Technically Speaking, August 2021

It’s August already, and life seems to have taken a step backward. Covid made a comeback and all of those “pandemic recovery” stocks took it on the chin. Fortunately, unlike last year, we have potent weapons at our disposal, so this could be just a temporary setback. That means the economic recovery should continue later this year. Could rising interest rates derail it? Did oil just correct and is preparing to break out to the upside again? Take a look at a long-term chart (20 years) of gold, too.

So many cross currents to consider. Will the meme stocks keep meme-ing? Will poorer global economies bounce back after getting more of the vaccine? And just how long can the large-cap indices make new highs when the others are offering no profit whatsoever since the start of the year (look at the Russell 2000)? Of course, these may be famous last words in the limbo period between when I write them and when they are officially published.

On the Association front, the summer, especially another Covid summer, is a quiet time. Chapter meetings are just starting to ramp up again, but CMT testing is going strong. In this month’s edition of Technically Speaking, we’ve taken yet another dive into the past with content poached from newsletters of yore, including a biography of John Magee, of Edwards & Magee, written by George Schade, CMT. If you did not already know, a lot of that famous tome was based on the work of Richard Schabacker, who was not coincidently Richard Edwards’ brother-in-law. We’ve also reprised Donald Mack’s review of Schabacker’s book, Technical Analysis and Stock Market Profits.

This month’s member interview is with Marc Lichtenfeld, a long-time member. Of course, there is member news, the official CMT Podcast announcement with Pamela Yoon, CMT and a page of photos taken at the 14th Annual Seminar in Naples, Fl.

If you have some old photos, please scan them and send them in to editor@cmtassociation.com. We would love to have them. Also, if you would like us to run an interview with a favorite technician, let us know that, too. Any content we run to make your professional and analytical life easier is fair game. And if you have something to say yourself, let’s go. Write that article!

Until next month. Look for a story then about how the organization survived September 11, on the upcoming 20-year anniversary.

Michael Kahn, CMT

Editor

What's Inside...

President's Letter

According to the World Health Organization, during the week of July 26th there were 4.0 million confirmed COVID-19 cases worldwide....

Read More

Book Review: Technical Analysis and Stock Market Profits by Richard Schabacker

This review originally appeared in in the November 1998 edition Technically Speaking.

Richard Schabacker was at his prime in the...

Read More

Member Interview with Marc Lichtenfeld, CMT

Please tell us what you do professionally.

I am the Chief Income Strategist at The Oxford Club. I have also...

Read More

Biography of John Magee

This story originally ran in the May 2004 edition of Technically Speaking.

John Magee is one of the most...

Read More

Fill the Gap Episode 8 with Pamela Yoon, CMT

The August episode of Fill the Gap shines a light on the vitality of technical analysis not often on display...

Read More

CMT Photo Archive

This is an occasional series revisiting the Association in pictures, just to offer a glimpse into our past, and in-person...

Read More

Membership News

Members on the Move

The CMT Association would like to congratulate the following members on their new positions:

  • Akshay...
Read More

President's Letter

According to the World Health Organization, during the week of July 26th there were 4.0 million confirmed COVID-19 cases worldwide. Weekly reported cases are up 58% since mid-June. While the Americas and Europe are still well below their peaks made in late-2020/early-2021, case counts are rising, putting people back on guard and motivating lawmakers to consider reinstating public health protocol mandates.

In India, it’s quite the opposite situation, as case counts have decreased substantially since Spring; total new cases in India during the week of July 26th were 284,000, down 90% from the peak in early May. However, other APAC (Asia Pacific) countries are experiencing spikes: Thailand, Malaysia, and Indonesia have seen case counts rise meaningfully from very low numbers previously. And cases in Russia, Turkey, Iran, and many countries in Africa are on the rise, too.

The CMT Board and Staff monitor conditions where our members and CMT Program candidates live, and we frequently discuss how we can best provide value. For example, over the past 12 months, we have hosted three entirely online conferences (India Summit, Americas Summit, and the European Summit), and we will be hosting our inaugural APAC Summit in October (look for an official announcement about this soon). Meanwhile, planning is actively taking place for our Annual Symposium in the Spring of 2022, which may include both in-person and online access options for attendees.

