Fill The Gap Episode Twenty, with David Keller, CMT


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Most market participants have learned that the markets are driven by Fear and Greed. This month’s guest challenges that assumption with the idea that financial markets are ruled strictly by fear alone… Fear of loss, fear of missing out, fear of being wrong. Knowing that humans are not purely rational has helped academic research in the field of Behavioral Finance adapt theories to what technical analysis has proven to work in practice.

This month’s esteemed guest has an encyclopedic knowledge of the tools as detailed in the compilation he edited in 2007 for Bloomberg Press: Breakthrough’s in Technical Analysis: New Thinking from the World’s Top Minds, as well as a deep understanding of applied behavioral finance. Through his blog The Mindful Investor, Dave explores disciplined routine decision making under conditions of uncertainty.

As host of The Final Bar on StockCharts TV and serving as Chief Market Strategist at, Dave Keller remains closely attuned to today’s market dynamics. This interview discusses the current state of equity markets and the responsible approach investors must take to navigate periods of regime shift.



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 veteran 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 filled 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 refine the design of technical markets.

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. optimate 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

Good afternoon, Dave Lungren How are you on this fine August afternoon.

David Lundgren, CMT, CFA 1:58
I’m doing wonderful Tyler, I have my windows closed to keep the heat out of the office for a change. So now it’s you know, we’re in the heat of the summer here, but a little bit of freeze going on in the markets.

Tyler Wood 2:08
A little freeze in the markets a little steamy dog days of summer. Welcome to Episode 20. We’re in season two of fill the gap, the official podcast of the CMT Association. And Dave, what a pleasure to talk to Mr. David Keller this month. What did you think of our interview?

David Lundgren, CMT, CFA 2:25
Yeah, no, I think it was great. I mean, there’s so many great reasons to have him as a guest on the podcast, not just because of his involvement in the in the CMT Association as a past president in multi term member of the board. But his his background beyond that as having run the technical research group, that renowned technical research group at Fidelity, big position at Bloomberg, etc, wrote a book. So it’s another really esteemed guest, we’re fortunate to have on the program. And the thing that I really liked most about having our conversation with him is, you know, Tyler, you and I talk all the time with our guests on this program about the importance of behavioral, the behavioral aspect of investing, whether it’s technical and fundamental. And, of course, Dave is he’s known for a lot of things, but he’s become a bit of a noted expert in the field of behavioral investing. And so to be able to have him engage with us in a conversation on this podcast, was, I think, was really special because he shared with us a lot of nuggets in that regard. So that was a major contribution, I think, to the content of the podcast.

Tyler Wood 3:29
Absolutely. And I think for a lot of our guests finding out about their path into finance, and their path to technical analysis has always been a great way to open all of our interviews, Dave receiving degrees in, in music and psychology from The Ohio State University, it was great to hear the parallels that he can draw from that psychology degree in terms of not just running organizations, but also communicating what is happening in the marketplace. And the fact that he was so drawn to technical analysis, which provides a language and a set of vocabulary and tools to visualize what is happening with investor irrationality. And I thought his comment that we’ve all read, markets are driven by fear and greed. We’ve got fear and greed index is on on what’s happening with market sentiment, Dave’s contention that the market is exclusively driven by fear, fear of losses, but also the fear of missing out and that there’s just as much panic buying going on as folks fear the that that will miss the next rally to 100,000 on on Bitcoin or whatever other nonsense they’re out hunting for. I thought that was a clairvoyant sort of comment about what investor psychology feels like today, particularly in the context of, of these last couple of years in this current cycle.

David Lundgren, CMT, CFA 4:44
Yeah, I thought it was a really astute observation and coming from him, again, with his background and behavioral investing was was particularly valuable. And I think one of the things that I wanted to comment on in terms of Dave’s contribution to the content in the technical community, the other thing he does in this and his other day job is the he’s the host of the final bar which is, which is an end of day program on stock charts TV, you know, on that show, he does a great job of visualizing and bringing to life what’s happening in the markets, visa vie charts, but with a, with a bit of a behavioral overtone to it, you know, and just in really kind of keeping things guided and grounded in a very, very, an awareness of how just how behavioral, this whole endeavor of investing is. And in addition to that, he has a lot of great guests on the program, many, many of which are a few of which have been on our program as well. So overall, it’s just a great conversation with Dave and coming from somebody that’s made so many great, important contributions. It’s just it’s a pleasure to be able to spend some time with him.

Tyler Wood 5:40
So for all of our listeners out there, make sure to tune in to the final bar on stock charts. every weekday at 4pm. Also streaming on YouTube. You can check out David Keller, CMT, also at the mindful investor, his blog and service to investors throughout the industry. Let’s welcome Dave Keller, CMT, to Episode 20 of fill the gap.

David Lundgren, CMT, CFA 6:08
Welcome to fill the gap, the official podcast of the CMT Association. This month we’re excited to have Dave Keller as our guest as a CMT charter holder. Dave is a past president of the board of directors of the CMT Association, and a former subject matter expert for Behavioral Finance. Dave is also the former managing director of research at Fidelity and Boston, where he managed the technical research team as well as the legendary chart room. In his post fidelity days, Dave has been very busy to say the least. At a high level, he started Sierra Alpha research as well as a very successful blog called Market misbehavior. And he’s the chief Market Strategist, where he is a frequent host of stock charts, TV. Somehow in all of this, he finds time to fly planes. I assume he uses a lot of autopilot so that he can multitask. We’ll find out about that. So clearly, there’s a lot to talk about. Yes. Let’s get started. Dave Keller, welcome to fill the gap.

David Keller, CMT 7:08
Thanks, guys. It’s good to see you both. Great to see you.

David Lundgren, CMT, CFA 7:12
So usually Dave, what we’ll do is just ask our guests to just give a quick intro in terms of their their background. But in particular, what we want to know from you is how to how you went from majoring in music in psychology at The Ohio State, you’re welcome to fully immersing yourself in NGO career into the world of technical analysis. How did you make that transition?

David Keller, CMT 7:35
Thank you for addressing the Ohio State University with a healthy dose of respect, they wonder, I appreciate that. Let the record show, let the record show. No. So I always joke that I have a very non traditional career path of going from music and psychology into into investing into technical analysis. But, and I used to joke that I would I used to call my dad and try to reinforce how worthwhile those degrees were that he helped me pay for. Because, you know, look at all this great, so I’m doing but to be honest with you over my career, I’ve learned how much I’ve been able to draw on those experiences. And I feel like over time, I’ve learned more and more how it ended up somehow to be a good foundation for what I do. So to be, you know, to be honest, at the end of my undergraduate career I had taken so long, I’d waffled so much between music and other disciplines, I ended up with two full degrees from Ohio State after about five and a half years BA in music and a BS in psychology. And that sort of spoke to who I was, I’m a very right brain person, I always joke, I’m a right brain person and a left brain industry. So I very much think creatively. That’s much more how my mind is wired. And so the musical part of it was all about creativity, it was all about expression, it was all about working with other people in a meaningful way. And so for me, most of my career has been spent teaching people and a lot of the techniques I learned standing in front of a symphony orchestra trying to conduct them are the same techniques. I’m using now trying to teach a roomful of people how to do something or how to think about the market. So it’s somehow miraculously maps pretty well in terms of what I was doing there to what I want to do now. And then psychology was another interesting one as well. I mean, you guys know, as well as I do, how deeply rooted technical analysis is, in the psychology of investors, I always say it’s a technical analysis is a way of quantifying investor psychology. It’s the tools that you have available to help you understand how to get inside the head of all those other investors. And so when I learned early on in my days at Bloomberg, that there was a set of tools to help you understand how other people were thinking, and a language with which you could have a conversation with other people about market dynamics. It completely clicked for me and things like bond math and economic analysis and fundamental analysis, which I did not fully enjoy was nowhere there was nowhere near as engaging as As the world of technical analysis, so from then on I’ve, as you gave in the bio have had a lot of really cool experiences along the way at Fidelity, being in the leadership of the CMT association that have just helped me to reinforce those lessons that I learned early on. I feel like,

