
LETTER FROM THE EDITOR
This year’s Annual Symposium will focus on the fusion of technical analysis with fundamental valuation, behavioral finance, macroeconomics and quantitative methods. The work of three of the scheduled speakers is included in this month’s newsletter.
Steven Leuthold explains his investment strategy for the next year and readers can ask him for an update in April at the Symposium. Steve is the only individual who has received the
Charles H. Dow Award from the MTA and the Graham and Dodd Scroll Award from the CFA Institute. Dr. Ben Hunt relies on game theory to understand the markets and the economy. Dr. Tucker Balch, a featured speaker, presents the results of research into buying and selling by company insiders that he completed with Scott Strong. Insider trading information is a form of sentiment analysis that technical analysts have used for many years.
We also have several other articles this month including Tom McClellan’s look at VIX ETNs and John Bougearel’s review of the current state of the market. Tom presents facts to demonstrate why long-term investors should avoid an ETN that is designed specifically for short-term traders. John presents some interesting chart patterns and provides a forecast based on technicals and fundamentals. He includes an overview of the macroeconomic environment that exists now and at several key turning points in the market. Please send any feedback or work you’d like to share through the newsletter to editor@mta.org.
Michael Carr
What's Inside...
2014 OUTLOOK
by Steve LeutholdEditor’s note: This is a reprint of a letter to clients which discusses successes and missteps along with an investment strategy for the future and is reprinted here with permission. For most...
IT WAS BARZINI ALL ALONG
by Ben HuntEditor’s note: This was originally published in a newsletter by Ben Hunt and is reprinted here with permission. “Tattaglia is a pimp. He never could have outfought Santino. But I didn’t know...
VIX ETN NOT RIGHT FOR INVESTORS
by Tom McClellanEditor’s note: This was originally published as a Chart in Focus by McClellan Financial Publications on January 02, 2014 and is reprinted here with permission. In the Dec. 16, 2013 issue of Forbes...
ASSESSMENT OF INSIDER TRADING INFORMATION FOR INVESTMENT STRATEGIES
by Scott Strong & Tucker Balch, Ph.D.Editor’s note: This was previously published at The Augmented Trader and is reprinted here with permission. Dr. Balch will be a presenter at the MTA Annual Symposium in April. This paper...
INTERVIEW WITH BRUCE KAMICH, CMT
by Bruce Kamich, CMT & Amber Hestla-BarnhartHow would you describe your job? My job and current passion is teaching technical analysis (TA). I am an adjunct professor of finance at Baruch College in New York City. Every semester I work hard to...
NY FED MODELS FORECASTING EXCESS RETURNS THROUGH 2018 ENCOUNTER THE YEAR OF THE HORSE, VALUATION MEAN REVERSIONS, & GEORGE LINDSAY’S THREE PEAKS AND A DOMED HOUSE
by John Bougearel, CMTThe NY Federal Reserve has an equity research department. Their research department determined in 2013 that “stocks are cheap” and investors should enjoy “excess high returns” in an...
Editor’s note: This is a reprint of a letter to clients which discusses successes and missteps along with an investment strategy for the future and is reprinted here with permission. For most individual and professional investors, the biggest unexpected surprise of 2013 was the huge surge in the U.S. stock market. Those full year gains of 26% for the DJIA, 30% for the S&P 500 and 37% for the Russell 2000 (Small Caps) seemed impossible 12 months ago. But the median gain for hedge funds in 2013 was a mediocre 6.7% (HFRX Hedge Fund Index). Some investors did anticipate a market rally in early 2013 while few, if any, dreamed it would continue all year! In the last half of 2013 the S&P 500 advanced an additional 15% with the Russell up 19%. Institutional investors scrambled to play catch up. Speculators climbed aboard and even individual investors finally began joining the party. Nevertheless,
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Contributor(s)

Steve Leuthold
Steve Leuthold has been an investment strategist, manager, and researcher for over 45 years. He is Founder of The Leuthold Group, LLC, an institutional investment research firm established in 1981. In 1987, Steve initiated a small investment management operation that is...
Editor’s note: This was originally published in a newsletter by Ben Hunt and is reprinted here with permission. “Tattaglia is a pimp. He never could have outfought Santino. But I didn’t know until this day that it was Barzini all along.” – Don Vito Corleone Like many in the investments business, I am a big fan of the Godfather movies, or at least those that don’t have Sofia Coppola in a supporting role. The strategic crux of the first movie is the realization by Don Corleone at a peace-making meeting of the Five Families that the garden variety gangland war he thought he was fighting with the Tattaglia Family was actually part of an existential war being waged by the nominal head of the Families, Don Barzini. Vito warns his son Michael, who becomes the new head of the Corleone Family, and the two of them plot a strategy of revenge and survival
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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.
Contributor(s)

