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Fill the Gap Episode Fifteen, with Special Guest Ian McMillan, CMT

 

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Summary

Ian McMillan, CMT and his colleagues run an RIA in a less-than-traditional approach… They use technical analysis to participate in trends and limit downside risk. For clients who are used to being stuck in a diversified portfolio of passive holdings, the education process can be a paradigm shift.

In the March episode of Fill the Gap, Ian will discuss the challenges of non-trending markets, and the coaching his firm does with clients. Starting with the simple concept of a moving average cross, clients begin to understand the philosophy of trend following.

Ian does not mince words. Gamecocks 2023! And, markets are not efficient. Emotions and cognitive biases lead to poor investment decisions. The flip side of this is that they also create opportunities for those that have mastered investing without emotion. Ian’s podcast co-host and investing partner David Zarling, CMT developed a money management approach for identifying market leadership, risks, and price trends that was designed to consistently participate in themes of strength.

When he is not managing client money, tweeting market observations @the_chart_life, or leading the effort for financial literacy (https://whatisastockbook.com/), Ian is talking with David on their Podcast: The Weekly Trend.

Enjoy episode #15 with our special guest Ian McMillan, CMT!

Transcript

Tyler Wood 0:13
Welcome to Fill the Gap, the official podcast series of the CMT Association hosted by David Lundgren and Tyler Wood. This monthly podcast will bring veterans market analysts and money managers into conversations that will explore the interviewees investment philosophy, their process and decision making tools. By learning more about their key mentors early influences and their long careers in financial services fill the gap will highlight lessons our guests have learned over many decades and multiple market cycles. Join us in conversation with the men and women of Wall Street, who discovered engineered and refined the discipline of technical market analysis. Fill the Gap is brought to you with support from Optuma, a professional charting and data analytics platform. Whether you are a professional analyst, portfolio manager or trader, Optuma provides advanced technical and quantitative software to help you discover financial opportunities. Candidates in the CMT Program gain free access to these powerful tools during the course of their study, learn more at www.optuma.com.

CMT Association 1:52
Fill the Gap is brought to you with support from Optuma. In addition to candidate study of the official CMT curriculum, Optima provides a full video course on all of the material that candidates need to know for each level of the CMT exams. Each course is broken up into modules, ranging from 15 to 45 minutes, depending on the complexity and length of the topics being covered. Learn more at www.optuma.com

Tyler Wood 2:26
Good morning, Dave Lundgren, and welcome to March 2022, episode three of season two of Fill the Gap. This month we are featuring our special guest Ian McMillan, CMT, who runs an RIA. Dave, what what really stood out to you in this conversation with Ian?

David Lundgren, CMT, CFA 2:43
Well, a few things. First and foremost was, you know, that the this is a, I think Ian is probably a perfect example of the type of person we’re trying to really, truly shine some light on in the industry. You know, we’re very fortunate to have the likes of Jeff dygraf, and Christopher Rohn, and Frank to share and, of course, the legends, Luigi Martin, and others on the podcast that that everybody knows who they are. And it’s always great to have conversations with them to get their insights. But if I really want to drill down and what the purpose of this podcast says it is to really bring to light those lesser known CMTS who are just killing it, you know, by leveraging the value they receive from their CMT, either the charter itself or the community they belong to, and I it’s hard, I’d be hard pressed to give you a better example than that Ian McMillan so and he’s doing just a great job. But in terms of the the things that I really took away from the conversation was having having, you know, momentum and trend following in technical analysis, in what generally is just a really difficult strategy to get your clients to really fully embrace when it’s not working. And and so as a portfolio manager, that was one of the things that Frank and I, as we worked together Wellington really struggled to get across to clients how this strategy behaves over time. And so for me, it was incredibly refreshing to hear Ian talk about how every new client that he that he onboards has to sit down with him and David Zarling, CMT his co-manager and boss and go through a one hour session to learn about the strategy.

Tyler Wood 4:26
Mm hmm.

David Lundgren, CMT, CFA 4:28
I don’t know if that the importance of that nugget in the podcast can be overstated.

Tyler Wood 4:34
Absolutely

David Lundgren, CMT, CFA 4:35
It was brilliant. And as I’m as I’m kind of moving forward with the things I’m doing and you know, money management and research, why not I’m going to make that a point to do that exact thing because that was just incredibly value added for me and I hope others trying to build a business, manage money for others, etc, that are facing the same challenges that they take that observation seriously, because it’s a good one. Big value added there. And then just very quickly, I also thought that the, his distinction between… when I asked him about what he found found to be the value added for technical analysis, he obviously had a lot to say about it, but the whole risk management in telling him when he’s wrong, etc, in that point sort of spun into as well, his his observation about the risks you take, not only in portfolio management in the risks that you’re, you know, the risk of losing money in your portfolio, but as a business manager, as a trend follower, one of the advantages of trend following in technical analysis and managing risk this way is that if you’re managing, you know, $500 million of client assets, and you get a fee based on those assets, from a business perspective, it behooves you to not let that portfolio drop 50%. So not only should you not let that happen, because of your clients, you know, interest.

Tyler Wood 5:56
Yes, and your ethical responsibility. Yeah

David Lundgren, CMT, CFA 5:58
Right! and fiduciary responsibility, but it also cuts your revenues in half if you let that happen. So again, just a very interesting way of thinking about the value of technical analysis and the risk management processes that it brings to the table.

Tyler Wood 6:12
You know, it strikes me, particularly in this moment, post pandemic, when you got just a huge onslaught of new traders in the market. When Ian and David onboard clients, and they talk about a 50 day and a 200, day moving average, and if orange is above blue, we’re we’re good. If blue is above orange, then we’re in defense mode. And, you know, clients can understand some really simple concepts of technical analysis, in the first five minutes of the conversation. And I think that’s, that’s one of the values of our discipline is that it is a visual tool. And I think there is, there’s a really accessible logic to what it is that trend following investors are going after, but emotions like fear and greed, they create stress, and they they drive markets and influence really poor decision making. And so it seems like the asset management business can decide: A) to ignore all of that, and just, you know, passively index and, and hope that clients just hold on through the roller coaster, or see that the flip side of all of that fear and greed and emotion also creates opportunities. And, you know, those who can master investing without emotion, who can understand that, you know, we’re gonna, we’re gonna buy gold at 1500 We’re gonna get out we’re gonna buy back in at 1550 as Ian was saying, you know, a lot of clients who are used to those long mutual fund manager sort of traditional approaches are shocked that that he would be in a position again and again, buying back as it as it comes back into trend. But, you know, to just choose to ignore volatility, and just hold on for the ride seems like a bit of a cop out. And it was great to talk with Ian about, you know, you see Everest, you just start making a plan and figure out how to climb it. And they seem to be doing a really great job with that.

Right. Yeah. well said,

Well, Dave, this month, let’s share with our listeners the insights, the wisdom and the experience of Ian McMillan, CMT.

David Lundgren, CMT, CFA 8:21
Welcome to Fill the Gap, the official podcast of the CMT Association. In episode 15, we are joined by CMT charter holder, Ian McMillan. Ian is a portfolio manager using technical analysis exclusively to manage his clients assets. Ian also co-hosts The Weekly Trend podcast with David Zarling, CMT and is very active on Twitter. Finally, Ian can now refer to himself as an author having just recently published a children’s book titled “What is a Stock?” Jay Woods, by the way, who’s also a CMT charter holder. I believe his daughter illustrated the book. So it’s a very small community we have here, but without further ado, Ian, welcome to Fill the Gap.

Ian McMillan, CMT 9:07
Oh, thank you so much for having me on. I’m Excited!

David Lundgren, CMT, CFA 9:11
We’re looking forward to looking forward to the conversation so much to talk about, you know, I’m a huge fan of yours on on Twitter. And I’m a very regular listener to your your weekly podcast with you and Dave and before we get into all of that, why don’t we Why don’t we spend just a few minutes for those who don’t know you just to get get to know you a little bit better. Tell us about your background, what got you to where you are, but in particular, what got you to technical analysis?