David Lundgren, CMT, CFA 10:14
yeah, that transition, or the the ability to leverage what you’ve learned in psychology has a clear direct line. I know you also fly planes in the name of your your firm is Sierra Alpha research. There’s a lot of tie in there as well. So I mean, there’s got to be a lot that you learned. We talked to Jeff De Graaff, probably 12 episodes ago, but he talked a little bit about flying planes. And yeah, and season one. Yeah. But he talked a lot about flying planes and how you can leverage the processes that you need to go through for flying a plane into the market. So can you flesh that out a little bit for us.

David Keller, CMT 10:48
My own experience with the relationship between flying and investing came when I was just getting started. And I was learning outside of the Boston area, I flew out of Norwood, which is about 12 miles southwest of of Boston. And as I was flying around with my flight instructor, you know, when you’re taking off and landing, it’s pretty busy us a lot of things to think about. But when you’re flying at 6000 feet kind of strain level, you got a lot of time to talk to the person in the plane with you. So we started chatting. And once he learned that I was, you know, a technical analysis expert, when I wasn’t learning to fly planes, I learned that when he wasn’t teaching people, he was actually day trading stocks when he was on the ground. And so we immediately started comparing notes. And it was so funny how much of relationship there was, because most of what you did in the plane was learned how to make decisions and not be clouded by the obvious emotional reactions you would have. And one of my favorite examples is the first time I tried to, they did a simulated engine cut out. So one of the instructors favorite tricks is to get you up, everything’s good, no problems, and they just yank the throttle out and simulate that your engine just completely stopped. And he says, Alright, you lost your engine. Now, what do you do? And I’ll tell you what you do you absolutely panic, I mean, the plane, and profit quickly, your heart goes in your throat, your pump, My palms are sweating a little bit just talking about the story. And it’s like this very visceral, physical sensation of panic. And so you’re trying to like the plane is going down, you’re trying to find this little piece of paper that tells you what checklist you’re supposed to follow, and you absolutely lose it and the instructor quickly steps. It’s like, alright, that’s okay. You know, let’s, let’s talk about what happened. And then three months later, they do the same exact exercise and you don’t even think about it, there’s no, you still know that something happened. But it’s not an emotional reaction. It is a very systematic, very disciplined direction. You say, Okay, I lost my engine, what are the likely causes? How am I going to check it and there’s this little figure seven on the dashboard, you follow to check all the things, and 90% of the time it fixes it, and you’re and you’re just Okay, so eventually, that’s a non issue. And so when you hear dramatic stories of, you know, Sully landing a, an airliner in the Hudson, well, that’s an impressive feat. He really was following the training that pretty much all pilots get, which is don’t think don’t overthink don’t over emotionalize, what’s happening, you go through the checklist, and then you make the best decision you can. And as investors, I wish I was that good about doing that as an investor, as as you are learning to fly planes.

David Lundgren, CMT, CFA 13:15
So you’re touching a lot on the on your process in the tools that maybe you use to guide you and make this whole, very emotionally charged process more systematic. So we’ll talk about that in a moment. But before we do that, you know, I can’t, I can’t help but want to spend some time speaking with you about your experience of fidelity. I mean, there’s so much history there. And there’s so much, you know, respect for the charts. I mean, the chart room in net Johnson, who unfortunately just passed you, you got to know him quite well. So tell us about your role there. What did you do there? How did you get to the technical group? And what were your responsibilities? And what was it like working with net Johnson?

David Keller, CMT 13:50
Yeah, I believe you went to Fidelity once or twice in your career. David, I

David Lundgren, CMT, CFA 13:53
was. So when When did you join? We we didn’t overlap.

David Keller, CMT 13:57
Unfortunately, that’s one of the things that I regret. And maybe as life goes on, we’ll have an opportunity to work together. But I joined in 2008. So it was after it was 2008 to 16.

David Lundgren, CMT, CFA 14:08
You’re much after me. I left in 2002 with a bunch of guys from fidelity to start a hedge fund. I thought I thought we were a lot closer. But But anyway, so flesh out your role for us if you would,

David Keller, CMT 14:20
yes. So that was one of the coolest calls I ever got was when when I got the call from Fidelity about interest in running the technical research team up there. Because for me early on in my career, you know, being a very aspirational, eager young technical analyst, I’m trying to think of where what would be like the place and I originally thought for me, it would be a broker, right? I’d be in the on the floor of some desk and be like the desk analyst and, but the more time I spent on those floors, which was much of the early part of my career at Bloomberg, the more I realized that’s not really my personality type that didn’t really speak to me. And the moment I started going to places like Fidelity and Wellington and State Street. And not that it’s a Boston New York thing. You guys, but but just the fact that the the feel of those firms it was much more thoughtful it was much more of a collaborative environment and less, much less of an antagonistic environment. And for me that fits with my, my personality very well. So going to Fidelity where it was all about, you know, we do well, when the entire firm does, well, we’re all trying to help each other. And the fact that technical analysis had a seat at the table with all other forms of analysis, and it was all and we talked endlessly about how does technical analysis relate to quantitative analysis? Where do we go? What are we putting into momentum model? Versus what discretionary choices? Are we making, you know, looking at individual charts? And what are the strengths and weaknesses of those different approaches? So I felt like I knew technical analysis pretty well. When I’m getting my CMT. When I’m at Bloomberg working with a lot of people, I feel like I really learn to appreciate the value of technical analysis in the investment process at fidelity. And if you mentioned losing a Nick Johnson recently, which is, which is tough eight, some of my probably favorite and least favorite moments at Fidelity, were meetings with the chairman, because they were incredibly stressful. I mean, talk about someone who was an encyclopedia of market knowledge, who was a very successful investor, a, you know, obviously very successful, wealthy man who’d been able to build I mean, just a visionary for what a financial firm could be, I mean, basic things like, you know, writing checks from your brokerage account, setting up an 800 number, so people could actually call and talk to the firm, those are all things that and many others, those are things that he created while he was there. And having him grill you on gold stocks versus us life sciences versus Brazilian oil companies. I mean that like it was a sweat filled discussion. And what we learned over time was to have what am I, you know, one of the analysts like Mark Dibble or Darren chat or one of those guys, and we would we would team up because just one person couldn’t withstand the barrage of questions from the chairman would have to have a couple of us there. So one person could always be off in a room looking something up on their laptop and coming in to answer his questions. But the teat looks into my time at Fidelity was awesome. It was it was working with some really successful investors, money managers who had really demonstrated not just that technical analysis should work, but that it does work. And you can tell because their returns were enhanced by the fact that they included technical analysis in their decision making. And I also I just to wrap up this part, my some of my favorite moments were when a new portfolio manager, someone who had been a fundamental analyst, they learned a particular industry or theme very, very well. And then they were, you know, usually the traditional path, they would be given some sort of sector fund to run. And then if they do well, with that, eventually some sort of diversified fund. And when they actually started running live money, that kind of go for a while, and then I mean, without a doubt about one to three months into their thing, I’d see them just kind of appear at my office door, kind of hesitantly not kind of coming. We’re like, Dave, can we just talk about the technical team, I’m having some trouble and portfolio manager a sent me up here and told me I needed to talk to the guys in the chat room. And I would just talk them Alright, tell me how you’re making decisions, what, you know how you’re approaching things. And we talk about how technical analysis can be a key part of risk management and in 2022, I think it’s been a masterclass in the value of technical analysis for risk management. And that’s some of my favorite memories of those conversations with portfolio managers on how to sort of upgrade their their processes using the charts.

