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Technically Speaking, February 2016

LETTER FROM THE EDITOR

Many of us have been planning to attend the MTA’s Annual Symposium and February might be the time to start acting on those plans. According to a study done by CheapAir.com:

In 2014, [we] amassed [a database of] 1.5 billion airfares as we watched 4,986,522 trips, recording the lowest fare for each trip every day from 320 days in advance up until one day before flight time. It’s a treasure trove of cool info if you’re an airfare geek; or, a curious use of terabytes, if you’re anybody else.

Since the majority of questions we get asked every year start with “When is the best time to book my flight to…”, the first thing we always do with this data is determine, on average, how far in advance should you book your flight to get the lowest fare.

This year, for domestic flights, the answer is 47 days.

This is actionable market data and there’s even a chart that shows now is the time to start watching airfares for those flying to New York which will kick off on April 6, 2015 and run through April 8. You can learn more about the Symposium here and I hope to see many of you there.

Technically Speaking, February 2016 - 2022

In addition to Technically Speaking, the MTA provides actionable ideas at chapter meetings and at the Annual Symposium. It’s time for many of us to start planning for that meeting. It will be held in New York City.

In the rest of the magazine, we provide you with more traditional market analysis. As always, please let us know what you’d like to see in future issues of Technically Speaking by emailing us at editor@mta.org.

Sincerely,

Michael Carr

What's Inside...

TALKING NUMBERS: TECHNICAL Vs. FUNDAMENTAL INVESTMENT RECOMMENDATIONS

by Doron Avramov & Guy Kaplanski & Haim Levy

Editor’s note: this paper compares the opinions of technical analysts with those of fundamental analysts using forecasts made on a CNBC show. The complete paper can be found at SSRN and was the...

CMT STUDY SUPPLEMENT P&F CHARTS FOR BEGINNERS: THE ULTIMATE TOOLS FOR MAKING PROFITABLE INVESTMENT DECISIONS

by Intalus

Editor’s note: this was originally published by Intalus as a “How to” guide for Tradesignal users. It is reprinted here as a review of basics for CMT candidates and other members wanting a...

THE PERPETUITIES THAT ARE NO LONGER PERPETUAL

by Dr. Bryan Taylor

Editor’s note: This article was originally published at the Global Financial Data blog and is reprinted here with permission. At the beginning of 2015, the British government had £2.59 billion in...

WHO ATE JOE'S RETIREMENT MONEY? SEQUENCE RISK AND ITS INSIDIOUS DRAG ON RETIREMENT WEALTH

by Peter Chiappinelli & Ram Thirukkonda, CFA

Editor’s note: this was originally published at GMO’s web site in August 2015. The full paper can be found there. Summary Defined Contribution (DC) plan participants are haunted by an invisible...

RETHINKING INVESTMENT PERFORMANCE ATTRIBUTION

by Jagdeep Singh Bachher & Leo De Bever & Roman Chuyan & Ashby Monk

Editor’s note: this was one of the most widely read papers at SavvyInvestor.net in 2015. It was originally published in the Rotman International Journal of Pension Management (Volume 7, Issue 2,...

BLOOMBERG BRIEFS: CHARTS THAT SHOW GLOBAL STOCK MARKETS ARE TEETERING AT KEY SUPPORT

Editor’s note: this originally appeared in Bloomberg Briefs on January 21, 2016 and is extracted below. The MSCI World Index is one of six major stock indexes that have broken, or are testing, key...

ETHICS CORNER: WHAT CAN I SAY ABOUT THE CMT EXAM ON MY RESUME?

This might be the most frequently asked question related to ethics – what can I say about my participation in the CMT program on my resume? Candidates in the program want to know how to provide...

AMBA: THE FULL CYCLE OF TRADE

Ambarella, Inc. (AMBA) by far was 2015’s ‘everything’ trade. Never can I remember a single stock doing so much in one year from a bull and bear perspective. There was literally something for...

CHART OF THE MONTH

Editor’s note: Crestmont Research maintains charts on a number of fundamental data series. Much of this data can be applied by technical analysts. P/E ratios and dividend yields can be interpreted...