Ian McMillan, CMT 9:40
Alright, so yeah, as you mentioned CMT. I have been in the wealth management/RIA/ financial planning space for my entire career, obviously not as a financial planner but on the investment side. So I’ve worked at various RIAs. It wasn’t until a few years ago that I actually discovered that there are RIAs out there that use just technical analysis, which was great. But yeah, I’ve worked in a couple banks. Right. So definitely not using technical analysis too much in a bank setting. And I would say that’s probably what spurred it at. I was an analyst in a trust department. I’m not sure how many of obviously, you guys would know. But so trust departments, right. We’re like not taking any risk. It is. Yeah, it’s like blue chip, Dow, long-term stock buying. And it’s just that wasn’t what I wanted to do. I was discovering I had kind of discovered technical analysis. A few years before that.

David Lundgren, CMT, CFA 10:55
How so? How did you discover it?

Ian McMillan, CMT 10:58
Well, to be completely honest, I, I had a boss, my very first boss, I intern there, you hired me out right out of my grad program. And it was I don’t know if it was the first day it was in the first couple weeks. He said, Okay, I need stock ideas. And when you’re 22 years old, like I have no idea what that meant. I kid you not I went to Barnes and Noble. I bought a book called “Technical Analysis for Dummies.”

David Lundgren, CMT, CFA 11:30
Wow. Yeah, I’ve read that book. Excellent.

Ian McMillan, CMT 11:33
And I read it, but it wasn’t something that my like other peers were doing. Like looking at charts, it made sense to me. But it wasn’t something that I found other doing. So it kind of tucked that away for a few years, ended up in this deep value, type of strategy and a trust department. And definitely knew I did not want to do that. So that’s when technical analysis bubbled up a little bit more into my life into my career. And you know, I tried to add some of it in like, you know, like monthly charts, and like some like monthly MACD crosses, and it just you things like that when you’re trying to get this technical tilt to it, but still using this basket of names that and it was like, I think the basket like they had to be rated at least three stars by Morningstar. So it’s like that type of thing. Like “ughhh” just brutal.

Tyler Wood 12:39
You seem fully recovered, though Ian. You’re doing great now!

Ian McMillan, CMT 12:43
I have. I did go through therapy and emerged on the other side, as a CMT. And here we sit today.

David Lundgren, CMT, CFA 12:53
Yeah, yeah, that’s great. Well, we’ll talk more about your process. Because in our in our prep conversation, I learned quite a bit about your process. And it’s really almost funny how, how what you’re doing today is the exact opposite of a trust department with 85 stocks that you only can buy deep value oriented, what you’re doing today is completely opposite. But what we’ll definitely get to that. So right now you’re you know, where are you at? Now? You’ve got a team of I guess, you just grew your team a little bit, you got a new couple of CMTs on the team? Tell us about that.

Ian McMillan, CMT 13:27
So I work for an RIA outside of Milwaukee client first. Yeah. And it is owned by three partners, my boss being one of those

David Lundgren, CMT, CFA 13:39
Dave Zarling, right?

Ian McMillan, CMT 13:40
Dave Zarling, and then his brother, and then another partner who kind of runs the financial planning side. So we’re very split on our financial planning. And investment teams have almost nothing to do with each other other than the, you know, the planning team is telling us what model the client belongs in and based on their risk profile.

David Lundgren, CMT, CFA 14:06
Right So one quick question – as it relates to the the financial planner and then you have the the actual money management group at the firm do what as you’re managing money, do you manage all of the assets? Or do you are you just does the financial planner just sleeve out some of the management to you guys, and maybe also to other funds I’ll do

Ian McMillan, CMT 14:27
everything in house. Right. So you

David Lundgren, CMT, CFA 14:30
got it you across the board? Yeah, yeah.

Ian McMillan, CMT 14:33
Planners, planners are not advisors are not making any decisions in portfolios. That is yes, not there. Yeah, got

David Lundgren, CMT, CFA 14:40
it. Got it. Yep. And you just you just brought on a new member jam I learned on your weekly podcast last week.

Ian McMillan, CMT 14:47
Yeah. Got Dan Gore Coober, who has more of a commodities background, more of a futures background that we don’t have and then we’ve got our analysts So that’s three CMTS. And when we have a level two, CMT. So, hopefully fingers crossed. By the end of the year, we will have four CMTS on staff.

David Lundgren, CMT, CFA 15:12
That’s fantastic. Yeah, that’s great. Good stuff. And so your typical client is high net worth is do you manage money for any

Ian McMillan, CMT 15:20
institutions doesn’t have to be high net worth, we have some that certainly are. But the way we manage money, I mean, really five, I mean, 5000, I would say 10,000. We do have clients that are kind of in a different model, if it’s under 10,000. But I mean, with Technology and Logistics these days. Yeah, sure. 10,000 or 10 million, it all gets managed the same way.

David Lundgren, CMT, CFA 15:46
Yeah, it’s it’s not a commingled account, right. It’s just they’re all separately managed accounts, but they’re all on the same platform. So you press by once,

Ian McMillan, CMT 15:52
also big block trades, you know, things, write it out. And yep,

David Lundgren, CMT, CFA 15:57
yeah, fantastic. All right. So let’s maybe talk a little bit about your philosophy. I mean, we can, we can cite many, many academic research reports that have been written over the years. And of course, we have, we’ve had many very successful trend following momentum investors on this podcast. And of course, there have been many others interviewed elsewhere to demonstrate the, you know, the efficacy of technical analysis. So in your mind, why does technical analysis work? Why does it add value?

Ian McMillan, CMT 16:28
It adds value to me because it lets me know when I’m wrong, are big one of our biggest things is, right, so any trade can have four outcomes, big loss, big winner, small loss, we’re trying to avoid the big loss. I am so Okay, with being wrong. 40 to 50% of the time. Yeah, I’m so okay with that. And technical analysis, lets me know. And that sounds crazy to some people, that you could be that you could be wrong. 50, you know, sometimes 52% of the time, right? Because I’ve got data on all of our trading, and still have a positive profit factor. That’s very mind blowing. And it’s because you’re just constantly willing to accept when you’re wrong, and move on to something else. And I don’t think fundamentals give you that no, one’s like, well, I’m selling if the P E ratio hits 12, then I’m out. Like, no one says that. Yeah, they’re probably buying more if the P E ratio goes,

David Lundgren, CMT, CFA 17:29
No, I was gonna say they sell it when the P E ratio goes to 30. Just before 40 5060. Right. Yeah. I

Ian McMillan, CMT 17:35
mean, it’s, um, yeah. So that that would say that is the biggest of, and it’s just, it’s really what’s happening on like, if you, you can look at a chart, and that is the truth of the matter, no matter the noise that’s going on what your, you know, someone told you at a party was gonna happen, or, you know, I think stocks are gonna do this in the coming weeks, because I saw on the news. I mean, I can’t tell you how much stress not saying that what we do isn’t stressful, but how much stress is avoided? By simply looking at the chart?

David Lundgren, CMT, CFA 18:17
You know, you’re hitting on something that we Tyler and I have talked a lot about offline, as well as online here with our guests. And that is the, this notion of expectancy, and, you know, knowing as you just said, you can be wrong 50% of the time and still make money. I mean, last year, I didn’t have a great year, last year, just because we all know what, what happened to the momentum factor last year, but I was right 40% of the time last year, so I was wrong 60% of the time, and I still made money. Yeah, and the only reason I did because I didn’t have any outlier gains, I just really was very adamant about keeping my whatever losses I did have kept them small. So whatever gains I did have was was enough to offset and then make a little bit of money. And myself personally over the years, one of the things I’ve tried to develop most is my ability to accept the loss, not just physically do it, but mentally do it understand what it means. And I think one of the things I really appreciate about what you and Dave do with your clients, and I’ve never heard this before, until you mentioned it to me is that you sit down with every new client for an hour, and you talk to them. So talk about that. That’s such an important point. So tell us what you, you know, what do you teach them? What do you tell them?

Ian McMillan, CMT 19:30
So, you know, first off, we want to we want to lead off that what we do is a lot if they’ve been with a wealth manager or an advisor before, they probably had, you know, a diversified portfolio of mutual funds. That is gets rebalanced once a year. And so to go from that, to a very actively managed portfolio can be and we’re not day trading, we’re not scalping. But as you know, you’d mentioned we mean what We do is different than 99% of advisors out there. And so and to see things like, Well, why did you sell gold last week at 15? And then buy back again this week at 50? And 50? Like why didn’t so go like there are theories, right? We have to that’s an education and explaining trend following explaining that I’m okay being wrong, and then being, you know, getting stopped out, and then being back in a week later.

