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Technically Speaking, April 2009

Letter from the Editor

This month’s newsletter contains a variety of information and we hope find some of it to be useful in your pursuit of profits in the markets. As traders, we often get caught up in small stuff and forget about the big picture - knowing when news will move markets is critical to success. In Forex, economic data represents the fundamental inputs that traders should be aware of. We reprint an article from the Online Trading Academy web site describing some of the more important indicators which can drive stocks, bonds, and Forex prices. In stocks, fundamentals are commonly thought of as ratios. Crestmont Research recently completed a report on the P/E ratio and their detailed study includes a chart which shows that P/E ratios have been range bound for decades. Enterprising technical analysts may consider applying indicators to this data to forecast long-term trends. We also added a feature last month that allows you to prepare the newsletter for printing in its entirety with a single click. Please let us know if you

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Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.

What's Inside...

Letter from the Executive Director

As a result of accumulated customer survey information and discussions with our membership, we realize that the education a person can receive in the field of technical analysis is one of the key...

The P/E Report: Quarterly Review of the Price/Earnings Ratio

by Ed Easterling

Notes: adjusted using the methodology popularized by Robert Shiller (Yale; Irrational Exuberance), as modified for quarterly data based upon historical relationship of EPS and GDP as described in...

MTA at the New York Traders Expo

by Kimberly Sokoloff, CMT

I had the pleasure of working the MTA booth at the 2009 Trader’s Expo, which was a great experience. I recommend it to all MTA members. While it was my first show, it was well attended considering...

Essentials of Foreign Exchange Trading by James Chen, CTA, CMT

by James Chen, CMT, CTA & Michael Carr, CMT

Foreign exchange trading is largely driven by technical analysis, and in this short book Chen offers insights into the markets, trading strategies, and details on the mechanics of forex trading. The...

Elliott Wave Analysis of Indian Equity Markets

by Ashish Kyal, CMT

We are going through some of the most unpredictable economic times in history across the globe. It is truly an inspiration to see the entire world coming together to fight against what we have now...

Economic Indicators

by Online Trading Academy

Economic Indicators are valuable and reliable reports that are assembled by the Government, Universities and the private sectors of business. They measure the economic health of our overall economy....

Uptick Rule: A Clear Illustration That It Favors the Bulls

by Christopher Gurkovic, CMT

On February 25, 2009 FRB chairmen Ben Bernanke mentioned the possibility of reinstating the uptick rule. I thought this would be a good opportunity to revisit the previous articles I wrote in...

Trading Forex

by Michael Carr, CMT

Technical analysis works in any freely traded market. Legend has it that technical analysis has been employed for centuries in the commodities markets for hundreds of years, since the days when...

Honor Our Own! Support the MTA/MTAEF Library Fund

by Bruce Kamich, CMT

Did you know that Baruch College is among the top 10 percent of US colleges according to the 2009 edition of the Princeton Review’s popular annual guide to undergraduate colleges and is the...

MTA Announcements

CMT Level 3 Exam – REGISTRATION CLOSES FRIDAY! Registration for the CMT Level 3 Exam closes this Friday, April 3rd. Sign up today! For detailed instructions on how you can register online,...

Letter from the Executive Director

Letter from the Executive Director

As a result of accumulated customer survey information and discussions with our membership, we realize that the education a person can receive in the field of technical analysis is one of the key member benefits of joining the MTA. Today, one can retrieve technical analysis information from hundreds of different sources (individual web-sites, books, courseware, etc.) but rarely is technical analysis information available in a single, interactive, and organized space for easy access by the technical analysis user.

Over the last year, the MTA has been quietly developing a segment of our existing website and populating it with baseline technical analysis information. It is envisioned that this website will be “The” repository for current and interactive technical analysis  information. The website will be open to the general public for certain baseline information but further,

To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.