Furthermore, in some locations members have begun to consider meeting locally at CMT chapter meetings for the first time in almost two years. We encourage members who have the opportunity to meet locally to do so safely, if conditions permit. We are also very aware that the pandemic is far from over, and we will continue striving to bring you the best in technical analysis educational content in an online format.

The CMT Association Board and Staff recognize the strong sense of community shared by technicians as one of the unique strengths of our Association. In-person events, including conferences and chapter meetings, have historically been among the highest-value benefits cited by members. When I joined the Association in the early-2000s, chapter meetings were a “grassroots” affair, conducted by local members who met regularly (monthly), at the same location (usually borrowed office space), and a small entry fee was collected at the door to cover the cost of sandwiches and sodas. This approach may very well be the best way for CMT members around the globe to begin meeting again, when the time is right. Please feel free to contact Barbara Terry at the CMT Association for assistance organizing a meeting.

Speaking of great online content, be sure to tune in to this month’s CMT Podcast Fill the Gap, which features an interview with Pam Yoon, CMT, Portfolio Manager at RBC Dominion Securities in Vancouver, Canada. This is a great opportunity to hear from someone who successfully uses technical analysis in their professional career as a wealth manager.

Contributor(s)

Brett Villaume

Brett Villaume is Past President of the CMT Association, having served on the Board of Directors from 2014 to 2023. Additionally, Brett is a Financial Advisor at Equitable Advisors based in San Francisco, California. Brett previously served as Director of Investor Relations...

Book Review: Technical Analysis and Stock Market Profits by Richard Schabacker

This review originally appeared in in the November 1998 edition Technically Speaking.

Richard Schabacker was at his prime in the 1920s and 1930s, not only as a guru of technical analysis but also as the first Financial Editor of Forbes magazine and then as editor of the Annalist, a weekly section of The New York Times. Schabacker’s interest was almost entirely in the stock market. His first book, published in 1930, was entitled Stock Market Theory and Practice and his examples are drawn mainly from the equity field. In passing, it should be noted that all the original illustrations have been redrawn for this reissue, making them very bright and clear (not necessarily the case with most editions of Edwards & Magee’s Technical Analysis of Stock Trends, with which this book must constantly be compared).

The content of the book is almost entirely related to line and bar charts and to the patterns that they reveal. Interestingly, although Schabacker stresses the importance of the closing price, they are not included on any of the chart illustrations — possibly a result of their redrawing. In fact, few of his descriptions of patterns incorporate closing prices, and in the whole book there are only two references to closes as being particularly significant — the One-Day Reversal, and the Trend-Line Break. Otherwise, it’s the pattern that counts.

Pattern analysis has never have been covered better than here. Robert Edwards admitted, in the introduction to his book, that Part One is based in large part on the pioneer researches and writings of the late Richard Schabacker. The description of important reversal formations takes up 114 pages, covering all the major patterns, and we then have minor continuation formations, miscellaneous intermediate patterns and phenomena’ (not as portentous as it sounds), and lengthy discussion of trendlines, support and resistance, measuring rules and so on. Most of this will not be new to technicians, but the assured certainty and deftness of approach makes it very readable as a work of reference.

There is some unfamiliar material here too – to me, at least. The “Cradle” is a new name for a known phenomenon, but the “two-days away“ rule for placing stops looks intriguing. Discussion of why there should be differences in chart action between the Averages and their individual constituents is logical and stimulating, as is an explanation of why a stock might hang fire in spite of a classic constructive chart picture. Log charts are judged as against arithmetic, with a quick glance at square roots. Point and Figure, which back then were apparently either point or figure charts, is dismissed, partly because volume is treated as an extremely important constituent of pattern. The author also believes that measured moves are more efficiently estimated from bar charts than from P&F. Weekly charts are favored for discovering support and resistance. Trend lines may be drawn through ranges if there is a sufficiently good reason. These are all practical discussions arising from the desire to make pattern analysis work.

So back to the comparison with “the bible of Technical Analysis,” Edwards & Magee, I would suggest that if you don’t possess a copy of that best-known tome, you should buy this one instead; it is beautifully presented, and the work is at least as comprehensive. You will miss out, however, on John Magee’s lessons regarding the right way to trade and invest. If you already own Technical Analysis of Stock Trends, there is probably little need to buy the Schabacker book, but you should at least have a look at it.