David Lundgren, CMT, CFA 20:30
What tools do you use to explain that? Like, do you use charts and examples to show yours,

Ian McMillan, CMT 20:35
a lot of it is trend following. So we like to use and with our clients, there’s one in particular graphic, and for whatever reason, it sticks with almost all of our clients. But during the education, there’s a slide with a 50 and a 200, day moving average, and the 50 is orange and the 200 days blue. And clients know that if orange is above blue, the 50 is above the 200 day, then markets are probably fine. Now, that is not how we strictly manage individual positions. We’re not waiting for this 50 208 crossover, it helps clients and those who have kind of a very low knowledge, to no fault of their own of technical analysis, it helps them kind of understand what following the trend means. So we have a lot of clients that when they come in for their meeting, and they are usually meeting with the planning team, when it comes to their portfolio, they’re the investment side of their financial plan. A lot of them all they want to know is orange above blue. And if the answer’s yes, they’re cool with you now going on about the rest of the conversation and not having to worry. And they know if orange is below blue that we are in protection mode.

David Lundgren, CMT, CFA 21:57
Yeah. Maybe you can talk a little bit about the tools you use, you know, once you have established orange above blue, then then what do you use? Tyler, you can ask a similar question. But if you want to elaborate on a question, Tyler?

Tyler Wood 22:10
Yeah, I mean, I was just thinking about 2020 versus 2021. To stick with your example. David, I mean, the challenge with trend following investments is that the death by 1000 paper cuts can you know, can really wear on you your process and with clients. So if they have that basic understanding, do they also understand, you know, when when regimes shift, or do you get under the hood with them, instead of just talking about it at an index level? Like where risk on versus risk off? Do you do talk about rotation strategies as well with them to to keep finding new opportunities? Yeah.

Ian McMillan, CMT 22:43
So I love that you brought that up. So yes, to both of those, do we talk about regime changes? Yes. So we do quarterly Lunch and Learns with our clients where we meet in person, there’s an an afternoon and an evening one, it’s usually about 180 people total between the two. And right, I mean, that was a huge part of 2021. Now, you didn’t really know there’s a regime change until, like the summer like no one knew on March, you know, we all talk about oh, and March is when the average stuff well, no one knew the first week of April that okay, now’s when Brett’s gonna start to get really bad, like, you don’t know that to like July. Um, and so we talk about the and that’s hard. I mean, we are a, we’re a firm that prides ourselves on not being up against the index, our benchmark is the s&p for our most aggressive model, our benchmark is the s&p. And so we have been a firm that likes to get out in the play in the pools of individual names and all these areas. And so when that starts to get tight, I’m explaining that visually, being able to pull up a chart of, you know, the NY a composite, or the Russell 2000, or value line, you know, geometric and say like, this is what the average stock is done. Now, did we have to alter our game plan? Yeah, I mean, I had to crawl back towards, you know, and be a little bit more involved in SMP last year, for the second half of the year than I would have liked to have been. But I’m not gonna sit there and just play the individual stock game and continue to drown in there. So to get a little bit, um, especially last year, a little bit less individual names, you know, q3 q4, than you would typically see. And then you had also mentioned education in regards to kind of rotation so yes, relative strength is a big thing we, we get our clients to focus on is like, this is why you’re going to see changes because things are going to fall out of favor. We like to use the grocery store analogy that tended tends to hit home with a lot of people, you know, you walk into the grocery store lots of things to choose from. You know, you pick up the grapes, and you say, well, grapes are on sale to box, this is awesome, you get home, they’re molding, right? They’re still because they were moldy. Lots of things to choose from the grocery store lots of things based on seasonality, as like my boss, David likes to say, hey, probably not going to get watermelon in December. And we can see those seven same types of things that we can see throughout the market moving in and out of favor. And we want to be doing the best we can to put our clients in those areas.

David Lundgren, CMT, CFA 25:37
Yeah, so the idea is thinking about the markets in the regime, the market is in similar to how you would think about the seasons that the that we go through throughout the course of the year. And you know, you don’t want to be wearing a winter parka during the summer. And you know, only carry your rain, your your umbrella during the rain and things like that. So I know what regime you’re in. So you know, what, how to position a portfolio?

Tyler Wood 26:02
So let’s dive into that a little bit in just in terms of your process. I mean, we started off saying that, you know, it’s perfectly acceptable to be wrong in stock selection. How do you get to your list of ideas? What’s What’s the top down approach? Is it always top down? Do you start with any fundamental or narratives? Are you looking at certain sectors to start with? Or do you take a technical approach? Right from the beginning?

Ian McMillan, CMT 26:29
Yes. So I wouldn’t say we, there’s no, there’s definitely no fundamentals. I mean, we can talk about narratives, you can talk to me and inflation, and now am I am I invested in all these commodities because I bought into deflation narrative or because that’s what the chart said to do. I would argue that that’s because what the charge to do and this inflation narrative, what I mean, the media is going to talk about it. In regards to Now, part and what was the first part of your question, Tyler,

Tyler Wood 27:01
top down versus bottom up? I mean, are you? Are you scanning and screening for 1000? Through 1000s of different charts for a particular set of factors or conditions? Or do you start from the top and look at the areas of the market that are leading and then do single select single stock selection from there?

Ian McMillan, CMT 27:20
So, so it’s funny you asked that, so I always like to say only and that it’s top down? Um, but I think from the scanning that we do, so now we’re not, we’re not looking through 1000s of charts a day. That’s crazy, I think no, I mean, you’ve got to have some type of process of narrowing it down. So we’re looking for stocks that are making new absolute and relative highs, that’s really the biggest positive to us, it’s got to be just because it’s in an uptrend. If it’s underperforming, it gets tossed, it’s not going to show up probably on any of our scans. But so I would say top down, right, so if NASDAQ is outperforming then we probably like tech, we like tech, and we probably like some type of subset of that software, semiconductors, cloud computing, blah, blah, blah. And then if we whatever subset of that we like, let’s say it’s semiconductors, and obviously there’s a handful of semi conductors that have to be doing the best. But I would say in regards to the scanning that happens, it’s impossible for it not to be somewhat bottom up because you see the scans on the individual names. And it’s just very clear that there is a we’ll call it a breath thrust from regional banks or from gold miners or from energy and I would say, you see those pop up before the ETF swill? You know, at least the stronger names. And I mean, there’s been, I can’t tell you how many times where I’ve watched an in, you know, a couple energy stocks, I’m like, why are these breaking out? With the rest of energy doing so bad, and you knew, you figured it had to be some type of clue that they were so I would, I would say from a portfolio construction, it ends up being top down by, you know, how positions are put in and the risk we want to take, right? We want to move broadly and then more narrowly into the individual names, but from a research and data and idea generation. I think there’s definitely some bottom up to it. Yeah, thank

Tyler Wood 29:38
you for that.

David Lundgren, CMT, CFA 29:40
You. You mentioned screening and whatnot. But I just want to maybe draw a distinction between systematic investing and discretion. I believe everything you do although your process your research process might be systematic in the sense that you routinely screen the market your decisions are discretionary. Yep. Discrete decisions are discretionary Yeah, right in in that you you, you highlight a couple terms that I think most CMTS will be aware of. But a lot of the folks that listen to this podcast are not CNTs yet right, Tyler? Yeah. So so like when you say, hitting new highs, relative performance new highs? Are you looking at three month highs? Are you looking at 52 week highs? And maybe I’ll go ahead and then just find one and then on the other is, there’s a lot of ways to define a breadth thrust. So how would you define a breadth thrust for our listeners?

