public

Technically Speaking, February 2015

LETTER FROM THE EDITOR

This year marks the 42nd anniversary of the MTA. We tend to ignore anniversary years unless they end in 0 or 5 but each year is important to the organization. Each of the past 42 years has presented the MTA with opportunities for growth along with occasional challenges that have to be met. The fact that we are now nearly 42 years old as an organization is a tribute to the volunteers who have led the MTA. Most of us rarely think about the leadership of the MTA. That fact indicates that they are doing an outstanding job because we tend to worry only about major problems. No major problems means no worries about the MTA. This month, I’d like to join Dave Keller, CMT, and Past President of the MTA in asking you to think about our organization’s leadership. In particular, as Dave notes, it’s time to nominate individuals to serve on the Board of Directors. Individuals in these positions will help set the pace for growth in the next 42 years. If you know of the right

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.

What's Inside...

OMAHA, PROCESS, & SKIN IN THE GAME (AND MY PORTFOLIO FOR 2015)

by Mebane Faber, CMT, CAIA

Editor’s note: This was originally published at MebFaber.com and is reprinted here with permission. The first part of this reprint explains Meb’s basic portfolio allocation philosophy and was...

INTEGRATING MULTIPLE DISCIPLINES FOR ACTIVE PORTFOLIO MANAGEMENT: AN EVENING WITH FRANK TEIXEIRA, CFA, CMT

by Michael Sacchitello, CMT

For far too long, it has been cliché to talk about the two schools of financial market analysis, fundamental analysis and technical analysis, as if they possessed the molecular structures of oil and...

BEATING THE S&P 500 WITH MOMENTUM AND TREND FOLLOWING

by Riccardo Ronco

Editor’s note: Riccardo Ronco is scheduled to make a presentation at the Annual Symposium in March. He provides research to institutional investors and will be sharing his latest research ideas at...

AN INVITATION FROM THE MTA NOMINATING COMMITTEE

The Market Technicians Association (MTA) is a dynamic association focused on building a strong community of market professionals, maintaining the highest ethical standards in the industry, and...

ROHRBACH'S FIRST LESSON IN INVESTING

by Amber Hestla-Barnhart

“When an investment is not going the way you thought it would, it’s important to sell it and take the loss.” That lesson makes sense. By taking a loss, you preserve capital for the future....

ETHICS IN FINANCE- ROBIN COSGROVE PRIZE 2014-2015

Competition for the Prize of $20,000 will be open until April 15, 2015. The Ethics in Finance Robin Cosgrove Prize seeks to promote awareness of ethics, integrity and trust in the finance sector,...

HOW TO LET PROFITS RUN AND CUT LOSSES

by Michael Carr, CMT

Cynthia Kase, CMT, MFTA, has decades of experience in the markets and understands how to consistently win. She has developed a number of new tools in the past few years and recently shared some of...

WHY PASSIVE INVESTORS GET HAMMERED

by Mike Posey

Editor’s note: This was originally published in Proactive Advisor Magazine and is reprinted here with permission. For a nocost subscription to Proactive Adviser, click here. This article...

BUCKET INVESTING OVERVIEW

by Jerry C. Wagner & David Varadi & Z. George Yang, Ph.D. & CFA

Editor’s note: Bucket investing is a well-known financial planning concept. Technical analysts might discover their techniques can be applied within this framework to improve returns for the client...

2015 NAAIM WAGNER AWARD CALL FOR PAPERS

In 2009, the National Association of Active Investment Managers (NAAIM), launched the NAAIM Wagner Award is designed to expand awareness of active investment management techniques and the results of...

MASTERS IN TECHNICAL ANALYSIS: JIM ROHRBACH

by Amber Hestla-Barnhart

“There are really only two good feelings in investing. One is being in the market when it is going up, and the other is being out when the market is going down.” Jim Rohrbach Jim...

SHAKE OFF THOSE WINTER BLUES WITH THE RIGHT STOCK SELECTION

by Ron Meisels

Editor’s note: This report was originally published by Phases & Cycles on January 20, 2015 and is reprinted here with permission. The sixth gain in a row for the Dow, new all time-highs for the...

OMAHA, PROCESS, & SKIN IN THE GAME (AND MY PORTFOLIO FOR 2015)

OMAHA, PROCESS, & SKIN IN THE GAME (AND MY PORTFOLIO FOR 2015)

Editor’s note: This was originally published at MebFaber.com and is reprinted here with permission. The first part of this reprint explains Meb’s basic portfolio allocation philosophy and was published in 2014. The second part is a January 2015 update. You can hear more of Meb’s thoughts on the market at the Annual Symposium in March where he is scheduled to make a presentation.

Every time Peyton Manning steps up to the line of scrimmage he is prepared to audible. He has spent thousands of hours of film study to get ready for nearly every situation. So when he shouts “Omaha”, he isn’t panicking or reacting emotionally, he is simply instituting a reaction to calculated probabilities from many years of experience and study.