Ben Hunt
Ben Hunt is the Chief Investment Officer at Second Foundation, a venture that arose out of Epsilon Theory, which is a financial analysis website and newsletter that examines capital markets through the lenses of game theory and history. Prior to co-founding Second...
Editor’s note: This was originally published as a Chart in Focus by McClellan Financial Publications on January 02, 2014 and is reprinted here with permission. In the Dec. 16, 2013 issue of Forbes magazine, the editors offer their list of “365 Ways To Get Rich” with their 2014 Investment Guide. #100 on the list is this suggestion: “Profit from stock market volatility: Buy into a VIX futures fund and use wild, seemingly irrational swings as buying opportunities.” The most commonly known VIX futures fund is VXX, the iPath S&P 500 VIX Short-Term Futures ETN. And while it might be a useful trading vehicle for someone looking to trade extremely short term moves, it is a horrible idea for “investors”. The share price history of VXX has a terribly negative bias, and it has ever since it debuted back in 2009. VXX ended 2013 at a price of 42.55 (unlike SPY or GLD, VXX’s
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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.
Contributor(s)

Tom McClellan
Tom McClellan has been editor of The McClellan Market Report since 1995, and is ranked as the #2 Stock Market Timer for 2016 according to Timer Digest. He is the son of Sherman and Marian McClellan, who in 1969 created the McClellan Oscillator and Summation Index. Tom was...
Editor’s note: This was previously published at The Augmented Trader and is reprinted here with permission. Dr. Balch will be a presenter at the MTA Annual Symposium in April. This paper demonstrates how he applies insider transaction trader and offers a detailed look at is thought process. Overview Lucena Research has evaluated the InsiderInsights Company Ratings database as an information source for an event-based study. In this white paper we provide a brief background concerning insider trading information, implement an event study with the data and conclude with back tests to assess the effectiveness of the information in trading. Overall, our analysis shows that the data provided by InsiderInsights has persistent and meaningful value. Background on insider trading information (The information in this section is excerpted from the book “Profit from Legal Insider Trading”) It should come as no surprise to anyone that insider trading occurs every day in the stock market. What might surprise investors
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Contributor(s)

Scott Strong

Tucker Balch, Ph.D.
Tucker Balch, Ph.D. is a former F-15 pilot, professor at Georgia Tech, and co-founder and CTO of Lucena Research, an investment software startup. His research focuses on topics that range from understanding social animal behavior to the challenges of applying Machine Learning to...
How would you describe your job? My job and current passion is teaching technical analysis (TA). I am an adjunct professor of finance at Baruch College in New York City. Every semester I work hard to teach a lifetime skill (TA) to eighty, 20-30 year old students from various backgrounds and experiences. For the past fifteen years I have been combining old school and new school approaches. On the first night of classes students select a stock to follow and chart by hand from the IBD top 50 list. The CANSLIM methodology is covered later in the semester. Students must enter a real time trading contest. The contest could be FX or stocks or commodities. There is homework to convert the classroom theory into practice. But teaching has gone beyond chalk and talk – today you need to have access to videos, online discussion boards and extra readings without making a trip
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
Bruce M. Kamich, who has held the Chartered Market Technician (CMT) designation since 1992, is a technical analyst for TheStreet.com and a two-time past president of the CMT Association. He serves as an advisor for the Technical Analysis Educational Foundation, of which he is...

Amber Hestla-Barnhart
The NY Federal Reserve has an equity research department. Their research department determined in 2013 that “stocks are cheap” and investors should enjoy “excess high returns” in an abnormally low or negative real interest rate environment for the next five years through 2018. Before reviewing potential mean reversions, implications from the Year of the Horse, & George Lindsay’s bearish Three Peaks and Domed House model, let’s attempt to quantify the NY Fed models and determine how high the Dow Jones might climb if it is to enjoy “excess high returns” through 2018. Goldman Sachs research team, based on their earnings growth models, forecasts the S & P 500 to rally a modest 19% to 2200 by 2016 from the 2013 close. That amounts to roughly 6% annualized returns for the next three years in US equities, an amount that hardly qualifies as “excess high returns.” The two behavioral models shown below suggest
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)

John Bougearel, CMT
John Bougearel, CMT, is a founder and principal of Structural Logic Inc, a Commodity Trading Advisor. Structural Logic incorporated in August 2000 as a financial newsletter and later became a CTA, offering managed futures accounts to clients in 2012. John's career in the...
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