Ian McMillan, CMT 30:34
So okay, great questions. So we use 40 day new, we use 40 Day highs on both an absolute and relative basis to thumbs up for me if a stock is breaking out on both an absolute and relative basis, that’s we want to see, it is very, very, very hard to beat a benchmark if you do not own things that beat the benchmark. So that is where relative strength comes into play. It’s almost I mean, some would say it’s mathematically impossible. Because it is right. So we can’t we I got to be involved in things I don’t have time to waste in. That’s great that you know, Coca Cola is going up. But if it’s staples, and it’s underperforming, I I’m not there for I’m not there for the dividend, I’m not there for a news story, I needing to make money and alpha, not just right, because as a portfolio manager, I’m being paid to beat a benchmark plus a fee. So there has to be there has to be alpha generation in there. And I need that to happen. Now, I can’t sit in a room with a client and say, Well, we think, you know, this stock is undervalued and in the coming months or quarters that the rest of the market will come to see our view on the proper price for this asset. I don’t have time for that. I get fired for that. So it’s I’m here to make money now in the things that are outperforming now and again, we’re not day trading, we’re not scalping. But there are always evident themes of outperformance. Now, if it’s outperforming to the downside, we don’t want to be involved in it.

David Lundgren, CMT, CFA 32:15
Of course, yeah. What do you mean by that? Is it is that if the stock is going down, but it’s going down slower? Yeah, that’s the definition of a bear market. So that that’s what gets you to cash. Mm hmm.

Tyler Wood 32:24
Yeah. So do you ever find yourself exiting a winning position to go go after something that’s outperforming on a relative basis?

Ian McMillan, CMT 32:36
Yes, there’s definitely times where as especially in 2021, I think one of the things that 2120 21 taught me the most was teachers taking the money and the relative to 2020, where you could let things run? Yeah, exactly. 2021 was very much, you know, by the time you got to June, July, it was very much just like screwed, I’m taking my 7% and I on this trade, and I’m gonna go find something else because at least I’m locking it in. So definitely willing to actually definitely willing to trim definitely wanting to add to positions. So all of those are open.

Tyler Wood 33:22
We had a fantastic guest on fill the gap last year, named Frank to share, who spent a little bit of time in our conversation talking about how technical analysts because technicals offered the the most efficient way to manage risk to know when you’re wrong, we tend to lean really heavily on our discipline to provide that risk management side. And he said, what often gets overlooked is that technicals allow you to really lean into positions that are that are working and talking about the expectancy formula, you need some of those really outsized gains to offset small losses. So in terms of sticking with trends, I find the relative work is really interesting because it it often has technicians leaving a trend that they were following to perhaps follow something that’s that’s even got better legs to it.

Ian McMillan, CMT 34:15
I mean, call it the new I’d say it’s, I mean, it’s definitely a shiny object syndrome, but at least you’ve got this backdrop of willing to be wrong.

Tyler Wood 34:28
Yeah, I think my nephew’s would make great technicians. They’re done with a toy where, you know, five minutes later, they’re ready for another toy.

David Lundgren, CMT, CFA 34:38
Yeah, so can you can you just give a quick synopsis of your definition of a bread thrust? Because there’s a lot of ways to define that as

Ian McMillan, CMT 34:43
well. Bread, right. So I would say now, it’s hard to put a it’s hard it’s really hard to put a number it’s not you know, 50 stocks from this sector or, you know, making new highs because there’s no there’s 800 biotech stocks, and there’s like, you know, 10 You know, 20, utilities companies. So I would say, and this is, this is just going to come after running the same screen every day for six, seven years of just knowing it of why I haven’t seen gold miners on my scans in three months. Why now over the last, you know, couple sessions, am I getting 1015 20 gold miners popping up? Why is the majority of my scan today? Energy, you know, if I’ve got a scan, and it’s so we call it doubles, new relative highs, new absolute highs, called a double scan, if that scan produces 150 stocks, and 45 of them are regional banks. I consider that a breath thrust, right, that’s a huge chunk of that scan to be in this subset or if it’s semiconductor, whatever it may be. So I would say it’s rare. It’s always relative to you know, buy. So biotech is a great example biotech comes up all the time, on doubles, there’s always going to be like 1520, even the past few months with with biotech in a horrible relative downtrend as a whole, if we want to use IV B or x bi, or any of these ETFs, there’s always going to be 1520 biotech names that show up on doubles because of some FDA approval, or whatever it

David Lundgren, CMT, CFA 36:30
may be. It’s very idiosyncratic in that space. So it’s very hard to say, oh, man, there

Ian McMillan, CMT 36:35
are a lot of biotech stocks today. That might be a thrust. It’s it’s just one of these things that you know, when you see it, and sometimes, you know, from experience because you ignored it in the past, right? And you’re like, Well, I’m not next time that those bubble up, I’m gonna pay more attention to that area. So is it a hard number? No, it’s more of just a route and we use up Touma a lot to for our breath works, we think or scan, or Think or Swim intraday. And then Optoma for more of our data collection and being able to look at financials and you can definitely see, you know, a thrust now, is it a certain amount of stocks that, let’s say 30% of the industry has an RSI above 60. Right, you could use that as a thrust, but it’s always relative to each individual’s sector or sub industry.

David Lundgren, CMT, CFA 37:39
So over the past year, several of our guests we’ve asked them about this, the importance of this sort of lost lost art of chart reading, because everything has been so systematized and everything is, you know, we back in the day, we used to actually do charts by hand. And of course, Jesse Livermore was a renowned tape reader where he would literally read every single, every single quote that came across the tape and what you just described to me struck me as being modern day tape reading, where you’re getting your screens and you’re not just like taking the aggregate assessment of the screen, you’re actually looking at the screens and noticing change day by day, week by week in an accumulation of six or seven years of doing that has has embedded in you a skill set of being able to note the changes and flows in being able to act accordingly. That says same

Ian McMillan, CMT 38:31
I mean, it’s been the same process we I mean, I have looked and I can’t even tell you people have asked me why I picked 40 Day highs and right because a lot of people use 30 days some people use you know 90 day 60 day Why 40 I have no idea why I did it I just know that in 2015 When I started building my first scans that that is what I used and it worked and it’s been the same I mean it’s such a simple scam and there’s that’s it it’s new absolute highs a new relative highs and there’s no there’s nothing other than that. It’s just what is moving higher. What do people want to buy more than they want to buy? Like what do they want to buy the most? What are they buying more than the average stock?

David Lundgren, CMT, CFA 39:24
So I think recently because it’s 40 days I think it’s conceivable I’m not positive I don’t have charts in front of you right now. But I wouldn’t be surprised if say Coke or Pepsi has perhaps been making it through your screen both price in relative

Ian McMillan, CMT 39:39
leave Coke was on there Friday.

David Lundgren, CMT, CFA 39:42
Right? So be that Be that as the case is would you buy Coke or are you What do you have some sort of additional discretion beyond the doubles screen that that says yes by COVID don’t like

Ian McMillan, CMT 39:58
Coke is absolutely open and fair game.

David Lundgren, CMT, CFA 40:03
Yeah. Interesting. And is it is it? Is there a scenario? We in some sense in some environments, you would buy it in some environments? You wouldn’t? Or,

Ian McMillan, CMT 40:14
I mean, if it’s a if it’s an environment like, you know, q4 2019, or q4 2020, or q4 2019, for that matter to where Yeah, high beta. I mean, if there’s something else out there that now if we’re in a high beta environment, I doubt Coke is going to be coming up on, it’s probably not going to be making relative highs. I’ll be honest with you, where I’m still not involved. I’ve got I own four individual stocks right now. And I typically own 12 to 15. At any given time, and our individual stocks leave, I’m just, I’m not super anxious about going out there and loading up on individual names. And especially, I mean, we we came into the year with low exposure.

David Lundgren, CMT, CFA 41:11
Yeah, no, I was gonna say that to for our listeners that that is. It is the case that you’re currently not very constructive on the market. But you’ve also you haven’t been for a while. So I was going to hope, hopefully get you to elaborate a little bit within your process, what got you to take a more conservative cautious stance on the market? Certainly before, what most people would say the evidence was on the table for.