The same should be true for your portfolio. Do you have a plan? Or do you simply have a portfolio for today, that you will emotionally react to if and

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)

Mebane Faber, CMT, CAIA

Back to top
INTEGRATING MULTIPLE DISCIPLINES FOR ACTIVE PORTFOLIO MANAGEMENT: AN EVENING WITH FRANK TEIXEIRA, CFA, CMT

INTEGRATING MULTIPLE DISCIPLINES FOR ACTIVE PORTFOLIO MANAGEMENT: AN EVENING WITH FRANK TEIXEIRA, CFA, CMT

For far too long, it has been cliché to talk about the two schools of financial market analysis, fundamental analysis and technical analysis, as if they possessed the molecular structures of oil and water. Not only does this approach leave investment professionals at a disadvantage, it also does a huge disservice to investment professionals whose strategies incorporate both of these disciplines into some of today’s most powerful investment models.

Boston-based Wellington Management’s Frank L. Teixeira, CFA, CMT is an industry leader in this fusion concept. As a partner and senior vice president of the firm, he manages over a billion dollars in both domestic and foreign securities and leads the technical analysis division for Wellington. Mr. Teixeira manages his portfolio based on an investment philosophy that combines both fundamental and technical principles.

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 Sacchitello, CMT

Back to top
BEATING THE S&P 500 WITH MOMENTUM AND TREND FOLLOWING

BEATING THE S&P 500 WITH MOMENTUM AND TREND FOLLOWING

Editor’s note: Riccardo Ronco is scheduled to make a presentation at the Annual Symposium in March. He provides research to institutional investors and will be sharing his latest research ideas at that time.

If you like a pure long-only, fully invested momentum strategy for US equities, there is an ETF for that – the iShares MSCI USA Momentum Factor ETF (MTUM).

It is a young ETF that started trading in the summer of 2013, but if you check in the DES field on your Bloomberg terminal you can see the underlying index, M2US000$. This index goes back to 1988 and that is great news because we can compare its total return against the S&P 500’s total return (see Figure 1). Both time series have been normalized to 100 starting in January 1988. You get still a 50% drawdown in the 2008-2009 period, but it has beaten the S&P 500 by 2.33 times

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)

Riccardo Ronco

Back to top
AN INVITATION FROM THE MTA NOMINATING COMMITTEE

AN INVITATION FROM THE MTA NOMINATING COMMITTEE

The Market Technicians Association (MTA) is a dynamic association focused on building a strong community of market professionals, maintaining the highest ethical standards in the industry, and promoting the use of technical analysis in the investment process. Participating in the leadership of an organization like the MTA can be a deeply rewarding experience. It is an opportunity to work closely with industry leaders, to significantly further the mission of the MTA, and to have a real impact on technical analysis in the financial industry. You will also find the experience to provide great opportunities to improve yourself both personally and professionally.

So what is actually involved in serving on the MTA Board? What qualities should you look for when nominating other members? Is this a good role for you personally? Here are the expectations of MTA Board members, which I have boiled down to the “5 P’s.”

An MTA Board member should

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.

Back to top
ROHRBACH'S FIRST LESSON IN INVESTING

ROHRBACH'S FIRST LESSON IN INVESTING

“When an investment is not going the way you thought it would, it’s important to sell it and take the loss.”

That lesson makes sense. By taking a loss, you preserve capital for the future. Avoiding the bulk of a decline means you have more capital to put to work after the bear market ends and that should allow you benefit more from the bear market.

In addition to being logical, this lesson was proven mathematically by Crestmont Research. As the chart below shows, if an investor had perfect timing and always sold at the top, they would only need to capture 27% of the upside to match the market performance. The chart shows the size of the loss in percentage terms on the x-axis and the amount of upside capture required to match the market average on the y-axis. For example, if you suffer through 40% of the decline

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)

Back to top
ETHICS IN FINANCE- ROBIN COSGROVE PRIZE 2014-2015

ETHICS IN FINANCE- ROBIN COSGROVE PRIZE 2014-2015

Competition for the Prize of $20,000 will be open until April 15, 2015. The Ethics in Finance Robin Cosgrove Prize seeks to promote awareness of ethics, integrity and trust in the finance sector, especially amongst younger professionals aged 35 years or less. The Prize invites young people from across the world to submit a paper (in English or in French) on Innovative Ideas for Ethics in Finance.

The mission of the Prize is to stimulate innovative ideas for promoting ethics and integrity in the finance sector. The Prize reaches out to young people familiar with the banking, finance and investment sectors, with special attention to emerging markets, to attract innovative ideas, proposals and

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.

Back to top
HOW TO LET PROFITS RUN AND CUT LOSSES

HOW TO LET PROFITS RUN AND CUT LOSSES

Cynthia Kase, CMT, MFTA, has decades of experience in the markets and understands how to consistently win. She has developed a number of new tools in the past few years and recently shared some of those tools in a webinar that is available at her web site.