Contributor(s)

Donald Mack

Donald Mack, an American living in England and a member of the Society of Technical Analysts (STA), became interested in TA in the mid-1960s. In the late 1970s, he established the only bookstore in the U.S. that dealt exclusively in stock and...

Member Interview with Marc Lichtenfeld, CMT

Please tell us what you do professionally.

I am the Chief Income Strategist at The Oxford Club. I have also been a sell side analyst at Avalon Research Group, a columnist at TheStreet.com and a reporter/anchor at ON24.

How did you get there?

I could have made it easy on myself, as my grandfather had a seat on the NYSE and still knew lots of people on Wall Street when I graduated college. At that time, I had no interest in the markets. Shortly after he passed away, I realized I needed to figure out how to make my money go further and started reading everything I could on investing and the markets.

Several years later in San Francisco, I landed a job as a trading assistant at a proprietary trading firm. I walked in and handed them my resume, even though I knew that with zero experience I had little chance of getting the job. But I also saw they were in desperate need for an assistant immediately. The manager said he’d call me. I offered to work the rest of the week for free entering trades for the traders and that if he didn’t think I did well, on Friday afternoon he could tell me not to come back on Monday. I got the job.

My career was not a traditional one.  Though I used technical analysis for my own trading, I was hired as a fundamental analyst at Avalon Research Group, passing the 86, 87 and other required licensing exams. When they found out that I knew technical analysis, they had me write up a morning report.

Avalon folded not long after and I briefly went back to journalism for TheStreet.com.  In 2007, I joined the Oxford Club, where today I am the Chief Income Strategist. Some of my services are purely technically based and some are based on fundamentals, but I never make a recommendation without consulting the charts. If I love a stock’s fundamentals but the stock is in a downtrend, I’ll keep it on my radar until it starts to look stronger.

I’ve written two books, including Get Rich with Dividends, which has been published in four languages and won the 2018 Book of the Year Award from the Institute for Financial Literacy.   I have appeared on CNBC, Bloomberg, Fox Business, and been quoted in IBD, Forbes, the New York Times and others.

Who was an early mentor in your career?

Dr. Hank Pruden. I was involved in the Technical Securities Analyst Association of San Francisco (TAASF) where he was heavily involved. I also took classes with him at Golden Gate University.

What book/author was most influential in helping you understand TA?

John Murphy, Technical Analysis of the Financial Markets. It all started to make sense after reading that book.

What do you like to do when you are not looking at markets?

I am the only published financial analyst to ring announce world title fights in boxing and MMA on HBO, Showtime and ESPN. I also love to play poker.

What brought you to the CMT Association?

Originally, I wanted to learn more about technical analysis, but achieving the CMT designation became increasingly important to me. Those three letters are instant credibility. Interestingly, while the CMT was the goal, I enjoyed the journey much more than I expected. I learned so much studying for the exams and it definitely helped me become a better analyst.

What it the most useful benefit of membership for you?

The breadth of subjects that are written about and discussed in the newsletter and hopefully in meetings in the future.

Contributor(s)

Michael Kahn, CMT

Michael Kahn, who holds a Chartered Market Technician (CMT) designation, is a seasoned financial services strategist, analyst, columnist, educator and speaker.  Michael has been working with charts and technical analysis since 1986. He is the author of three books on technical analysis...

Biography of John Magee

This story originally ran in the May 2004 edition of Technically Speaking.

John Magee is one of the most well-known names in the field of technical analysis and is viewed as the leading authority on classical charting. All chart readers know the phrase “Edwards and Magee,” and John Magee is rightfully famous as the co-author of Technical Analysis of Stock Trends, originally published in 1948 and now available in its 8th edition.

Magee graduated from MIT in 1923 and worked in a variety of sales and marketing jobs, including a position as a Fuller Brush salesman, until he met Robert D. Edwards in 1942. Edwards was the brother-in-law of Richard W. Schabacker, a Forbes financial editor in the 1920s and later a New York Times financial columnist. When Schabacker died in 1935, Edwards took over Schabacker’s papers and the operation of the Schabacker Institute. In 1941, Edwards moved to Springfield, Massachusetts, where Magee joined him the next year.