David Lundgren, CMT, CFA 18:30
Yeah, no, I having, as you said, work that fidelity doing exactly that. And I, by the way, I can’t let you mention their names without putting a little more color behind. Darren Chabot and Mark dibble. I mean, when you talk about technicians CMT charterholders I actually don’t think Darren is a CMT charterholders but as technicians on the street, the ones you hear about are the sell side, rightfully so they’re out there, you know, on CNBC, and all these other things in there some very talented, super talented sellside technicians. We’ve had several of them here on the podcast, we hope to have more in the future. But you know, at the end of the day, if I had to point to who is truly the best in the business, you know, I it’s got to be frank to Shara Mark dibbles. Right up there. And Dan Chabot is right up there as well. And I, you know, a shout out to Patrick Torbert, who was there actually, when I was there, he’s still there. 21 years later, I checked out his LinkedIn profile. And he, you know, this is another CMT charterholders in an uptrend, he was just recently promoted to a technical analyst position on that team. So that’s fantastic for him. So really, really, really great work is done on that team, our offices back when I was there, were on the periphery of the chat room, which was just incredible, because you’d have these PMS come in, who just you know, it was particularly volatile moments they come in, and they would tend to just start rifling through the charts that are on these walls that have all the history of the markets. And so we’d see them there. We come out of out of our offices and kind of help guide them through the charts and answer the questions and whatnot. So you will also responsible for that chart room.

David Keller, CMT 19:56
So it’s still let’s talk about that. No, I mean, it was it’s an amazing physical repository for market history. And, you know, our meetings with the chairman would always be in the chat room, we would walk through that space and talk about market history. I had some really cool meetings in that room, guys like Walter Deemer. And, you know, walking through, he ran the technical team at Putnam in the in the 1970s, walking through the chat room with him talking about the 1974 low, what have you is that like, he was there invested in and how he approached it, how he got through it, what he learned from it. I mean, those were amazing lessons about market history, the value of contrary opinion, and just an appreciation for recognizing that there’s a repetitive nature, there’s a cyclical nature to life, but but certainly to to the financial markets, I think one of my favorite parts of what I was able to do during my time at Fidelity was incorporating more and more digital, you know, electronic capabilities to the chart room. So the chart room, in a lot of ways was, you know, it was it was a it was a wall size paper charts. And I remember talking to Bill Dunn, who ran the team in the 1970s, at fidelity. And he had a team of people whose job was basically to go through Barron’s and the journal and whatever other sources and go through accounting Ledger’s to calculate moving averages and ratios, and then hand update the charts. And the value of having a chart room was you actually could update the charts because you had so many people that were able to manage all that data. And that was a great advantage. I think, you know, what I when I think of you, Dave, I think of someone who combines the best of the subjective nature of technical analysis with the best of the objective nature, more the systematic nature of technical analysis. And that’s what I think what we were able to do, I think computers are really good for certain things. And humans are really good for certain things and thinking about how that chart room should, you know, display the strengths on both sides was a really cool exercise, a lot of to install a 13 foot plasma screen, which was a blast to try to figure out how to do that. And just thinking of different ways we could bring the charts to life and interact with them in new ways, was something I really, really appreciated. Yeah.

Tyler Wood 22:03
Dave, you you mentioned that Nick Johnson had an encyclopedic knowledge of financial markets. But you yourself wrote a book called breakthroughs in technical analysis, very early on in your career at Bloomberg surveying the global landscape of technicians bringing, bringing some light to a lot of different tools. I wanted to hear a little bit about your experience, learning from some of the best technicians, not just here in North America, but but elsewhere, around the planet and new techniques, do you still use any of the tools that you surveyed in that book? I know we’ve talked a lot about simplifying process and how you implement technicals. But it’s good for our audience to also hear that you started by taking a global journey around around the technical community and putting that book together.

David Keller, CMT 22:51
I often recommend people review my book way down the road. I rarely selfishly, say get the book because I, if I could do it again, I’m sure I would do it much better. As you mentioned, I did it earlier in my career. And it was, it was probably one of the it was a great time for me to do it. Because it allowed me to meet people like Connie Brown and talk to her about what you know, what do you think should be included? And how do you think about these different things? What are you looking at now, what’s changed? I edited the book in 2006, if I remember, right, mostly, and then it was published in 2007, I believe. And so, you know, that was sort of the, you know, recovery from the 911 into 2002. Low. And then we’re sort of you know, heading toward the financial crisis, we didn’t really know it at the time, it was more just a cyclical bull market and things were kind of working again, it’s all about what happens when we retest the 2000 highs. That was like the theme, I think, for a lot of investors in the in the back of their mind. So talking with a group of technical analysts about what would be meaningful to them, and what kind of stuff they were paying attention to is really helpful and how the craft had evolved, was really good. So you know, Connie Brown was a was a good one in there. Tom DeMarco was the first person I asked and he agreed to to do it. And I’ve worked with Tom a great deal. At my time that Fidel again, I listened to your interview with Katie Stockton, who we all know and appreciate very much. And I know she’s worked a lot with Tom and his work as well. Early in my career, I was very deeply intimately involved with Tom’s work. And so I’ve not met anyone yet who has thought as deeply about price action and price dynamics than Tom, maybe Larry Williams had put in that same bucket of a small group of really thoughtful, you know, detail oriented, you know, thinking about every tick and what it means that type of people. But it was great talking with him and thinking about what he would want to highlight and where and, you know, in my book, it was more aggressive versions of the indicators he had been using for a long time and how to tweak some of the settings for it. With Connie brown it was, you know, her sort of ultimate oscillator sort of this, you know, one oscillator to rule them all to think about, you know, where things were at. And so my takeaway from from editing that book was, in a lot of ways it was less about some of the individual techniques but more reinforced Shouldn’t the fact that my journey and I don’t remember exactly when I got my CMT was right around that time though, if I remember a, it was that my journey as a technical analyst is not done now that I’ve sort of learned the toolkit and started work people it’s like, it’s going to continue involve people like Tom DeMarco and Connie Brown and Robin and mesh and Ted Hearne, and others that wrote in my book, were still evolving their craft decades after they’d started it. And it was great inspiration for me now, years later, it continue to do the same.

David Lundgren, CMT, CFA 25:29
I’m gonna have to reread that book again. To David, row of heavy hitters, right, they’re gonna have to reread that, again, is a great book to maybe carry on from Tyler’s question, what what is there that you can point to this new today in the field of Behavioral Finance? I mean, it’s been around for a while, called What, like the 1970s is probably the right, yep, that’s a launching point. And we’re familiar with a lot of the biases that are now inherent in investing, etc. But have you have you can you point to anything that’s more recent, that’s probably underappreciated in terms of work that’s being done in this field.