Ian McMillan, CMT 41:36
Yeah, so it kind of had to wait out. Brett, I mean, breath was bad for months, right. And you can’t go into cell mode, simply because breath is bad, as we learned in 2021. But really, it was the rustle coming down out of the range, the failed breakout on the rustle, and then breaking down, and just seeing the continued deterioration everywhere and just earnings, right earnings reports that, and I don’t I, we talked about this on a podcast a couple weeks ago, I’m not big on earnings reports. This just these guys that come out with these estimates that are wrong a lot. So I don’t get why there’s always an uproar, when there’s a surprise or a mess, or whatever it happens. But when the market when it’s supposed to be good, when there’s a big earnings beat or a big sales, you know, the earnings were good, quote, unquote, according to Wall Street, and they sell the stock, or there’s an initial pop, and then they sell like, if you take Airbnb for an example, great earnings, I think it was Thursday, they popped it and immediately sold it. I mean, that’s the type of action where you don’t see that in a healthy market. Right. And just failed breakouts, I mean, break, if you’re a brand, I’m a breakout guy. And it was it’s 2021 was just such a pain. For breakouts, you’re looking for those types of moves. And

Tyler Wood 43:20
with a few of our other guests, and but you’re hitting the nail on the head, even if you had the crystal ball, you knew exactly which companies were going to beat earnings, that that doesn’t give you a full picture of what the market is going to going to do Netflix beat earnings and drop 20% Tesla beat earnings below, you know, 10 12% and you don’t really know when those fundamental metrics are going to matter which ones or by how much.

Ian McMillan, CMT 43:45
And you’re there. And you know, from my our view term, you know, we’re about a little bit more intermediate to longer term, we like daily and weekly charts. So you’re having to sit through 2021 You’ve got Russell 2008 months range, you don’t know if it’s accumulation or distribution. So you can’t get you know, you can’t get super bullish or super bearish either way. You’re trying to, you know, see what this does. Meanwhile, you’ve got the s&p just marching higher. So, but I would say to answer your question, it was it was the breakdown from Russell 2000. And, you know, just the loss of so many trends, I mean, there’s so many things, you know, lose like a flat 200 day, days rolling over. They still haven’t, they’ll haven’t, you know, bought up these the most beaten down areas, which, you know, if we’re gonna have some type of recovery, I would think that a serious recovery that they’re going to see, you know, the arcs and software’s and all this other stuff. But

David Lundgren, CMT, CFA 44:59
it’s So so obviously, you’re you’re, you’re, you have a large cash balance right now. And I, I wonder, what gets you back into the market? Is it things turn and you just start to get 40 Day highs? Or? Or do you have like longer term trend supports where you’re willing to start to get long off support before the trend actually turns in the short term. And so like the long term trend is still up. So you’re willing to buy long term trend support, just like you’d be willing to buy short term trend support if you had a short term trend going?

Ian McMillan, CMT 45:29
Yes, so so not. So in regards to exposure? Definitely super minimal. I mean, outside of shipping and metals and mining, and, you know, a handful of individual stocks, it’s we’ve mainly been in commodities.

David Lundgren, CMT, CFA 45:47
And on the commodity, so we

Ian McMillan, CMT 45:51
do not we do the ETFs, the hiring of you know, Danner commodities, is to kind of get more tours, we have to do NOkay ones, but I mean, agriculture, oil, gold commodities, aluminums, you know, soft platinum, I mean, these are carbon credits. I didn’t even know a carbon credits were a thing until one of our analysts brought this to my attention, like last October, and it was like, hey, carbon credits are in an uptrend. And I don’t know who determines the prices, carbon credits, or how that industry works. But I know that you can buy an ETF that tracks the price, apparently, and it goes up more than the s&p.

David Lundgren, CMT, CFA 46:34
So just the same. You need to you need to do the work. And then that’s your follow up book. What is a carbon credit? Mm hmm. All right. The series is we’ll leave the trilogy out of you.

Ian McMillan, CMT 46:48
Okay, so what gets interested? I mean, Russell’s got to get back in the range. And you’ve I mean, I’ve got to see s&p at a minimum. I mean, let’s get back above the September highs, right. So s&p 4550 or 4545, whatever it is in there. I just I mean, we continue to lose 200 days, and I’m not a huge moving average person in regards to the decision making. But in regards to what type of environment are you in, these continue to start to roll over that’s going to be a lot of now we’re now we are entering more into we’re going to test indices from the underside. Now we spent years testing them from overhead Now, are we going to move into this? So it’s RAM and if they I mean if mega cap if mega cap growth goes, that’s going to be a huge, so is this that the markets? Is there some rotation? We’re going international now? Is there some rotation to value? I mean, you could say that it’s really just been energy banks work on and off. But

David Lundgren, CMT, CFA 48:05
this Yeah, that was gonna be one of my questions for you. Given that you you review, probably 1000s of charts throughout the course of a day in a week, if not visually, certainly through screens. Are there any, any themes sort of bubbling up through your research process that suggests the dominant trends of the past 10 years are starting to change, like, growth versus value? Us versus the world commodities? Are you do you see anything that looks like it’s a, you know, a durable, lasting transition in the underpinnings of trend today versus the past 10 years?

Ian McMillan, CMT 48:41
So, you know, are his his mega cap growth or large cap growth going to fall out of favor? I don’t know if there’s any definitive long term change in trend? Yeah, I mean, it’s not like Apple’s fallen apart. And it’s not like Microsoft has fallen apart. Now there’s been some others, right? Your Facebook’s your Amazon hasn’t gone anywhere for I don’t have the charm phone, but it’s been close to a year. I think at this point. We are I mean, Silver has outperformed. Yes, Silver has outperformed Amazon over the last three years silver who would have thought that? So are these types of I you know, is it coming now? It certainly would come into fruition with this overall right you know, rising rates are bad for growth and you know, we can’t supply growth now on you know, by just raising cheap debt. Are we is that all is there some type of you know, if I put my CFA hat on, is there some type of cool collision coming here? That the markets like Yeah, we’re done with software, we’re done with these unicorn, VC type companies, I could think you could see that starting to build, I don’t know, when I look at, you know, large cap growth versus small cap value on a relative basis that there’s any type of, you know, multi year, like, first Sure, we’re going to move into this value oriented environment like a 2003 to 2007. I guess, if you want to call it that.

David Lundgren, CMT, CFA 50:38
Yeah, it’s interesting when you when you look at the we know, and we see, you can see in the charts, if you don’t see in the charts, you certainly see it often enough on social media that everybody’s talking about how energy and value and maybe even non US benchmarks have been outperforming year to date. And that’s the key word is or phrases year to date, because a lot of those charts, you look at them in the long term sense. And they’re still down. You know, a perfect example is rates. I mean, rates are above 2%. And everybody’s, you know, rightly so making a big stink out of it. But if you, if you actually look at that long term trend, the trend doesn’t turn abandoned its downside until you probably get through today, it’s probably to 75 to 80. Right?

Ian McMillan, CMT 51:20
Yeah, I mean, I don’t, right, we’ve been doing it. I mean, we’ve been in REITs move in 3040 years cycles, like to say that this now is, the end of lower rates is I’m gonna see a lot more evidence, and from my point of view, evidence is the actual price chart. And I’m just not totally buying yet buying yet that yeah,

David Lundgren, CMT, CFA 51:46
not against it. But keeping an open mind. And really, at the end of the day, having a long term secular sort of structural view is unhealthy anyway, right? I mean, you want to be able to just adapt to the changing, right?

Ian McMillan, CMT 51:59
Based on the fact that I think in four years mortgage rates are going to be at 9%. Right.

Tyler Wood 52:08
So in, in, in the scenario where there’s a huge regime shift and thinking about your risk management standpoint, is it is it merely a raising cash in the portfolio? If you don’t want to express things in the equity space? Or are you believing that there’s always a bull market somewhere, and you just don’t lock your shop into being a, you know, growth equity fund or a, you know, particular style box? But maybe go anywhere? I mean, would you be a we are emerging? That’s what the chart says?

Ian McMillan, CMT 52:40
Yes. I mean, we will literally own anything, it is available in the US. And I mean, and that includes short positions, right? So we’ve got, if I look right here, we got six different short positions on right now. So we are definitely willing to cut exposure to our benchmark by, you know, netting that out with short, you know, your 30%, long s&p, and you’ve got your 20% short, so your, you know, 10%. net long, now that you write so now, when we go back to people always ask, Oh, you must have high cash? Well, not necessarily, I’m just might be using that cash in different ways to express my feelings.