Schabacker was the first to apply charting methods to individual stocks and not just the market indexes. Schabacker was Edwards’ and Magee’s intellectual mentor. Between 1930 and 1934, Schabacker had written three books. The 1930 classic, Stock Market Theory and Practice, devoted 250 out of nearly 800 pages to charting. The book was so highly regarded that Graham and Dodd in their 1934 Security Analysis referred readers to Schabacker’s 1930 book for an explanation of charting, even though they saw no value in “chart reading.”

Edwards and Magee added to Schabacker’s materials and greatly expanded that work, leading to the 1948 book, today recognized as the definitive book on charting. Edwards’ and Magee’s book has two parts. Part I, Technical Theory, is based on Schabacker’s charting work, but Part II, Trading Tactics, is based on Magee’s studies and personal trading experience. Part I is Edwards’ work. Part II is truly Magee’s work. This partnership lasted less than a decade before Edwards left in 1951 to become a high school science teacher in South Carolina.

Magee maintained daily charts on almost every stock on the NYSE and AMEX. He said, “Charts are the working tools of the technical analyst.” But he understood the limits of his craft, “A chart is not a perfect tool. It does not give all the answers quickly, easily and positively.” His understanding of the imperfect nature of charting could have resulted from his personal trading experience:

“Frankly, I haven’t done as well with my own investments, over the long haul, as I have with my recommendations to clients, but that’s because of a shaky beginning.”

In the early 1940s, he had lost $25,000 in the market.

Magee’s work focused on four basic and useful types of chart analysis:

  1. Area patterns or formations of price fluctuations that indicate consolidation of strength or an impending reversal of the price; formations give “get in” and “get out” signals.
  2. Trend and trendline studies which supplement analysis of area patterns or formations because stock prices tend to move in trends and once established, trends continue.
  3. Support and resistance levels which show where a move is likely to slow down.
  4. Broad market studies such as Dow.

Magee defined technical analysis as follows:

“Technical analysis is the science of recording, usually in graphic form, the actual history of trading price changes, volume of transactions, etc.) in a certain stock or in the averages and then deducting from that picture history the probable future trend. [T]he real value of a share of [a stock] is determined at any given tire solely, and inexorably by supply and demand, which definitely are accurately reflected in the transactions consummated on the floor of the New York Stock Exchange.”

In Magee’s opinion, supply and demand, and nothing else, moved the market. His philosophy was, “I will not be swayed or panicked by news flashes, rumors, tips or well-meant advice.” In 1958, Magee told market historian John Brooks:

“Before I came to work here, 1 was on my own, making my charts and operating in the market out of an office…where I had nothing hut a table, a chair, a telephone, a ticker and an air-conditioning machine. I sealed up the windows with boards and putty, so there would be no outside sights and sounds to distract inc. I had no fundamental information at my disposal whatever, which left me free to make up my mind solely on the basis of my charts.”

He felt that the successful analyst should be concerned with interpreting supply and demand, as shown in these two insightful quotes:

“The technical analyst’s task is to interpret the action of the market – the flux in supply and demand mirrored in the market. In this work, it doesn’t in the least matter what creates the supply and demand. The fact of their existence and the balance between them at all that count.”

“What does this action really mean in terms of supply and demand?”

Magee had a wall sign which read: “MY MIND IS MADE UP. DON’T CONFUSE ME WITH THE FACTS.” The facts were the “daily outpouring” of financial news and announcements. Except for the daily quotes, he only read two-week old Wall Street Journals. When TV arrived, his motto became, “We Follow the Tape Not the Tube.”

In later editions of his books, Magee pointed out that “the inherent nature of a competitive market does not change very much over the years, and that ‘the same old patterns’ of human behavior continue to produce much the same types of market trends and fluctuations.”

Magee enjoyed writing and teaching. He wrote two other books, The General Semantics of Wall Street and Wall Street – Main Street – And You. These books presented his market wisdom in a lighter, but educational, writing style. As for teaching, for eight years, Magee taught an investment course in the Springfield adult-education program titled “The Semantics of Wall Street.”

In December 1984, Magee attended the CMT Association’s monthly meeting.

Magee’s contributions to the study of technical analysis were formally recognized by the CMT Association in 1978 when he was named the recipient of the prestigious annual award. He died in 1987, at the age of 86.