David Keller, CMT 26:04
So you know, I’m glad you brought up behavioral finance. And for me, I realized early on, I think it’s from my psychology background, the moment I learned about technical analysis, I immediately connected it to psychology, and particularly behavioral psychology, it’s all about decision making. And I found that charts were a way not just of helping people make good decisions, but help people avoid making bad decisions. And when I was learning technical analysis at the beginning, which was like 2000 2001 2002, it was all about people that were able to recognize bad mistakes, right? Recognize when they were wrong, admit when they were wrong, rotate their portfolio recognize that conditions were changing and unwind from sort of how we’re a pre wired to make bad decisions. And I think that’s what behavioral finance really does, It codifies, and it categorizes the ways in which we are wired to make decisions in life in general, but also with our investments. So a number of years ago, I sort of decided on a personal vendetta to reinforce as much as possible the relationship between behavioral finance and technical analysis, I think that’s the future of technical analysis. I think there is a lot to be done certainly with quantitative models that use technical analysis. But for me, the markets are not a mathematical problem to be solved. It’s a very human problem. And it’s all about your thinking and how to address your own challenges with your with your own thinking and benefit from the fact that other people are not so enlightened that they’re continuing to make bonehead decisions, because they’re, they’re wired to do that. So I think the future is more and more closely relating what Behavioral Finance has done, we think about Professor Andrew Lowe and Carol ostler and others who have, you know, who have written some foundational work that demonstrates how investors are irrational how people make poor decisions. I think connecting that more and more to the discipline of technical analysis is fantastic. For me, what it’s done is reinforce what a lot of previous technical analysts used and deeply believed in, but didn’t have the tools to back up why they worked so well academically. And I think now we are more more able to do so. So I think the fact that it’s becoming more widespread, I think the fact that investors overall are becoming more and more open to the fact that they make bad decisions and that they need a toolkit to be able to address it. I think it’s pretty powerful. I think that’s how the discipline starts to evolve from here. It’s worth mentioning, by the way to remember that technical analysis, I think was very sign at a at an MTA conference years ago made the point that technical analysis predates fundamental analysis. And its modern form, right technical analysis, really modern technical analysis was early 20th centuries, like Dan, and Dow and others, Elliott, who are trying to create a toolkit to empower investors to have any sort of edge to compete against these big, you know, money conglomerates that were sort of the Masters of the Universe. Fundamental Analysis came later after the Great Depression 20s 30s 40s, which a lot of the regulations were still abiding by were created a little bit later. So technical analysis came about as a way to empower investors to have an edge and I think it’s still very much the case today.

David Lundgren, CMT, CFA 29:09
You know, Dave said, shame on me for this. But um, I forgot to mention in your intro, that you are also a former adjunct professor at Brandeis University, having taught technical analysis at Brandeis. And, of course, I took over that role from you as well. So reflect on that a little bit. Was there Was there something that you learned in that process, that the ability to repeatedly teach these lessons is, is one thing and I have another question for you that when you finish up that one,

David Keller, CMT 29:34
arguably my best decision as a an adjunct professor at Brandeis was finding a very capable person to take over it. Take it over after I was done. You outperform me significantly. Do you took that to another level, which was great. I, Charlie Kirkpatrick started that course at Brandeis and work with Carol ostler Blake LeBaron who’s Dima Barron’s Asana famous hedge fund manager, they’re both professors there so there’s a very much a an appetite for technical analysis. And so I shadowed Charlie for one semester. And we kind of taught the course together. And then I took it over from him. And, you know, for me, it was, it was really a powerful lesson for me in terms of how I would want to structure an entire learning experience at technical analysis, my time at Bloomberg had been very, you know, one off types of things, I would teach someone about relative strength, and I’d come in for an hour and leave you with a bunch of ideas, and then I go, but this was, you know, you’re going to spend a semester with these students, and your job is to have them come out the other end, recognizing that there are inefficiencies in the market, recognizing that the real life experience of the markets is very different than the textbook experience of what the market should look like what they had been taught up until my semester. And I don’t know how the course evolved when you were doing it, David, but for me, it was the it was basically the last semester for the Masters students. So it was you know, Ma’s in economics and like MSF students, I think we had as well. So it’s a very answer, I feel like my whole first class was unwinding a lot of what they took to be true. And it was, look, this is what the efficient markets hypothesis says, This is what my experience has been right, you will find when you leave this place and go into a firm, the world is very different. And here’s how it actually is. And I, I found it reinforced for me how practical of a toolkit, technical analysis is, and one of the stories I would share with my students will just share with you now I when I was studying for the CMT, which I think was like mid 2000s, early 2000s, my wife was studying for her CPA exam, at the same time, we didn’t have kids, we lived in New York, tiny little apartment, we’d sit at our little kitchen table, and we’d be studying at same time. So CPA, the Certified Public Accountant, she would you know, after a night of studying would be completely broken. Like, I’m studying law, which I’m never hoping to do, I have to study consulting, there are four parts and you had to pass all four parts. She was doing, you know, basically, tax compliance, but she had to learn all this other stuff that had no practical application for her at all. And it was super frustrating. I was like patting myself on the back for taking this amazing exam where I would be studying something, I go into the office the next day, and literally take what I’ve learned and applied, I’d be studying the dollar and looking at the chart of Toyota and looking at us versus Brazil, and I would be literally applying John Murphy or Martin Pring or whatever. And I was I was improving my thinking improving my decision making process every day. And so between that CMT process and what I learned teaching, it was just reinforcing the practical nature. It’s such a practical, powerful toolkit, that is one of the great benefits of technical analysis, we have the ability to not overcomplicate the markets, we have the power to simplify market dynamics. And and that’s where I hope we should be focused as a as a discipline and as an organization, for sure.

David Lundgren, CMT, CFA 32:42
Yeah, I love that, that observation and the practicality of it in the fact that you were able to actually learn that the curriculum and then go to your office, the very next day put it to work immediately. That’s, that’s powerful. It was one of the one of the messages of this of this podcast from from Tyler and myself, the point that I wanted to make, in addition, about teaching at Brandeis was, you know, we didn’t really consult on this, but you and I both ended up with the same decision that our first class, we’re going to spend the entire class, not even talking about technical analysis, just really knocking down the barriers between how people perceive technicals, and what we how we perceive them in doing what we can to to knock that barrier down. And one of the things I did was I made the observation that, to your point, that technical analysis, formally has been around longer than fundamental analysis. And Charles Dow was sort of the grandfather of technicals, as we know, in the late 1800s. And he made the he used the analogy of the ocean to represent the various timeframes of trend like tides of the long term, the waves of the medium term and the ripples of the short term. And it was a very clean graspable concept in terms of how to understand how these trends can coexist and, and kind of go back and forth on top of each other at the same time. But it turns out that in the 1950s, Paul Samuelson wrote the what is one of the probably one of the best economics books ever written in very aptly named economics. In that book, he actually used to address the what he perceives to be the reality that the markets are efficient in some ways, but in random, and in other ways. He used the analogy of an ocean after Charles Dow used them, you know, so the whole point was that it’s not it’s not that it’s different, or that there were one is right, and one is wrong, it’s just a different way of filtering the same information. And the real power comes when you as you and I can attest to when we work with folks that fidelity is bringing them together. Right leaning on both don’t change who you are, just use these other tools to augment to sort of fill in the gap. No pun intended of your process using technical so you know, really powerful message. Okay, so thanks for bringing that up. How about we talk about current markets, maybe how you perceive them today, what tools you’re using to measure them and what are we in Vienna, clearly in a bear market? Is this a cyclical bear that which means that we’re close to done or is this like a crisis bear where we have another 20% to go?