David Lundgren, CMT, CFA 53:30
Yeah. You know, Tyler, you had mentioned Frank, sorry, we worked together at Wellington. And in our presentations to prospective clients we used to, they used to ask us questions like, What is your turnover? And you know, what’s your process and whatnot. And so when we told them, our turnover, depending on the regime is, could be upwards of 800%, they would fall out of the chair, and then we’d have to get that back in the chair and explain to them why turnover was a good thing and everything. And so, Ian, during during our prep call, a couple weeks ago, I’d asked you what your turnover was, and I fell out of my chair, being somebody who’s very accustomed to high turnover. So talk about that. I mean, your turnover is higher than that I’ve probably ever heard.

Ian McMillan, CMT 54:13
I don’t Yeah, so I don’t know what now in this environment. Right now, like you said, it’s going to be way different when you’re in an environment where you can let positions run for a month or two, or even sometimes multiple quarters. Yes, I mean, there’s like, I love the months where I don’t have to come in at the clothes and do anything. Those are love, but it’s I’m not going to change the process that I’m not going to go through this huge style drift. And so if that process ends up just being in and out of a lot of things over a certain timeframe, then it is what it is. I’m not going to you know if it’s breaking out I’m not going to ignore I’ve done it I’ve ignored it before. because Oh, I didn’t believe the chart or I thought the market environment was doing something else. I’ve done that I’ve, I’ve ignored what the chart told me to do, because I had some owl over out, you know, some other larger umbrella thought about what was going on the market. And that oh, the markets going down. This won’t you know, this, for sure won’t go up. Or this, you know, nothing in this industries work. I don’t know why I would buy tech, nothing else in tech is working right now. Why would I buy this stock? And it ends up being a so yeah, turnover? Definitely very, very high. And we’re okay with it. It goes back to what you said earlier, you know, educating clients on like, why have you bought, why have you bought gold miners three times in the last two months? Like either just buy it or don’t buy it? And say, well, that’s just, you know, it is what it is? And I’m not gonna, I’m gonna keep trying?

David Lundgren, CMT, CFA 55:57
Yeah. Yeah. And it’s so it’s a, it’s a function of, I guess it’s a function of like any, any process, all processes don’t work all the time. In fact, most processes and even the market itself is in a drawdown probably 80% of the time, if not war, right. And so those periods of drawdown are just periods of turnover that results from the from the trends not engaging, and being willing to recognize that out of those regimes can come bad outcomes. So you want to make sure you’re protecting against the possibility that the reason this is this is turning is because it’s prepping for a bad outcome. The way you mitigate against that is by taking these small losses, but always being willing to get back in. Yeah, to capture those dominant sort of right tail them back in.

Ian McMillan, CMT 56:40
And because the second you say, you know, I just haven’t been hitting the ball lately, I’m gonna, I’m gonna sit this in these next couple of trades out because I’m sure I’m wrong. I’m sure I’m wrong. Oh, the minute you let that creep in, it’s really hard to overcome that. And you and it’s almost like Kate work, you know, those trades are gonna fly. It almost never fails. Yeah. And then you psyched yourself. And it’s hard. I mean, 2021 was such a humbling year. For, for me, I will be completely honest about that, for a lot of people that I’ve talked to that, you know, and employ some of the type of same outlook strategies, entry and X, you know, what they’re looking for an entry.

David Lundgren, CMT, CFA 57:24
I know, I totally concur with what you’re saying it was, it was for me as well. I think the only one that did well was Mark Minervini. And somehow he sucked all the trend following alpha out of the market. That’s probably why we all sucked. Yes, exactly. 350% of God only knows what he did. But

Tyler Wood 57:39
well, here’s a question to both of you. I mean, for folks of past generations, that the idea of turnover was probably a lot scarier, given the transaction costs. And unless you’re, you know, swinging through crypto exchanges, you’re just not getting scalped in the same way on equities, and certainly with ETFs unless now, right. Yeah, there’s, there’s very little friction. I mean,

Ian McMillan, CMT 58:03
huge, and, you know, for so and we used to pay. So before they started that we used to pay all the trading fees for our clients. So Wow. I mean, you Yeah, so we were willing to do that. But now and you had to be conscious of that. But now, it’s mean, you can do anything for free.

David Lundgren, CMT, CFA 58:22
Yeah, it’s interesting. If you have if you think about the, in the old days, the high commission costs used to be a deterrent to trade. And in many ways that probably saved a lot of clients because it didn’t have a process. And so something that kept them from trading kept them from doing something stupid, but in our world, in trend, following in particular, where, you know, turnover is actually an ingredient to what we do. The fact that that trading cost and friction has dropped so much actually just augments the process and just makes it better for us. Yeah. Yeah.

Ian McMillan, CMT 58:56
For and it and it probably has, it probably has caused a lot of bad habits out there. Right.

David Lundgren, CMT, CFA 59:03
Um, no, exactly. That’s that was the that was the conclusion. I was gonna come back to which thank you for doing that. Because the problem is, is that you now have frictionless trading opportunities and if you don’t have a process that’s just going to make you you know, lose money faster. Right. Absolutely. Okay, so let’s we’ve already talked a little bit about it we have a few minutes left let’s let’s just jump into your current view. I know you’re you’re you’ve got some shorts on you’ve got some some cash you’ve got a few Long’s on you know, when you when you’re looking out over the course of the coming year, I mean, one of the things that I am always you know, the evidence can always be assessed for what it is and when you look at it today, obviously things are tilting negative. But if you actually look back over the past 100 years, whenever the markets down 10% Whenever you have the s&p go below the 200 day moving average, the majority of the times, that actually ends up being a buy opportunity in time. And so in other words, I’m in a credit you for not that assessing getting short now or getting raising cash now, because you’ve already done it to your credit. But here we are, we are below the 200 day average. And when you get there historically, it’s actually time to really lean into the market. I’m not saying you should do that. But my question to you is, you know, one of the one of the in your last episode, Dave Zaarly, made the comment that nothing good ever happens under the 200 day moving average. And I get the essence of that comment. But what the way what the way it should really be phrased is that every single bad situation that’s ever happened in the history of markets has happened below the 200 day average. But not every time you get below the 200. day average is a bad outcome. It’s actually more often than not, it’s a good outcome. So here we are. Well, below the 20 day average, we’ve gone through a at least a one year correction in breadth, which by again, most measures is a durable correction in this in this ongoing bull market. What do you think? I mean, it’s a if you had to, if you had to guess because this is this is we can have conversations and not necessarily act on it. So if you had to guess, what are we looking at for the for the balance of the year?

Ian McMillan, CMT 1:01:17
So you mean, like where we add on December 31? Or, you know, I? So we’ll start out shortly,

David Lundgren, CMT, CFA 1:01:25
let’s say, You think we’re like, do you think we’ve seen the majority of the losses, and now we’re just kind of sideways for the balance of the years? We kind of correct and fix everything we broke? Or do you think there’s a lot more downside?

Ian McMillan, CMT 1:01:36
A majority of losses in the indices or like our core? I mean, you say you’re you are asking in the majority of losses in the indices? Yeah. Now, I don’t, I think that the market will go lower. Now. There’s some positive seasonal things, seasonality that comes in here, February and March. It’s a midterm year, which is really wonky from a seasonality, I mean, midterms years or, you know, because there’s people that play games, you know, right, we have to realize that not only technicians manage money, there are people that manage I mean, billions and trillions of dollars get around, thrown around because of policy and trying to guess who’s going to be in what position of power I continue to think that the major indices will break lower I think that having things like Tesla start to break lower now you still got your Apple’s and Amazon’s holding up.

David Lundgren, CMT, CFA 1:02:57
Do you think those before this whole thing is over?

Ian McMillan, CMT 1:03:00
I definitely I do. And I think that mega cap growth has to break for for and it has to start underperforming significant for this all to follow up. I mean, there’s just too much if mega cap growth starts to outperform again, you get Apple, Microsoft, these stocks that move the markets. I mean, I love playing around in mid cap, I love buying a mid cap energy names, but they don’t do anything. They’re like, they’re not going to move the SP. Right, buying aluminum futures is not going to move the s&p So I want to see the big names move. I think that I believe they will continue to get worse. But I don’t I don’t know. I think now I’ve got some other technical thoughts outside of technical analysis that we don’t have to get into the podcast on what would them what would happen to the market? What would be allowed to happen to the market in a midterm year? Are we gonna go into the bear market with an election? Nine months out? I don’t know. Um and that’s maybe that goes a little bit more down like conspiracy theory type

David Lundgren, CMT, CFA 1:04:28
that’s on the podcast. Yeah, quote,

Ian McMillan, CMT 1:04:31
unquote, day What are they doing? What are they gonna allow to happen? Yeah.