This article is based upon research done by George A. Schade, Jr., CMT. He can be reached at aljschade@aol.com

Contributor(s)

George A. Schade, Jr., CMT

George A. Schade, Jr., who holds a Chartered Market Technician (CMT) designation, has written extensively about the people and innovations that have advanced the field of technical analysis within financial markets. A member of the CMT Association since 1987, he has written about...

Fill the Gap Episode 8 with Pamela Yoon, CMT

The August episode of Fill the Gap shines a light on the vitality of technical analysis not often on display in broader financial media. Learn how client advisors use technical analysis to improve portfolio risk management, strengthen the investment process and supplement client education in this engaging conversation with Pamela Yoon, CMT, CIM, Vice-President & Portfolio Manager at RBC Dominion Securities in Vancouver, British Columbia, Canada.

An investment management veteran with 28 years of experience, Pam has guided a wide range of investors through many bull and bear markets. We discuss her process in detail to better understand how she manages concentrated, high-conviction global portfolios, while always controlling risk. As a tactical portfolio manager, Pam blends a unique mix of technical tools and analytical methods into her process. The conversation also touches on how cognitive neuroscience literature relates directly to the contrarian positioning often required by disciplined active managers who respond to the evidence of market price.

To see Pam’s favorite chart that appears in every new client meeting, and learn more about this month’s guest, we recommend reviewing the supplemental resources accompanying this episode using this link: go.staging.cmtassociation.org/ftge8.

Tune in on your favorite listening service – each monthly episode will be released on the first Friday of the month and will be available on Apple, Spotify, Google Podcasts and wherever podcasts are found.

Contributor(s)

Tyler Wood, CMT

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

CMT Photo Archive

This is an occasional series revisiting the Association in pictures, just to offer a glimpse into our past, and in-person events as a reminder of what we aspire to in the future.

If you have any pictures from seminars, meetings or after work get-togethers please submit them (in digital form, if possible) and include the date, location, and people in the photo. Better yet, if you remember presentations or topics of conversation, let us know. There’s nothing like revisiting market history as it relates to the current environment.

Montage

This photo montage, courtesy of Hal Marlow, was originally published in the June 1989 newsletter. The photos were taken at the 14th Annual MTA Seminar, which was held at the Registry Resort, now known as the Naples Grade Beach Resort, in Naples, Florida. Older members will remember not only excellent presentations but also informal chats by the pool and at the beach.

Contributor(s)

Michael Kahn, CMT

Michael Kahn, who holds a Chartered Market Technician (CMT) designation, is a seasoned financial services strategist, analyst, columnist, educator and speaker.  Michael has been working with charts and technical analysis since 1986. He is the author of three books on technical analysis...

Membership News

Members on the Move

The CMT Association would like to congratulate the following members on their new positions:

  • Akshay Chinchalkar, CMT, Cross Asset Editor – India at Bloomberg LP
  • Youssef El Mimouni, Senior OTC Pricing Analyst at BNP Paribas Asset Management
  • Ron Acoba, CMT, CFTe, MFTA, Co-Founder / Partner at APG Capital
  • Harsh Parekh, Technical Research Analyst at Bonanza Portfolio Ltd

 

CMT 

If you haven’t already scheduled an appointment for your CMT exam, we recommend that you do so as soon as possible.

When scheduling your exam, please make sure that your first and last names match the legal ID you will be using on the day of the exam.  If the names don’t match, please email admin@cmtassociation.org before scheduling an appointment for your exam.  If you have scheduled an appointment and need to adjust your name, please contact us at admin@cmtassociation.org.

If both names don’t match your ID, Prometric will not allow you take the exam and the exam fee will be forfeited.  For more information about what to expect the day of the exam, on the website under CMT Program please select Policies and Procedures then Day of the Exam.

If you need assistance scheduling an appointment for your exam, please contact us at admin@cmtassociation.org.

The CMT Association would like to congratulate the following members who received their CMT Designation in July 2021.

  • Christopher Flores
  • Chih-Chieh Chen
  • John McNierney
  • Lovelesh Sharma

Contributor(s)

Marie Penza

Marie Penza serves as the Director of Member Services for the CMT Association.