David Keller, CMT 34:55
So I have the great benefit now with my role at stockcharts and hosting a show on stock charts TV, I have a number one, we have a great group of contributors, many of which are CMTS, as you guys probably know, you know, sharing insights. But we also have a number of guests coming through stock charts, TV every day that I get to talk with, you know, most of them. For me, I guess my toolkit, how it’s evolved over time is basically settled in on a fairly straightforward set of tools. And I think for me, my time at Bloomberg was spent teaching people how to use technical analysis, who would be an FX Trader or someone just starting a hedge fund, who knew that they wanted to use technical analysis, but was just trying to improve how they were doing it. So I was teaching them how to do it at Fidelity was working with portfolio managers to integrate the charting capabilities into their own thinking, right? How do you know if I have 20? Fundamental names that I like? How do I incorporate this technical input as well? And how do I make a decision to to position myself effectively, for me, my toolkit is fairly straightforward. I focus on on price, I focus on trend, I would consider myself a trend follower. And that my main goal, as an investor everyday is three things, identify trends, follow those trends, and then anticipate when the trends are exhausted. And that’s it everyday, I’m just trying to answer those same questions over and over and over with whatever charts I have in front of me. And I’ve settled in on a mix of some systematic, more rules based approach. So you know, most of my own money is run on a very simplistic momentum model. And that’s kind of it. And the same with my process that I talked about. It’s it’s looking at a traditional momentum model using weekly data exponential moving averages, three timeframes, long term, medium term, short term, what are the trends, and I do that for the s&p 500, and for a number of different ETFs asset classes as well. And the long story short is for most of 2022, from about mid January, on all three of those timeframes have been bearish for most of the time, occasionally, the short term model has turned positive and is wrecking, you know, sort of those bear market rallies. But overall, it’s still telling me that this is a risk off environment and to be approaching it that way. I always tell people bear market rallies are through they are they are swift, they are sudden, and they are seductive. And and that is what all of them have been. They happen very, very quickly, it is so easy to get drawn into the strength of the move, and cruiselines just ripping to the upside. But you have to remember, these stocks are still down 50 60% It’s still not a great market. And so while you’re seeing some signs of life chart charts, like we’re recording this in sort of mid late July, you’re seeing things like you know, Netflix start to rotate higher, some banks start to rotate higher. But overall, I would still label this as bear market rally until you get enough accumulation enough sign that it’s it has staying power to convince me that this is a rotation higher. So overall, I still approach this in a risk off environment. And my guess is that the low for the year isn’t in yet.

David Lundgren, CMT, CFA 37:52
Okay, that’s interesting to know, interesting to think about not to know because we don’t know, I posted on Twitter and LinkedIn a while ago about the nature of bear markets and how they’re basically like the good cop, bad cop movie scene where you’re sitting there in that little cement room with no windows, you kind of sitting in a chair that’s that’s bolted to the floor. And you have the good cop sitting there going, hey, you know, we’re on your side, would you like a candy bar? Would you like some soda just trying to soften you up and then the bad cop comes in and grabs you into submission? And unfortunately, I confess your sins. And that’s what that’s what bear market rallies are the good nominate scenario. And I think we need to be mindful of that. Can you take this opportunity just kind of flesh out that moment that bear market rally, everything’s triggering everything looks great in the short term, behaviorally, what’s going on? In our minds in that moment? Why don’t we get stuck in sort of jumping in on these bear market rallies?

David Keller, CMT 38:42
So it’s sure I would, I would argue I was taught early in my career that the market is driven by fear and greed. So the market goes higher because of excess greed, and the market goes lower because of access to fear. And I believe that so strongly that when we created a technical indicator, when I was at Bloomberg, we literally call that the Bloomberg fear and greed indicator, because that seemed like such an apt way to describe the dynamics that we’re trying to capture. But what I have come to believe over the my career is that the market is driven 100% by fear, it’s fear of missing out, it’s the FOMO on the way up, it’s the fear of losing everything. And it’s not just the fear of losing a little or the fear of missing out of a little it’s the fear of missing out on Bitcoin going to 100,000 tomorrow. It’s the fear of the s&p going to 10 tomorrow. And that’s the level of extreme panic that we have about market movements. And I think that’s what’s fueled excess volatility. I think a lot of that is driven by the number of newer investors that have been drawn in the rise in social media. So we used to talk about the anecdotal sort of watercooler discussion about people being nervous or excited. Now you can watch it real time as people on Twitter are panicking or getting super excited calling for like these ridiculous upside or downside targets on a whim. And so I think you can read that how quickly the emotions will take hold. The reason why bear market rallies are so seductive This because we don’t like to lose and we are fearful we panic at the idea of losing money. And we especially now, panic at the idea of not participating in the next game, this, this fear of the missed opportunity is palpable, and it fuels people’s decisions so quickly. I think the other thing that comes to play is, is confirmation bias that fuels these rallies very, very quickly. Behaviorally, confirmation bias, as you guys know, is basically I’m bullish. And then I start gathering information, right, I make my decision first, and then I start gathering information to try to validate and all I end up doing is confirm what I was already going to do. What I have learned from the Technical Toolkit is that you should be looking at it with a clear lens, an unbiased opinion every day, and I have what I call a morning coffee routine, which is literally the same set of charts I look at I try to approach it not as Alright, we’re clearly in a bear market in 2022. Now, what are the charts saying it’s all right, let me start clean. Let me start with this weekly chart of the s&p, what am I seeing every day? It’s reinforced to me, all right, we’re in a structural bear market here. Okay. In the short term, we’re seeing some strength, okay, these are the sectors that are working its energy versus everything else. But I’ve done that with a fresh eyes as much as possible every day. And every week, what a lot of investors forget to do is keep it unbiased like that. And you think, Alright, we’re gonna rally at some point. And the moment you see some evidence that says, Yep, it’s a rally, it’s like, Great, okay, now I can go in, and you’re drawn in so quickly, because you’re already programmed to look for that. You’re just looking for the validation from other people. And so the echo chamber of Twitter and social media, I think, is helping create, you know, bear market rallies that are pretty significant. You made the point that David, I think it was in the in the episode with Katie talking about the biggest down days tend to be in bear markets. And the biggest updates tend to be in bear markets, too, if I remember, what you Saturday. And that’s exactly what happens when the the big moves tend to be in the bear market phases, it tends to be noisy. And again, I think charts and technical analysis are a great way to not get drawn into the seductive nature of a short term bounce, but take a step back, just like we did at the fidelity charter. And it was, alright, let’s take a couple steps back from the wall and look at this overall trend and how it’s evolving. I feel like a lot of investors are way too close to their monitors and focusing on the short term, and you need to take a step back and think about the bigger picture more now than ever.