TALKING NUMBERS: TECHNICAL Vs. FUNDAMENTAL INVESTMENT RECOMMENDATIONS

TALKING NUMBERS: TECHNICAL Vs. FUNDAMENTAL INVESTMENT RECOMMENDATIONS

Editor’s note: this paper compares the opinions of technical analysts with those of fundamental analysts using forecasts made on a CNBC show. The complete paper can be found at SSRN and was the subject of a recent MarketWatch article. Abstract: This paper studies the real-time value of technical and fundamental investment recommendations broadcasted simultaneously on the TV show “Talking Numbers.” Considering individual stocks, technicians outperform leading fundamental analysts in predicting upward and downward price movements over investment horizons of one to twelve months. Technicians also deliver a significant alpha with respect to the Fama–French and momentum benchmarks. Regarding market indexes, other equity indexes, Treasuries, and commodities, both technicians and fundamental analysts deliver poor forecasts. The evidence supports the notion that technicians can detect insider buying and selling of individual stocks, whereas fundamental analysis is virtually worthless.  1.  Introduction This paper employs a novel database from “Talking Numbers” to assess the value of technical

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)

Doron Avramov

Guy Kaplanski

Haim Levy

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CMT STUDY SUPPLEMENT P&F CHARTS FOR BEGINNERS: THE ULTIMATE TOOLS FOR MAKING PROFITABLE INVESTMENT DECISIONS

CMT STUDY SUPPLEMENT P&F CHARTS FOR BEGINNERS: THE ULTIMATE TOOLS FOR MAKING PROFITABLE INVESTMENT DECISIONS

Editor’s note: this was originally published by Intalus as a “How to” guide for Tradesignal users. It is reprinted here as a review of basics for CMT candidates and other members wanting a refresher on P&F basis. A five-minute video is also available. Point & Figure charts are one of the oldest chart forms and have many advantages in analysis and the derivation of profitable trading signals. Because of their unique design and presentation P&F charts, in many circles, are viewed as complicated or even confusing – wrongly. The origins of the Point & Figure charts date back to the late 19th century, when price movements were still drawn by hand and made of numbers. A.W. Cohen popularized this technique and was the one who introduced the now common representation: P&F charts are composed of individual boxes, each representing a certain amount of movement. In short: P&F charts are based on

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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THE PERPETUITIES THAT ARE NO LONGER PERPETUAL

THE PERPETUITIES THAT ARE NO LONGER PERPETUAL

Editor’s note: This article was originally published at the Global Financial Data blog and is reprinted here with permission. At the beginning of 2015, the British government had £2.59 billion in undated securities outstanding, representing about 0.23% of the British government’s gilt portfolio. These bonds had no set redemption date, but could be redeemed with three months’ notice. In theory, the gilts could have existed forever. These securities had originally been issued between 1853 and 1946 and replaced securities that originated back in the 1700s. Unfortunately, they are no more.  The last undated gilt, also referred to as a perpetuity because it had no redemption date, was called in by the British government on July 5, 2015.  Three hundred years of financial history has come to an end. Perpetuities Begin To understand why perpetuities existed, you have to go back to the beginning of Britain’s financial history.  Originally, loans were made direct to the

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)

Dr. Bryan Taylor - 2022

Dr. Bryan Taylor

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WHO ATE JOE'S RETIREMENT MONEY? SEQUENCE RISK AND ITS INSIDIOUS DRAG ON RETIREMENT WEALTH

WHO ATE JOE'S RETIREMENT MONEY? SEQUENCE RISK AND ITS INSIDIOUS DRAG ON RETIREMENT WEALTH

Editor’s note: this was originally published at GMO’s web site in August 2015. The full paper can be found there. Summary Defined Contribution (DC) plan participants are haunted by an invisible risk called sequence risk (sometimes called sequence-of-returns or path dependency risk), that is, getting the “right” returns but in the “wrong” order. Sequence risk in the retirement phase has been studied extensively. Sadly, not as much attention has been paid to sequence risk during the accumulation phase, but it is equally important. Sequence risk rears its head in this way: Even if an individual employee does everything “right” – participates in the plan, defers income religiously, takes full advantage of the company match, and even gets his exact expected return from his investments – he can still fall victim to disappointing final wealth outcomes if the order of those returns works against him. Current models of asset allocation – the

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)

