduced to Fundamental Equity Research & Technical Analysis during his MBA, where his team was the National Finalist of CFA Research Challenge. After MBA, Jayesh worked as a Sell-side Equity Research Analyst at JM Financial, covering Indian Auto & Auto Ancillaries.

Given his background in Engineering and love for Mathematics & Technical Analysis, he was always intrigued with likely application of Physics in Financial Markets. He authored this paper, as part of the same curiosity.

Abstract In the book “The Man Who Solved the Market”[1], the author quotes Renaissance’s co-CEO Rober Mercer saying to a friend – “We’re right 50.75 percent of the time…but we are 100 percent right 50.75 percent of time…You can make billions that way”. This paper intends to provide a similar indicator or system, which is right a bit more than half the time. Drawing inspiration from physics, the paper investigates the applicability of basic principles of physics to arrive at a price prediction system (or indicator) for stocks. The system hence derived, named as “Tyche System”, shows strong performance during back-testing.  The current paper also demonstrates the usage of Tyche system for – a) Market technicians who would like to get a heads-up about an impending technical event in a stock without scanning through the charts of thousands of stocks; and b) Hedge Funds, who would like to use their long-only

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The Volume Factor

by Buff Dormeier, CMT
Buff Dormeier, CMT
About the Author | Buff Dormeier, CMT

Buff Dormeier serves as the Chief Technical Analyst at Kingsview Investment Partners.  Previously, he was a Managing Director of Investments and a Senior PIM Portfolio Manager at the Dormeier Wealth Management Group of Wells Fargo Advisors.

In 2007, Dormeier’s technical research was awarded the prestigious Charles H. Dow Award. Also an award winning author, Buff authored “Investing with Volume Analysis“. Partnering with Financial Times Press, Pearson Publishing and the Wharton School, this book is the only one to win both Technical Analyst’s Book of the Year (2013) and Trader Planet’s top Book Resource (2012) to date.

Buff’s work has also been featured in a variety of national and international publications and technical journals. Now, with Kingsview Investment Management’s affiliation, Buff’s expertise and proprietary work on technical and volume analysis shall become much more accessible to journalists and other media alike.

As a portfolio manager, Buff was featured in “Technical Analysis and Behavior Finance in Fund Management” – an international book comprised of interviews with 21 PM’s across the world who utilize technical analysis as a portfolio driver. In his new role with Kingsview Investment Management, Buff’s unique performance driven strategies will be now be available to a wide audience of financial advisors and institutional clientele.

Buff has a Bachelor’s Degree of Science (B.S.) in Business and a Bachelor of Applied Science (B.A.Sc.) in Urban and Regional Planning from Indiana State University.

Abstract Evidence of outperformance garnered through factor investing is abundant through many sources. Typically, these accepted factors have been shown to add alpha to an index. Although market volume is a crucial piece of investment information, the majority of the public ignores volume as an investment factor. This paper introduces a new factor exhibiting alpha generation: the volume factor.   Introduction Presently baby boomers are piling money into the stock markets preparing for their upcoming retirements. According to Forbes Financial Council, over the course of the next decade, ten thousand baby boomers will retire per day on average. Meanwhile the highest earnings demographic, the millennial population, notorious for doing things ten years late, is just beginning to gear up their investment saving plans.  How are these new fund flows being allocated? According to CNBC, passive investing now accounts for 45% of all United States stock funds, up from 25% just a decade ago.

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MAC-V: Volatility Normalized Momentum

by Alex Spiroglou, CFTe, DipTA (ATAA)
Alex Spiroglou, CFTe, DipTA (ATAA)
About the Author | Alex Spiroglou, CFTe, DipTA (ATAA)

Alex Spiroglou is a quasi-systematic, cross-asset proprietary futures trader. His involvement with capital markets began in 1998, having worked for various proprietary trading and investment management firms in the UK and Greece. He is currently trading his own book, and is active in all major liquid futures markets, across all major asset classes (equity, interest rates, FX, commodities), while enjoying life with his family and the most amazing cat in the world (Greko), by the beautiful coast of South-East England.

Academic Background
Alex’s academic background began with a BSc in “Banking and International Finance” from City University Business School in London (1996). During those years he discovered technical analysis, which led him to specialize in that area. Eventually, this became his life-long passion. Since 2001 he holds the “Certified Financial Technician (CFTe)” accreditation by the International Federation of Technical Analysts (IFTA), and the “Diploma of Technical Analysis – DipTA (ATAA)”, administered by the Australian Technical Analysts Association (ATAA). Additionally, he holds the “Investment Management Certificate” (IMC) administered by the UK Society of Investment Professionals, as well as the “Market Maker/Trader” license administered by the Athens Derivatives Exchange and the “Investment Consultant license” administered by the Hellenic Capital Markets Commission.

Research Background
Alex over the years has built an extensive database of models and indicators, that includes inputs from Intermarket analysis, CoT, sentiment, and economic statistics, and thus developed a rules-based “Multiple timeframe, multiple factor” (MTMF) approach. His passion for research resulted in being an awarded Market technician, having received the NAAIM “Founders Award”, for advances in Active Investment Management (2022) and the CMT Association “Charles H. Dow Award”, for outstanding research in Technical Analysis (2022), for his paper “MACD-v: Volatility normalized momentum”.

Financial Industry
Alex enjoys being active in the Technical Analysis community. He was the founding Chairman of the London Chapter of the CMT Association (2010), one of the founding Co-Chairs of the Hellenic Chapter (2014), and continues to serve on the Advisory Board of the CMT Technical Analysis Educational Foundation. His involvement with CMT Association gave him the opportunity, to meet the greatest technicians of our time – Tom Demark, Ralph Acampora, John Bollinger, Larry Williams, Linda Raschke, and Martin Pring, to name a few.

Public Appearances
He has given presentations for various international Forums, Expos & Conferences, (London Money Show, London Traders Expo, etc). He has also done guest lectures/presentations for academic institutions in Britain and Europe, (City University, Macedonia University, etc) and interviews in local media TV, podcasts, magazines, and Journals

Latest Project
Finally, Alex is the Founder and CEO of SMART Trader Systems Ltd, London. A firm focused on the Training, Support & Development of Institutional Traders (primarily family office managers, emerging money managers, CTA’s) via a 15-step, rules-based Learning Path of quantified Technical and Macro strategies.  His Vision is to create a small, strong, Spartan-like, professional trader hub, whose members are willing to share ideas, techniques, and motivation because they realize that teamwork stands at the heart of great achievement.

He is a Happy husband and Family man, a caring cat dad, Global Macro Trader,  Awarded Market Technician & Energetic Entrepreneur – In that order…

He can be reached via his website www.AlexSpiroglou.com

Introduction What is this topic about? This paper will focus on the study of momentum using a very popular technical analysis indicator, the Moving Average Convergence Divergence (MACD), created by one of the most respected analysts of our time – Gerald Appel.[1] This paper is comprised of 6 parts. In the first section we will focus on the MACD itself. We will do a brief description of its construction, the most elementary ways to use it and then a review of the five limitations it has. This is a section that is familiar territory to all technicians. In the second section, we will show a widely known suggestion to deal with these limitations, that does improve one, but does not solve all of them. In the third and fourth sections we will present our own solution, which remedies the shortcomings, while creating unique advantages (edges) that would not be possible to obtain via the classic MACD. In

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