David Lundgren, CMT, CFA 42:20
Right? I don’t know if you saw there are many reasons being cited for the current rally that we’re in since we bought him a couple weeks ago. But the reason for the rally was when Merrill Lynch came out with their investor survey, people are invested the most bearish, Lee that they’ve been since the global financial crisis. And so that contrarian indicator, is the reason everybody piled in, meaning everybody else is wrong to be bearish. So I’m gonna pile in because it’s wrong to be bearish. I mean, that says it’s like a death spiral. So it can’t be that easy. Right. So what do you what do you think about that? I mean, any thoughts on that?

David Keller, CMT 42:53
Well, ya know, and I saw that, and I think, you know, with sentiment data, I tend to think of things price, then breath and sentiment, that’s sort of my macro order of operations, it starts with the price. So if I know nothing else, let me look at a chart of the s&p or the NASDAQ and start with that. After that breath indicators are very important and seeing where we’re at now, relative to previous cycles. Really, really helpful. And when you think about breath, is the breath really negative? Absolutely. Right? Has a lot of stocks gone down quite a bit, definitely, at times, single digit names in the s&p 500 above their 50 Day or their 200 day moving averages. That’s pretty significant. Here’s the problem, though, in 2008 2009, those indicators go down to single digits and remain there for six months, right? Because things are so negative, that it just kind of continues, right? It’s and while shorter term tactical bounces have had that same characteristics, it also looks a lot like the beginning of a much deeper, much more painful recessionary bear market. And I think, while I can’t say for sure, that’s what we’re in, I would say there’s a nonzero and probably legitimate risk, that that is something we’re faced with here in the coming months, and it’s enough of a risk for me not to be jumping into things. Same with sentiment. If you look at sentiment indicators that are very negative. That’s absolutely true. You can see that with investors intelligence, the AI survey, which is when I follow pretty closely, they’re all showing extreme levels of bearishness, which is true but you also can have extreme levels of bearishness that persist when the market is ruptured, which we’ve absolutely had. So I think a lot of people when they do sort of a deep analysis of what we’re seeing now you’re comparing it to the market since 2009, essentially, and you have to remember, you are limiting your observations to a secular bull market and cyclical brief pullbacks within that if you go to deeper history, you’ll find there are a lot of times in market history where sentiment can be very bond out. Breath indicators can be very negative and they can persist. And again, while I can’t guarantee that’s gonna happen, there’s very much a possibility. And that’s where I think you need to think of in terms of probabilities. There’s a probability of that happening. So how am I going to position myself if that ends OPM the reality.

Tyler Wood 45:02
Dave, you bring up a really interesting point about, you know, we’re all maybe using the same tools, but with a different level of experience. Early on in the MTA decade ago, I came in with a corporate finance background, it was just trying to understand what what these practical tools meant. And Ralph Backupper was in the office and I said, Oh, well, on this chart, you know, momentum is oversold. So it’s a buy, right? And he said, Oh, Tyler. Think about momentum, as you know, a beach ball and it gets oversold, you’ve plunged that below the surface of the water, and you’re holding it down there. And then you let go, experience will tell you, the beach ball flies back up and pops out of the water. Like, if you let go of that beach ball that stays down there. First of all, you’re gonna be asking, Where the hell did I get this beach? But also, that’s information, right that you wait until the oversold conditions are leaving before you jump back in. And so when you talk about making a contrarian investment, because you just learned about the AI survey, and it’s overly bearish, that’s a new person coming to a tool without the experience. I mean, you just you just referenced multiple cycles. Do you see a problem with how many folks have access to technical analysis tools, but without any idea how they’re supposed to be used responsibly?

David Keller, CMT 46:20
Yeah. So wow, that’s a loaded question. So I will answer it two ways. My short answer is, yeah, I mean, I’m concerned by… not that people have access to information. I think that’s fantastic. And the fact that if you think of the charting capabilities that we have now to apply the craft and learn the craft versus doing it by hand, 50 years ago, I would much rather have what we have now. And the fact that it’s a level playing field, and that everyone has access to that sort of capability, I think is very, very good thing. But I think there’s a responsibility to what you do with that information. And that was one of the reasons why I got the CMT. And I’ve kept my CMT, and find value in talking to people that have a CMT, because a big part of what we do, besides having a very structured way of learning the Technical Toolkit. It’s also a set of ethical standards that we all agree to abide by. And we agree that we’re not going to disparage other people’s work, and that we are going to apply things in a certain way that we’re we have a responsibility to our shareholders or our clients that is very real and defines how we spend our you know, every moment. And I find a lot of people that don’t have those ethical requirements that they have to abide by. There’s no guarantee that they’re that they need to do that. And for me, that’s a really important responsibility that we have, as technical analysts and as financial professionals that I wish was more widespread as more people have access to these tools.

The other way I’ll answer your question, though, is to celebrate your early interaction with Ralph Acampora who I think has been a mentor to most people in the organization. But I will tell you three early mentors through the CMT association that were pivotal for me. The first was Ralph. And I think what’s great is the fact that we can ask people like that questions. The fact that you had time with Ralph to ask a question about that, and have him teach you is why this organization is so power is so meaningful and so beneficial to all of us. My first conversations with Ralph were pivotal, not just for learning, technical analysis, but learning a way to go through what I consider to be a very stressful line of work at times, which is trying to figure out what the market is going to do. And do it with a great amount of levity and humility. And just recognizing that this is fun, and let’s treat it that way. He, Ralph laughed a lot. And he took me aside at a cocktail hour at I think one of those first midwinter retreats down in Florida, I want to guess. and said that, you know, Dave, I really think you could be in a leadership role in the MTA. I’d love for you to do that. And that began this process that led to me eventually being the President of the organization, which I’m super thankful for. So Ralph was a was a great inspiration on how we approach things, but also just encouraging young technical analysts to move the discipline forward and to help the organization. The second mentor, I would say, and you didn’t ask this question, but I’m answering anyway

Tyler Wood 49:15
No, I love it, keep going!

David Keller, CMT 49:05
His name is Jeff Weiss is the second one another CMT and he was at Jessup and Lamont is now at ClearView Trading Advisors. But in that same sort of era as Ralph. Jeff and I used to have breakfast, probably once a quarter in New York, and he would meet me, we’d go to this kosher pancake house in Midtown, and we would talk markets. And true story! My daughter who’s now 14 arrived, we got I got the call from my wife when I was having breakfast with Jeff Weiss. It was one of the funniest moments I will never forget was he you know, we’re talking about stocks around 7:15 the morning my cell phone rings, he’s like, Oh, that’s it! That’s the call ! and I got up and I ran out and he had the whole restaurant singing this like birthing hymn for me as I’m running down to pick up my wife. Um, he nevertheless lets me live that down. But Jeff was super great about just meeting. I mean, I asked him Can we meet regularly? He’s like, Absolutely. Let’s go get breakfast and I talked to him about trend lines and how he thinks of things. And what about now and what are you doing and that was super helpful. The third one was I called Mike Epstein out of the blue. This was my favorite one. Someone said, the MTA at the time is super open. All of the old members are really open. Just give them a call. And I’m like, Yeah, right. I called Mike Epstein. He had an office at MIT. He was teaching up there with Andrew Lowe, and I literally called him out of the blue was like, Mike. I’m a New CMT. I’m at Bloomberg, I’m coming up to Boston, you know, can I meet with you? And he’s like, Oh, absolutely. Come on, in. I spend like a couple hours with Mike Epstein. In his office, he bought me a sandwich. We talked about the markets, the CMT, the MTA, you know, just thinking about market dynamics and trading and his experience on the floor. And I left there just energized about this organization that was so open to helping you know, someone like me learn more and more so. So for me, I think your experience was Robert, just one of 1000s, if not millions of experiences that a lot of younger analysts and others have been able to have through through the organization.