Tyler Wood 1:04:38
Yeah. Economic theory and whether or not we’re living in a planned economy and let’s let’s go for it. Yeah, grab on.

Ian McMillan, CMT 1:04:45
I mean, when you know, it’s right or bear markets. I think bear markets happen when certain people say that they’re okay to happen. And that’s as far as well, I guess we’ll go on our tech Call in the house will have to start a new podcast.

Tyler Wood 1:05:03
Let’s bring it back to the chart then for a second. Do you do you look at other longer timeframes to see see the level of destruction? I mean, if you if you’re looking at weekly or certainly monthly charts on a number of those tech names, they’re still in trend. Right? They’ve you know, AR and aggravatingly underperforming since October of last year but but they’re still within within an uptrend. If you get out to a long enough time period, do you look to those longer term charts to develop a thesis on the on the regime? I know we just said it doesn’t matter what your secular thesis is.

Ian McMillan, CMT 1:05:43
I think you’ve got it. I think you’ve got especially on relative, right. So when you reach these extremes, you know, you’ve got relationships that are getting back to and some above the extremes that we saw 1000s. So if you look at like semiconductors versus the s&p, mm hmm, you know, I believe that that has peaked out again, where it peaked out in May 2000. Also, when SMH the semiconductor ETF debuted. So a little bit of ironic sentiment there. But so certainly those types of longer term, but again, I you know, if something, if I have an individual position, and it breaks below, you know, my support area, my, you know, mercy, you know, I’m going to call uncle, I, I’m not going to, I’m not going to zoom out to the monthly and be like, well, it’s still holding up on the month, I’m going to give this couple more weeks, see how this finishes, for sure. For sure. So on an individual position. So, again, so no decision making really based on monthly charts, but certainly trying to give awareness, right. And you look at these even at you know, emerging markets versus the s&p, and this or those types of historical, you know, where are we at now or about, you know, below the 2003 lows?

David Lundgren, CMT, CFA 1:07:24
You know, we’re certainly leaving the our listeners with the with the, I think justifiable perspective that that in minimum, the markets not healthy, it’s it, there’s a lot of things that are wrong with it. But and I agree with that I’m positioned similarly. And I guess I, what intrigues me is when you look at these equal weighted ETFs, which should, in theory should show the damage we’re talking about, because we talked about the s&p is holding up because the the large mega cap names have held it up, you would think that if you look at the RSP, which is an equally weighted ETF for the s&p 500 Over the past year, it’s up 12% Over the past year, the Russell 1000, which which has a lot of the smaller names in it not not the Russell 2000. But the Russell 1000 has a lot of smaller names than what you would find in the s&p 500. That’s up 10% The NASDAQ itself, which is arguably where most of the damage equally weighted has happened is flat on the year. And then, oddly enough, the it in the information technology equal weighted ETF is up 9% Over the past year. So what are your thoughts on I mean, that’s intriguing to me that, you know, we see what we see, we know these things have dropped a lot. But year over year, they’re still fine.

Ian McMillan, CMT 1:08:46
They have been good. And you know if so year over year, right? And you saw I mean, we saw in 2021. You know, a few of these areas do? Fine here and there. I think it just goes to show you. I mean how tough it is to be in, you know any of these names, because or at least I’ll take this back. Right? So for our time frame, right there. I’m sure there are trend followers out there who, you know, maybe on a different time frame and they say oh yeah, I was in and out of all those names in 2021. Yeah, but I mean, we look but we look at what are those compared to the s&p, so the s&p as a whole was up 20% last year? Yeah. So I think it does somewhat show the you know, lack of participation. We saw blood right? But it’s not right, negative. That’s what

David Lundgren, CMT, CFA 1:10:04
I’m saying. That’s what I’m saying. So it’s like you have you have a discussion that that seems to reveal a lot of negative outcomes. And again, I mean, if you’re a trend follower, you can see them I can I can call up, I can show you a five minute charts that look like, like the company has gone out of business. But when you when you look at these things on an equal weighted basis, you would expect those indices to reveal what we’re talking about, and yet, they’re up, maybe they’re up less, but they’re up.

Ian McMillan, CMT 1:10:31
They are up and they and they don’t right. So a lot of the headlines have been on this. The software’s and you know, Cathy wood and the types of name and though you know, those being down, secret, those get all attention, but they’re not I mean, they’re not in any of these major indices, but a lot of people don’t know, right, I think a lot of people spend 2019 and 2020, getting away from the index, and saying, like, I’m done with owning spy this.

David Lundgren, CMT, CFA 1:11:05
And they shouldn’t have right?

Ian McMillan, CMT 1:11:07
They’ve jumped into individual names. And it’s, you know,

Tyler Wood 1:11:17
didn’t have a process for how to manage them. So do you do you feel like in this environment, the single stock picker is it will be favored? Do you think more active management strategies are going to be coming into the market?

David Lundgren, CMT, CFA 1:11:31
Oh, so I love that question.

Ian McMillan, CMT 1:11:34
I would say yes. So I will say anecdotally, yes, based on the first two months of this year, and the amount of people that we have, you know, prospects and new clients have come through the door, and just like I’m done with, I’m done doing this on my own, I can’t do it. I you know, I work 45 hours a week, and I don’t have the mental capacity or the emotional, like, you know, I’m just drained. I don’t want to watch 25 stocks anymore. I just want I want to pay someone to do it. So yes, I think we’re seeing a lot of the, you know, a lot of the cockiness that came along in retail over the last few years as now throwing up their hands. And yeah, I see. I mean, I can’t I see it. I mean, I see the diversified portfolio last year of small caps and emerging markets, and, you know, whatever else, it was a brutal, brutal year. And I don’t think people I think that so many people have self educated themselves on the market, because they’re just

David Lundgren, CMT, CFA 1:12:48
self medicated or self educated.

Ian McMillan, CMT 1:12:52
self educated, sorry. And like buying whole just doesn’t get it done, like people expect you now to move on Edwin, what you see, like, I can’t get on the pod, like, you know, and I guess the podcast kind of helps Dave and I beheld someone accountable. If I get on the podcast and say, wow, we really like semiconductors, my clients are going to expect if they’re involved in semiconductors, and I just don’t think paying someone a fee for them to put you in a diversified portfolio cuts it anymore. Yeah, I work for debt and work for basically two decades in the financial planning space. And then you hit these pockets where people are tired of why did I pay you a percent last year? You know, for you to do nothing? Mm hmm. You just rebalance like you rebalanced into the same stuff. Yeah, no effort that takes no effort to do. Yeah,

Tyler Wood 1:13:55
I think this, this conversation is so valuable to CFT members around the world, because we’re not just talking about the markets, but also about changes to the infrastructure of the financial services system. And for all of the financial planners and advisors around the country who are thinking about how to better serve their clients, finding active money managers with a discipline, repeatable process to capture alpha and manage risk is certainly going to pay off hopefully through this next cycle.

Ian McMillan, CMT 1:14:26
I tell you, and I’ll go ahead. No, no, no, please,

Tyler Wood 1:14:29
please jump in.

Ian McMillan, CMT 1:14:30
I will say so back to the final point. The one point I was trying to make is I believe you’ve got to have risk management because you know, if you’re, if you are an advisor, and you’re going to ride it out, I mean, that’s a huge risk to your business as well. Right? This is a it’s a fee oriented business. This is right, it’s you get top line revenue based on your assets. And if you really want to risk that being cut in half That’s your client. That’s your that’s your business, not just your clients, that’s your business, that’s your employees. And we’re just we’re so now willing to take to take that risk of having a 40 to 50% drawdown, we want to preserve our clients, we have so many clients that went through it. Oh 809 and have spent the last 12 years building it back. Right, they were with someone else, and they came over, you know, after they had had the big drawdown, and they’ve worked and worked and worked and worked to get that back to where it was, and they are not gonna let that happen again.

Tyler Wood 1:15:38
Yeah. Yeah.

David Lundgren, CMT, CFA 1:15:40
Love it. I like that distinction, or, or bringing the two together the your portfolio risk, as well as your business risk as a money manager yourself. I mean, that’s brilliant.