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The P/E Report: Quarterly Review of the Price/Earnings Ratio

The P/E Report: Quarterly Review of the Price/Earnings Ratio

Notes:

    1. adjusted using the methodology popularized by Robert Shiller (Yale; Irrational Exuberance), as modified for quarterly data
    2. based upon historical relationship of EPS and GDP as described in chapter 7 of Unexpected Returns: Understanding Secular Stock Market Cycles; useful for predicting future business cycleadjusted EPS
    3. S&P 500 Index is the value at the end of the quarter
    4. ‘Reported’ is based upon actual net income for the past year (trailing four quarters); ‘Adjusted’ is an inflation-adjusted multi-year average; ‘Crestmont’ see note 2
    5. P divided by E
      Copyright 2008-2009, Crestmont Research (www.CrestmontResearch.com)

CURRENT STATUS (Mid First Quarter 2009)

The 18.6% year-to-date decline has returned P/E to fairly undervalued (from ‘somewhat undervalued’) and has positioned the market for nearer-term above-average returns (assuming that the economy is not expected to enter a multi-year period of significant deflation or relatively high

To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.

Contributor(s)

Ed Easterling

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MTA at the New York Traders Expo

MTA at the New York Traders Expo

I had the pleasure of working the MTA booth at the 2009 Trader’s Expo, which was a great experience. I recommend it to all MTA members. While it was my first show, it was well attended considering the macro environment that we are in. I was able to speak with a wide range of people which was interesting to me. You would think this type of event would just draw people from the financial community but that wasn’t the case. I think that was what impressed me the most. I spoke with individuals who trade their own accounts such as dentist, doctors, housewives, students and the list goes on. People are starting to care more about how their money is managed rather than simply relying on someone else to do it for them, and that is where Technical Analysis fits in!

Many years ago when I was awarded the CMT designation

To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.

Contributor(s)

Kimberly Sokoloff, CMT

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Essentials of Foreign Exchange Trading by James Chen, CTA, CMT

Essentials of Foreign Exchange Trading by James Chen, CTA, CMT

Foreign exchange trading is largely driven by technical analysis, and in this short book Chen offers insights into the markets, trading strategies, and details on the mechanics of forex trading.

The book is very well suited to the novice trader. The primer on technical analysis offers a great review for CMT candidates. It also highlights the importance of Elliott Wave and Fibonacci numbers in forex trading.

More experienced traders in stocks, bonds, or commodities will benefit from the book’s comprehensive explanation of the mechanics of the market. As traders know, each market has its unique personality and forex is no exception. It is very important to understand the subtleties and drivers of the markets. This is especially true in highly leveraged markets where losses can mount quickly.

In explaining the markets, Chen offers valuable insights into the fundamental factors that lead to moves in a currency. While technicians often ignore fundamental data in

To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.

Contributor(s)

James Chen, CMT, CTA

Michael Carr, CMT

Michael Carr, CMT

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Elliott Wave Analysis of Indian Equity Markets

Elliott Wave Analysis of Indian Equity Markets

We are going through some of the most unpredictable economic times in history across the globe. It is truly an inspiration to see the entire world coming together to fight against what we have now come to call the Global Crisis. In the end, even the coordinated benchmark interest rate cuts by the world’s major central banks, such as the Federal Reserve, the European Central Bank, the Bank of England and the central banks of Canada, Sweden, Switzerland and China on October 7, 2008, intended to halt the collapse of share prices and to prevent the deepening of recession, have proved to be futile.

The stock market always acts as a leading indicator of the economy. Therefore, being able to predict the market allows us to forecast where our economy is headed. In these turbulent times predicting the market is not an easy task. Inter-market analysis provides a very good view

To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.

Contributor(s)

Ashish Kyal, CMT

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Economic Indicators

Economic Indicators

Economic Indicators are valuable and reliable reports that are assembled by the Government, Universities and the private sectors of business. They measure the economic health of our overall economy. Most are monthly reports and some are weekly. Generally, the Market, as a whole, listens very carefully to the results to determine whether they are “net buyers” or “net sellers” for the day.