Peter Chiappinelli - 2022

Peter Chiappinelli

Ram Thirukkonda, CFA - 2022

Ram Thirukkonda, CFA

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RETHINKING INVESTMENT PERFORMANCE ATTRIBUTION

RETHINKING INVESTMENT PERFORMANCE ATTRIBUTION

Editor’s note: this was one of the most widely read papers at SavvyInvestor.net in 2015. It was originally published in the Rotman International Journal of Pension Management (Volume 7, Issue 2, Fall 2014).  An electronic copy is available at http://ssrn.com/abstract=2497513. Abstract: Proprietary information and data-processing systems have become key competitive differentiators for investors; better systems provide better data, which in turn drive better investment decisions and performance. But while the best systems are multifaceted and touch all aspects of the investment organization, one component of such systems is increasingly important: the measurement and attribution of investment performance. Performance attribution should do more than just explain the past; it should also be a tool to make better future investment decisions. This article describes the Alberta Investment Management Corporation’s journey to develop a performance attribution system as an investment management tool, in the hope of contributing to the institutional investor debate on

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)

Jagdeep Singh Bachher

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BLOOMBERG BRIEFS: CHARTS THAT SHOW GLOBAL STOCK MARKETS ARE TEETERING AT KEY SUPPORT

BLOOMBERG BRIEFS: CHARTS THAT SHOW GLOBAL STOCK MARKETS ARE TEETERING AT KEY SUPPORT

Editor’s note: this originally appeared in Bloomberg Briefs on January 21, 2016 and is extracted below. The MSCI World Index is one of six major stock indexes that have broken, or are testing, key support levels amid the market selloff that has intensified since the start of 2016. The MSCI World Index’s former support line may now become a resistance level, creating a bleak short to medium-term outlook. MSCI World Index Shows Bearish Head and Shoulders The six charts below show the MSCI World and five other developed market indexes. In each of these markets, support levels based on the lows of the last six months have been met or broken in recent trading. MSCI World Dips Below Support EURO STOXX Broke Support, Then Rallied Nikkei 225 Index Trades Through Support S&P 500 Continues to Flirt With Support   FTSE 100’s Support Has Held   Shanghai Composite Bounces Off Support Eoghan Leahy and Oliver Woolf are technical analysis specialists at Bloomberg

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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ETHICS CORNER: WHAT CAN I SAY ABOUT THE CMT EXAM ON MY RESUME?

ETHICS CORNER: WHAT CAN I SAY ABOUT THE CMT EXAM ON MY RESUME?

This might be the most frequently asked question related to ethics – what can I say about my participation in the CMT program on my resume? Candidates in the program want to know how to provide details on their accomplishments without violating any ethical guidelines. The answer is that you can include your status in the CMT program but must be factual. Below are specific guidelines for each step in the process: You’ll notice that after registering for an exam you are a candidate for that level. After passing an exam you can note that you passed that level as well as previous levels. The table above presents guidelines. Variations are allowed. Instead of saying you passed an exam, it is acceptable to say you completed the exam or use any other word that conveys that meaning. Once you earn the CMT, it is also important to use the term correctly. You should never

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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AMBA: THE FULL CYCLE OF TRADE

AMBA: THE FULL CYCLE OF TRADE

Ambarella, Inc. (AMBA) by far was 2015’s ‘everything’ trade. Never can I remember a single stock doing so much in one year from a bull and bear perspective. There was literally something for everyone here technically and fundamentally. Below shows the initial breakout, which really was just a short squeeze on a market leading name. This broke out right around May as RS stocks were going consensus while money had fewer places to go. For seasoned participants this is where things got interesting. Below is one of the very quiet techniques I’ve picked up over the years. As a fusion trader, I focus on fundamentals and technicals. Technicals include sentiment, and sentiment to me is one of the most important skill sets to build to really outperform. Study the chart below. As AMBA moved into the 120’s and was trading at 20X’s sales I stalked the message board looking for just the

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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CHART OF THE MONTH

CHART OF THE MONTH

Editor’s note: Crestmont Research maintains charts on a number of fundamental data series. Much of this data can be applied by technical analysts. P/E ratios and dividend yields can be interpreted as sentiment indicators while inflation and Treasury yields are inputs for intermarket analysis. These charts were updated in January by Crestmont Research.

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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