Tyler Wood 1:15:52
Absolutely. Ian, you’ve been so generous with your time today. And I know, you and David and the whole team of CMTS, over there have a lot of work to get done. But as we as we bring this to the end, I gotta ask 2021 seem to be the year where it lots of speculative bids on Spax and IPOs, but also the cryptocurrency space. And I wanted to know if alternative assets like digital assets are part of your world, if you if you get clients a little bit of exposure, is it just market weight exposures?

Ian McMillan, CMT 1:16:29
Yeah, yeah, we can buy Cryptos we can buy, you know, direct, you know, whether it’s Beto or GBTC. Or theorem, obviously, I can’t like it is logistically impossible for us to go set up a coin base account for every single client. There’s also like, major compliance issues there. So yes, we are a big believer in crypto. And, you know, what, if you want to call it web three, we actually have so our firm has an office in decentraland that we have actually had a couple client meetings at. So you know, we don’t know, of course, they just said the big headlines. JP Morgan had now has an office in the central and would just like to raise our hand that our firm has had an office since August. Yes, so big believers in all of that, and definitely willing to get Cryptos it’s an asset just like anything else. And you know, hopefully with maybe more Kryptos in the future in regards to futures and things like that. But yes, with you know, we can do Bitcoin and Aetherium are the individual stocks. certainly willing to go there. Yes. A lot of a lot of clients love. Love to inquire about Bitcoin.

Tyler Wood 1:17:55
Fantastic thanks again.

David Lundgren, CMT, CFA 1:17:58
You know, we’re gonna see you in, in Washington at the CMT symposium. What are the dates? Tyler?

Tyler Wood 1:18:03
April 28 and 29th We’re coming to your neighborhood in hasn’t even been announced yet. But we

David Lundgren, CMT, CFA 1:18:10
I guess it has been

Ian McMillan, CMT 1:18:13
muted in person.

Tyler Wood 1:18:15
We’re gonna get the nerd heard back again. Yeah. mentioned. Yeah, it’s gonna be a live physical in person conference, but also, for all of our listeners out there around the world, they’ll be able to participate online as well, if they cannot travel to DC this

Ian McMillan, CMT 1:18:30
spring, I have been dying to go for you know, the last two years. So yes,

David Lundgren, CMT, CFA 1:18:35
I’d be crazy.

Ian McMillan, CMT 1:18:36
I cannot tell you I cannot tell you the significance that that event has had on my career.

Tyler Wood 1:18:46
Yeah. Tell us more. Yeah, do your best tell us

Ian McMillan, CMT 1:18:50
like the networking and right like so. Um, I met my boss, my boss, who is you know, my, my current boss that each other there and just all the other networking that goes on? And you know, the now the events are fun, the education is amazing. But if I may, yeah, the late night, the late night fun is actually the best part. Going out after the official CMT events have all been closed for the evening is really where the networking begins. And I cannot I just because you know, you’re a bunch of like minded people, and I mean, it’s so easy to get along. It’s Oh my God, and we haven’t seen each other for three years. This is gonna be amazing. Awesome, man.

Tyler Wood 1:19:44
Well, John Bolger once said the the best education that’s ever happened at will then MTA events, happens at the bar outside the ballroom after the session, when everybody gets to debate what the keynote speaker was talking about. I can’t wait to do that with you just a couple of months in. This has been fantastic. Really appreciate you taking time with Dave and I and looking forward to seeing you my friend.

Ian McMillan, CMT 1:20:09
Thank you guys so much for coming on are having me on I’m sorry. And gosh, I’m so excited to see you guys.

David Lundgren, CMT, CFA 1:20:17
Thank you Ian. Thanks. Congrats on your success. Congrats on the book. And absolutely looking forward to seeing you in Washington. All right, take care, guys. Everybody, talk to you soon.

Tyler Wood 1:20:41
fill the gap is brought to you with support from optima. In addition to candidate study of the official CMT curriculum, Optima provides a full video course on all of the material that candidates need to know for each level of the CMT exams. Each course is broken up into modules, ranging from 15 to 45 minutes, depending on the complexity and length of the topics being covered. Learn more@optima.com Good afternoon Bill Keller, her CMT CFA, how are you doing?

Unknown Speaker 1:21:20
Doing great Tyler excited to be here?

Tyler Wood 1:21:22
Fantastic. Today we are talking about the 49th annual CMT symposium, am I right?

Unknown Speaker 1:21:29
That’s right, we’re getting excited to relaunch,

Tyler Wood 1:21:33
so to speak. We’re gonna kick off on Wednesday, April 27. And the conference will run two days, April 28 and 29th. We’re bringing back all of the world’s technicians into a three dimensional environment. Enough of this metaverse. You know, the learning over the last two years has been fully virtual Bill, what can we expect for this year’s conference?

Unknown Speaker 1:21:55
Well, I’ll tell you, we’re bringing this year’s event which we’ve historically held in New York City, we’re moving into Washington, DC this year. So we’ll have a fresh new location.

Tyler Wood 1:22:05
Bill in terms of the learning what what can people expect from a CMT Association Conference? I mean, you’ve been planning this agenda now. 10 years in a row? What have been some of the highlights for you? What do you what are the key takeaways from a conference like this?

Unknown Speaker 1:22:20
Well, Tyler, as the as the architect of this event, we are really exploring what is some of the current themes in the market. And, you know, markets continue to evolve over the years. And you know, the interesting thing for our community is we try to explore some of those first principles are some of the early pioneers that developed a lot of the early technical analysis work, which is still the foundations that, you know, the current technical communities still still puts to work today, what we recognize is a lot of people in the industry use technical analysis to varying degrees and within their process. So we’re looking at all the different analysis frameworks, or all the different strategies currently in the market, but through the lens of a technician. So if you’re a fundamentally based shop, you know, we recognize that you may be using technical analysis to some degree in your strategy. But we’re also exploring different asset classes, different roles within the industry, different themes. Again, as I mentioned, you know, market structure evolves, financial products evolved, you know, even over the last, you know, 1520 years, we’ve seen a massive growth in ETFs. We’ve seen a massive change in market structure with changes an decimalization and fully electronic trading.

Unknown Speaker 1:23:37
trading, more global. Now we’re seeing obviously, you know, some of the big themes currently crypto and decentralized finance, and all these things impact that financial ecosystem. And you know, the fantastic thing about our community is it, you know, technical analysis transcends asset classes transcends strategies,

Tyler Wood 1:23:58
we’ve seen human behavior never changes, right, Bill?

Unknown Speaker 1:24:01
Well, that’s sort of going back to some of those early pioneers, you know, before computers, you know, that were charting prices by hand. Whereas now we have all these indicators, we have all this information process for us at our fingertips. And now it’s, it’s how you utilize those inputs into, you know, into the various strategies. So we’ll take a look at different roles within the industry, and what degree of the strategy or the process they’re involved in.

Tyler Wood 1:24:29
Fantastic Bill, I’m really looking forward to it. You know, it’s been a long time since we’ve met with our clients and our friends and our mentors and bringing the community back together is going to be really exciting. So for all of you watching, April 28 and 29th. We’re kicking off Wednesday, the 27th in Washington, DC, two day conference covering all things technical analysis, right here from the CMT Association. Thanks so much for watching. We’ll see you soon.

Contributor(s)

Ian McMillan headshot

Ian McMillan, CMT

Ian McMillan is a Market Technician at Client First Tax & Wealth Advisors.  Prior to his role at Client First Tax and Wealth Advisors, Ian was a Senior Analyst based out of the Washington DC area.  Ian has been in the wealth management/RIA arena for 11 years.   He spends...

Dave Lundgren, CMT, CFA

Dave Lundgren, CMT, CFA

Dave Lundgren, CMT, CFA is a 30-year investment industry veteran, with a focus on technical analysis strategies, particularly momentum and trend following. He has held both analyst and portfolio manager positions at several major investment firms, including Wellington...

Tyler Wood, CMT - 2022

Tyler Wood, CMT

Tyler Wood serves as Managing Director of CMT Association with the aim of elevating investors’ mastery and skill in mitigating market risk and maximizing return in capital markets through a rigorous credentialing process, professional ethics, and continuous education. He...