David Lundgren, CMT, CFA 51:03
I connected with Jeff Weiss, during COVID. and whatnot, it turns out that my son had to move out in New York, because of COVID. And he ended up moving to New Jersey when he moved to the same town that Jeff Weiss lives in, which happens to be Wycoff, I believe in New Jersey, kind of crazy.

So I have a question for you on systematic investing in how you think about it. But before we do that, I want to just quickly circle back to something we talked about earlier, because I think it’s it’s an important thing to highlight, you touched on it, but I want to flesh it out a little more. In in 2008, the percentage of bears in the survey in the AI survey spiked to very high levels of bearishness in early 2008. Yeah, so when we think about bearishness spiking during the global financial crisis, most people would think well, that’s probably like November, December, or maybe March of 2009. At the bottom. It wasn’t it was now earlier on Spike early on, in the red figures that you cited, the percentage of stocks below the 20 day moving average spiked in March of 2008. Yeah. So that’s right, I just want to I want to point that out to people that we have a similar dynamic today where people have been bearish for a while the percentage of stocks below the 20 day average is very high right now, in under normal, you know, cyclical bear market conditions that typically is the the seeds that plant the growth of the next bull market. But until we see evidence that that’s happening, we need to be mindful that as Tyler alluded to, the ball may have no air in it, because we’re not really getting much response from these very persistently oversold conditions. So I just want to highlight that that’s its context. It’s not just the signal, its context. And again, to Tyler’s point is you have the context, you have the signal, what’s the market actually doing with that data. And as it stands, right now, it’s kind of like a wet blanket.

So systematic investing. So one of the analogies I use when I’m when I’m describing why I’m not 100%, systematic, you know, I kind of go back and forth between discretionary systematic, it, but it’s a very small, very isolated window of time where I do become more discretionary versus systematic. And I think the analogy holds with when you’re flying a plane, and it’s the analogy that I use it when you’re on autopilot, and everything’s going fine. And conditions are normal, which is 99% of the time, you just take your hands off the plane, and like you probably multitasking blogging on stock charts, or whatever, whatever you’re doing with the planes going along. And you’re perfectly happy to let the autopilot work for you. Because you’re leveraging the system, you’re leveraging the tools and everything else, no reason for you to have your hands on the controls. But if all of a sudden a bird goes through your jet, or a plane comes right into your view or something, you can’t just say, okay, autopilot keeps, you have to put your hands on the wheel, because there is no system that knows how to operate in those exact moments. Because every every one of those moments is different every single time. So sometimes, you have to put your hands on the wheel, navigate through that turbulent time. And then once you’ve can determine that things, the skies are clear again, and everything’s back to normal. You can go back to autopilot. First, what do you think about that? And then if you were to assess where we are today, do you think we’re in a moment because like, for me, personally, I have my hands on the wheel, I have my hands on the on the controls. I don’t have a systematic way. Now. I can’t wait to go back to systematic because it’s a lot less stressful. But I think we’re still in that moment where it’s just like we’ve talked about the data points right now that are just so contrary with each other right now. And it’s like, it’s really difficult. Even in the modeling process. It’s hard to say, what’s next. So I feel we’re in one of those UNbacked testable moments where you just have to have your hands on on the controls. What do you think?

David Keller, CMT 54:23
I think the metaphor that you just described there is probably even richer and better than you know, and I would say, beyond that, like, what what happens when you’re actually flying straight and level when you’re sitting there, you really aren’t paying, you know, you’re still paying at least some percent of your attention on the plane into conditions at all times. Right? You’re glancing through the instruments, you’re making sure that it’s reinforcing that everything is still okay. You’re monitoring the handling of it very disciplined process for you know, looking across the horizon and making sure that there’s no traffic or obstacles or things like that, because a plane on autopilot can do a lot of things. I mean, an airliner can do much More than the planes I’d be flying. But you know, it can do a lot, but it can’t do everything right. And there are times when you do need to step in. And when you will recognize that something’s going on before the plane is smart enough to tell you that something’s going on precisely more more, you know, sophisticated avionics, probably better equipped to do that. But for the average person, it’s still you know, you still have to interact with it. And also, even when things are stream level, if you’ve ever taken a commercial flight, which pretty much all you have, you know, you’re just kind of flying, but all sudden, there’s just this big bump, there’s just this turbulence out of nowhere. And pilots are always talking to compare notes on where those air pockets are, but it’s not fully predictable. Sometimes it just happens. And it just kind of comes out of nowhere. And then you need to be there. And sometimes the plane is going to weather it, okay. And even if you don’t touch the controls, you kind of get through it. But you put your hand on it very quickly, and you say, Okay, now I’m in control, hold on a second, what’s going on, and you make sure that you navigate through it. So I consider what we’re seeing right now, it’s a lot of turbulence, right? It’s not just a, you know, just kind of straightforward thing is this a turbulent period where all of a sudden, there’s some hiccups. And while a lot of stocks are not necessarily going making new lows, they’re not really making new highs, yet, they’re sort of in that, you know, sort of in that wilderness where it’s unclear what the next move might be. And those are exactly the times when you want to, you know, sort of anecdotally put your hands on the control and and see what happens. For me, I always try to help people to find things. But what I call the line in the sand for any particular position, if you’re looking at a holding a stock and an ETF, even the broader market, what line could you draw on the chart that no matter what if this line or this signal occurs, I agree to revisit this. And that is a very simple kind of systematic way of unwinding your emotional attachment. If you watch a chart tick by tick, it is impossible to not get drawn in at least some degree to the emotion of seeing those movements and get really excited when things move higher and get kind of nervous when they don’t. But if you draw lines, and you use a platform like stock charts, or whatever to alert you, hey, this was triggered, you need to look at it, the plane will tell you you’re experiencing turbulence, you need to put your hand on the control. And I think investors need to be doing that sort of thing, particularly in this sort of environment. Great way to manage risk and identify opportunities when you’re not watching every position like a hawk every moment, press rewind and listen to that again, because that was super powerful. Seriously, that’s, that’s when we talked earlier about the practicality of technical analysis, these notions in technical analysis that are undeniably true, their guarantees are no guarantees in this business, except the fact that a stock can’t go from 10 to 100, without first going through 20. That’s right, right. That’s right. And so that’s a powerful statement. But it’s also a guarantee, right? You can’t make guarantees like that, in the fundamental world, a stock can go up from 10 to 100, for for many different fundamental reasons. And you may or may not agree or disagree with them all along the way. Right. But the point is, you can’t deny that the stocks above 20 So if you can go to your your investment universe, we’re in a bear market now. And you can I tell us the checklist a trend change, and this is what I used to teach at Brandeis actually, what you just described that trendline, and I’m just gonna stay bearish or uninvested below this trendline. And but once it gets above, I have to start thinking about it. That’s actually step one in the checklist. And as long as you can, you know, stick stick to that discipline, I