Whenever a report is released, you need to be aware of the time and information given. It can dramatically change the price direction, depending on how the Market interprets it. There are many different indicators. Below we have given you a sampling. You must understand that not all indicators are important all of the time, so you must learn them, observe the reactions to them and, then, form an opinion on which ones help you in your specific style of trading. And to make it all more fun, their

To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.

Contributor(s)

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Uptick Rule: A Clear Illustration That It Favors the Bulls

Uptick Rule: A Clear Illustration That It Favors the Bulls

On February 25, 2009 FRB chairmen Ben Bernanke mentioned the possibility of reinstating the uptick rule. I thought this would be a good opportunity to revisit the previous articles I wrote in Technically Speaking, first in September ’07 and then again in March ’08. With a good year and half of data since the removal of the rule, a clear difference exists in trading. Before the rule was removed, an unfair advantage was given to the Bulls. The removal of the rule, has established an equal playing field to both Bulls and Bears. This is proven with data from the NYSE TICK index.

The TICK measures the NYSE stocks ticking up or down at a given time during the trading day, and should be looked at as a source of power and momentum in the market. It is the best index to look at for differences from the uptick rule, as it

To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.

Contributor(s)

Christopher Gurkovic, CMT

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Trading Forex

Trading Forex

Technical analysis works in any freely traded market. Legend has it that technical analysis has been employed for centuries in the commodities markets for hundreds of years, since the days when Japanese rice traders relying on candlestick charts. In the first half of the twentieth century, great technicians such as Shabacker and Edwards and Magee, applied the principles of the field to the stock market.

In Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications, John Murphy wrote that technical analysis is well suited to futures markets. The diversity of these markets makes it difficult to master fundamental analysis in any one market.

Foreign exchange is the latest market where technical analysis is an invaluable tool to analyzing the markets. Forex is a deep market where traders employ a great deal of leverage to profit from small moves.

Recently, some brokers have been offering leverage greater than 100

To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.

Contributor(s)

Michael Carr, CMT

Michael Carr, CMT

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Honor Our Own! Support the MTA/MTAEF Library Fund

Honor Our Own! Support the MTA/MTAEF Library Fund

Did you know that Baruch College is among the top 10 percent of US colleges according to the 2009 edition of the Princeton Review’s popular annual guide to undergraduate colleges and is the only school with both an undergraduate and graduate level course in technical analysis?

On April 28th Baruch College will host the Twentieth Annual Bernard Baruch Dinner at which past MTA president, David Krell will be presented with the Distinguished Alumnus Award. David received his MBA from Baruch in 1971. Interestingly, David’s thesis advisor was none other than Martin Zweig.

David was instrumental in bring together the various parties responsible for Baruch housing the MTA/MTAEF library. Today Baruch’s Newman Library is the home of the Market Technicians Association and Market Technicians Association’s Educational Foundation Library. Once cataloging is complete, this library will be an unparalleled resource for technicians, students and professors.

Please consider showing your support of David by making a

To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.

Contributor(s)

Bruce Kamich, CMT

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MTA Announcements

MTA Announcements

CMT Level 3 Exam – REGISTRATION CLOSES FRIDAY!

Registration for the CMT Level 3 Exam closes this Friday, April 3rd. Sign up today! For detailed instructions on how you can register online, please click here. Contact Marie Penza, 646-652-3300, for information on the CMT Level 3 Exam and/or to schedule your exam.

A Letter from the Symposium Committee Chair, Jeff Lay, CMT

Dear MTA Members, Affiliates, and Financial Professionals,

On behalf of the MTA Board of Directors, I want to extend a personal invitation to our association’s premier annual event – the Market Technicians Association Annual Symposium. The theme for 2009 is Secular Markets, Cyclical Risk: The Gilded Age of Technical Analysis.

This year’s list of marquee speakers is world class professionals and experts in the field of technical analysis. The range of topics at this year’s symposium represents an incredible opportunity to hear from

To view this content you must be an active member of the CMT Association.
Not a member? Join the CMT Association and unlock access to hundreds of hours of written and video technical analysis content, including the Journal of Technical Analysis and the Video Archives. Learn more about Membership here.

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New Educational Content This Month

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