Cynthia provided a preview of some of the ideas in the webinar in “Technical Analysis Keeps Traders on Track,” an article published in the January 15, 2015 issue of Bloomberg Brief: Technical Strategies that offered an example of the value of stops. For that article, she applied some of her tools to an analysis of Apple (AAPL).

A fundamental trader’s goal might be to hold AAPL as long as possible without ever experiencing a decline of more than 5%. To meet their risk management goals, the trader would need to apply technical analysis to close positions when necessary. The chart below shows one method for

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

Back to top
WHY PASSIVE INVESTORS GET HAMMERED

WHY PASSIVE INVESTORS GET HAMMERED

Editor’s note: This was originally published in Proactive Advisor Magazine and is reprinted here with permission. For a nocost subscription to Proactive Adviser, click here. This article illustrates Rohrbach’s first rule of investing in practical terms.

If I had a hammer, I’d hammer in the morning
I’d hammer in the evening, all over this land
I’d hammer out danger, I’d hammer out a warning
I’d hammer out love between my brothers
and my sisters all over this land.
–“If I had a Hammer” by Pete Seeger and Lee Hayes, 1949.

“If all you have is a hammer, everything looks like a nail.” –Abraham Maslow

I don’t know if American psychologist Abraham Maslow ever met Pete Seeger, but they seem to agree about the use of a basic hand tool. Over the years, I have heard many variations of Maslow’s statement though the meaning has remained the same—those good with

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)

Mike Posey

Mike Posey

Back to top
BUCKET INVESTING OVERVIEW

BUCKET INVESTING OVERVIEW

Editor’s note: Bucket investing is a well-known financial planning concept. Technical analysts might discover their techniques can be applied within this framework to improve returns for the client and to increase business opportunities for the analyst. This article details the bucket approach and includes references to behavioral finance heuristics that contribute to its success. Readers will readily see how technical analysis can be applied within the various buckets.

Designing an asset allocation approach to meet a client’s financial objectives often is cited as the most important component of the investment advisory process. Despite the advent of Markowitz and Modern Portfolio Theory, this process cannot be easily reduced to a financial engineering problem. Economists have long made a key assumption within their models that is highly flawed for the purposes of simplifying the mathematical implementation: they assume that human beings only make rational decisions.

Nobel Prize winner Daniel Kahneman, a renowned expert 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)

Z. George Yang, Ph.D. & CFA

Back to top
2015 NAAIM WAGNER AWARD CALL FOR PAPERS

2015 NAAIM WAGNER AWARD CALL FOR PAPERS

In 2009, the National Association of Active Investment Managers (NAAIM), launched the NAAIM Wagner Award is designed to expand awareness of active investment management techniques and the results of active strategies through the solicitation and publication of research on active management. $10,000 is presented annually for the best paper submitted to the competition.

NAAIM is now accepting papers for the 2015 Competition. The deadline for the full papers is Monday, March 2, 2015. Along with a $10,000 first prize, the NAAIM Wagner Award competition also often awards a $3,000 second prize and $1,000 third prize (given at the judge’s discretion).

The competition is open to all investment practitioners, academic faculty

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.

Back to top
MASTERS IN TECHNICAL ANALYSIS: JIM ROHRBACH

MASTERS IN TECHNICAL ANALYSIS: JIM ROHRBACH

“There are really only two good feelings in investing. One is being in the market when it is going up, and the other is being out when the market is going down.” Jim Rohrbach

Jim Rohrbach is the President and founder of Investment Models®, Inc. He is a Registered Investment Advisor and has written a weekly stock market time newsletter for the past 37 years. His career as a market timer began after a 25-year career with AT&T where he held various operations and staff management positions. After that, he turned his attention to the stock market and has developed two Market Timing RIX® Indexes. With these indexes, each day he

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)

Back to top
SHAKE OFF THOSE WINTER BLUES WITH THE RIGHT STOCK SELECTION

SHAKE OFF THOSE WINTER BLUES WITH THE RIGHT STOCK SELECTION

Editor’s note: This report was originally published by Phases & Cycles on January 20, 2015 and is reprinted here with permission.

The sixth gain in a row for the Dow, new all time-highs for the S&P 500 and double digit gains for the Nasdaq – no wonder the New Year’s parties featured large crowds dressed in bullish costumes shouting “wow” and “oh” and “bring it on!”

After such festivities it didn’t surprise us that investors woke up the next day with a headache. We wrote: “Expect an intense battle between bulls and bears to open the year.” This is exactly what happened in the first weeks of 2015.

Following a tour-de-force rally out of the October lows, the North American indices started on a series of rallies and selloffs. As usual, market participants found their “excuses” to sell or buy; one day it was euphoria about economic growth, another time it was panic

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)

Ron Meisels

Back to top

New Educational Content This Month

Back to top