David Lundgren, CMT, CFA 58:12
think that’s a super powerful point. So on your approach, do you stay systematic throughout the whole thing? Or do you actually put your hands on the controls? And if you do, put your hands on the controls? What are the things that you look for as specifically as you’re willing to divulge that say to you, okay, take your hands off the controls, everything’s fine. Again,

David Keller, CMT 58:31
Here’s what I do to be honest with you. And I guess I’d have to answer two ways. You know, I mean, my main day job is to educate and empower individual investors and financial advisors to make better decisions using technical analysis. That’s what Chip Anderson, the founder of stockcharts, asked me to do. And that’s what I’m, that’s what I’m trying to do. So, in this environment, what I encourage people to do is there are times when you need to just identify the trends, follow the trends, and then anticipate when the trend might be over. I think we’re in that potential third window. We’ve done enough. Now I feel like, regardless of what you’re looking at whether we’ve broken the key trendline whether, you know, maybe China was a good example, we’re clearly starting to break higher even before the US markets did enough has happened where you say, Okay, this might be something different. That might be what I call a, a change of character on the chart, right? Things might be changing from the phase, we had been in a distribution phase to more of an accumulation phase. So let me let me lay out right now, what are the guideposts that I would I would determine, and so I think this is the time when you’re taking control and you’re maybe, you know, taking short positions off, you’re you’re more neutral, and you’re waiting to see which way this price because I think the chart of Netflix or Goldman or the s&p or the NASDAQ could really break either way at this point, and we’ll look back and see that it made a ton of sense, but it’s just it’s not 100% clear at this at this moment. Now in my own portfolio, I do what’s called the core and explore quartz sort of structure. The core of my process is 100% systematic, the biggest challenge I have when I rebalance it every day month is to just stop thinking and do what the model tells me to do. And I will tell you, I have a monthly argument with my own brain, because there are a couple of times where it’s like, hold on a second, you know, do I really want to be doing that? And it’s just like, Nope, just do it. And then I have an explorer portion, which, depending on abuse, about five to 10% of my portfolio, and that is where I can do whatever I want. And that’s where I make fully discretionary decisions. And I don’t have a problem taking a lot more risk in that portion. Because it’s limited, right, my risk is limited. And I know that I’m comfortable with that exposure, because the core of my portfolio is driven based on, you know, traditional momentum at this point, by the way, my momentum models are not in equities. It’s all in fixed income commodities and fairly defensive and real estate, if I remember, right, fairly defensive positioning at this moment. Right.

Tyler Wood 1:00:48
So Dave, and Dave… between two Daves… I think we should rename the podcast this month! I’m a frequent reader of the market misbehavior blog, somehow, it’s like you’ve spent the week over my shoulder, seen my my terrible afternoons or my stressed out moments, and then wrote the newsletter for exactly what I needed to hear.

David Lundgren, CMT, CFA 1:01:07
So you asking for a royalty?

Tyler Wood 1:01:09
To all of our listeners, I have to encourage you all. It’s a quick read. But it’s really powerful. I think that’s the source of most wisdom. For you, Dave, we’ve talked a lot about responsible use of technical tools in the portion of what has the most impact on improved decision making? What level of importance do you give to the routine, the clarity of mind the taking a break and stepping away from charts? Because I know that’s something that you’ve spent a lot of time implementing in your own system, but also teaching others about? Can you just speak about how that fits into this whole process?

David Keller, CMT 1:01:42
So Thanks. And thank you for saying that. It’s funny, when I left fidelity in 2016, I really wasn’t sure what I was going to do. And I had some great sort of thoughtful, deliberate months and months of just, you know, soul searching of where I wanted to go next, because it had been a really fun experience. And I debated even leaving the industry altogether. I talked about going back to study music more. I mean, did all sorts of things. But in the end, I started writing a blog, I started marking misbehavior, I soon after, was asked to write for stock charts. And I started contributing content. And I found how much I loved it. And what also I loved being out of a firm with a pretty rock solid compliance department was I was now free to talk about whatever I wanted. And I you know, for me, personally, when I’m not investing, I think a lot about mindfulness and meditation and prayer and how that helps you stay centered. And a lot of my watercooler conversations with portfolio managers and with other analysts was what do you do when you’re not at the office? You know, what do you what kind of music are you into? How does that help you? What do you do to relax? What do you do to get worked up? And, and so you know, being able to share those kinds of things has been really helpful. So a lot of what I write in with market misbehavior is less market oriented. A lot of my stock charts work is very market focused, it’s what’s working, what isn’t what stocks are moving, and why, with what I write for my own firm, and with the Premium members that I have, are, it’s a lot about how you’re spending your time, you know, as a, as an investor, as an analyst, but also away from the markets. At fidelity. I used to be nervous about telling people I was taking a vacation, because culturally, that was not something you did. You needed to be available and not take, you know, people don’t take vacations, Money Never Sleeps we’ll be talking about. And now I make it very clear, like I’m off Thursday through the next Monday. And here’s where I’m going with my family. Here’s a picture of us on a trail. And you know, here we are, I’ll see you on Tuesday, like, don’t ask me, and I and my wife convinced me that that was the way to do it. And I find that helping people have an honest conversation with themselves about their routines and their decision making what they’re listening to and watching and reading, and how they use that to make decisions. I think that is a ripe battleground, where people struggle mightily, and if not, you know, a lot of times don’t have the patience or the honesty or the humility to go through that thought process. And so what I tried to do with my blog and with, you know, a lot of the courses that I’ve done for market misbehavior, it’s all sort of focusing on that I think routines are vital. When I went to Fidelity, I was most impressed not by the tools that guys like Mark and Darren and Patrick and others used to make decisions. It was how consistently they did the same thing every day, every week. They went through the same charts every week. I’m like, Oh my gosh, Mark, you’ve been going through that same list of charts. About 20 years. He’s like, Yeah, this is why I know everything that’s going on in technology, asked me one of the stocks and I’ll tell you exactly what’s happening and why. And it’s because he did it consistently. And that was the big takeaway I had for my time there was a consistent imperfect process is way better than an inconsistent perfect process.

No, well said, 100% true. Well said, yeah, love it.

Tyler Wood 1:04:50
This has been an honor and a pleasure. I appreciate both of you taking the time to share these thoughts and insights. For all of our listeners of Fill the Gap, make sure you check out the show notes, for more about these tools referenced, Dave’s book, and others. Dave, any closing thoughts for the young technicians out there? Or the veteran PMs listening to today’s talk?

David Keller, CMT 1:05:12
Oh, no, this has been awesome, guys. I’m thrilled having listened to pretty much all of the episodes up until now, I love what you guys have done with this to help promote how technical analysis can be used in so many different ways, but in so many beneficial ways for investors. So I’ve loved some of the conversations you’ve had, I’ll keep listening for sure. And I would just encourage people with the CMT association I have gained my life experience and my professional experience have been profoundly impacted in a very positive way by my involvement with the with the Association. And I would encourage you guys to meet people around you and ask questions from those that have done this before you because there’s a lot to learn from Dave Lundgren and Tyler wood and many, many others in the organization. So take advantage of all those opportunities.

Tyler Wood 1:05:58
So, Dave, looking forward to seeing you again really soon. Thanks, guys.

David Lundgren, CMT, CFA 1:06:03
Thanks a lot Dave.

Tyler Wood 1:06:08
Fill the Gap is brought to you with support from Optuma. In addition to candidate study of the official CMT curriculum, Optuma 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


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