public0

Technically Speaking, February 2023

Welcome readers to another edition of Technically Speaking! 

I found myself thinking about my journey recently, specifically about all the times I hesitated to reach out to leading market technicians for multiple reasons. As a technician, I was finding my footing in this industry and wanted to be sure of my ideas before approaching others. But if I think back, wanting to change something about my journey, I would’ve probably wanted to initiate conversations sooner. There is no substitute for one-on-one interactions, and the perspectives they provide are nothing like anything one could find on the internet! To clarify, this is not a regret but rather a learning. The learning is that my market knowledge will expand as I attempt to understand diverse perspectives and processes. Speaking of diverse perspectives, guess what’s closing in around the corner? The 2023 Symposium! If you haven’t already, the registration link can be found here, and I would implore you to give it your best shot at attending the event in person. 

It. Is. Glorious.

The market has been catching its breath. But as is true for any market, we certainly have sector rotation where Industrials keeps up with its appearances. If you want to get some global perspective (always a good idea), there are new all-time highs and 52-week highs to be tracked across the European market as participation widens. But King Dollar is back at it again with over four weeks of bounce-back, causing the stock market to take stock of the situation. But while DXY decides its bias towards the resistance of 113 or support of 104, we’re certainly looking at a rather messy environment. 

This month, we have write-ups that take a closer look at the recession chatter, sectors, and time cycles to analyze the market better. My favorite activity is to note down the methods analysts use to study the market that I haven’t incorporated in my analysis. It helps me refresh my knowledge and understand my fit with those methods. The only way forward is to keep learning! 

Until next time, 

Think Technically!

What's Inside...

President's Letter

by Brett Villaume, CMT, CAIA

The widely read New Yorker Magazine has a section entitled Goings on About Town, which reads like a bulletin board of current and upcoming events in the Big Apple. Of course, unless you live in New...

Assistant Director Position

by Stanley Dash, CMT

The CMT Association seeks to fill a newly created position for an Assistant Director of the CMT Program to work directly with the CMT Program Director on all aspects of the CMT Program. The person to...

A Funny Thing Happened on the Way to the Recession

by Martin J. Pring

Last year presented us with the largest consensus of economists forecasting an imminent recession that we ever recall. Contrary opinion theory says that when people start to think alike it is time to...

NASDAQ Composite

by Larry Thompson, CPA

In terms of the market, 2022 was a year many want to put in their rearview mirror including the NASDAQ, which finished down over 30%. So far in 2023, we are seeing the index pick itself up off the...

Breadth Data Signals Buoyant Days For Dow Ahead

by Foram Chheda, CMT

The previous year proved to be a troubled year for global equities. The equity markets underwent a lot of turmoil; there were many events throughout the year that affected in one way or the other....

Time Cycles - INDIA VIX

by Piyush Chaudhry

As technicians the area we focus on primarily is price action. While that is the most important variable, time acts as another variable that one can incorporate in their research. It is important to...

The Week Ahead

by Douglas Busch, CMT

“These expressions of emotion have within them the seeds of destruction.” Victor Neiderhoffer   Silver Lining:   Can the PRICE of silver be a good sign for the stock market?...

Job Posting

CMT Charter holders, new opportunities beckon you across various markets. Look below and reach out to the email IDs or contact links below for more information. Koyfin We are looking for a...

President's Letter

President's Letter

The widely read New Yorker Magazine has a section entitled Goings on About Town, which reads like a bulletin board of current and upcoming events in the Big Apple. Of course, unless you live in New York or plan to visit the city sometime soon, most readers probably skip over this section or, at most, quickly skim over it. In this month’s President’s Letter, I’m going to highlight some of the “goings on about the CMT Association” for you. There’s a lot happening that affects you as a Member. The 50th Anniversary Symposium will be held in New York City on April 26-28th. Hey, maybe the New Yorker will notice??? If you have yet to make plans to attend, it’s not too late! Standard registration pricing lasts until March 12th. If you have never been to the Annual Symposium, I want to encourage you to attend. You will be surprised by how

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)

Brett Villaume

Brett Villaume, CMT, CAIA

Back to top
Assistant Director Position

Assistant Director Position

The CMT Association seeks to fill a newly created position for an Assistant Director of the CMT Program to work directly with the CMT Program Director on all aspects of the CMT Program. The person to fill this position must be either a current CMT Charterholder, or a member who is a candidate for the charter who has successfully completed all three levels of the CMT exams and is awaiting only the professional work experience to earn the charter. This is a full-time position that will require availability for calls and meetings during US hours.  In addition, there may be some restrictions on the Assistant Director’s activities outside the CMT Association that conflict with the security standards necessary for a credentialing program or otherwise conflict with the mission, standing, or credibility of the CMT Association and the CMT Program. The work of managing the CMT Program falls broadly into three categories: Policies, Texts,

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)

Stanley Dash, CMT - 2023

Stanley Dash, CMT

Back to top
A Funny Thing Happened on the Way to the Recession

A Funny Thing Happened on the Way to the Recession

Last year presented us with the largest consensus of economists forecasting an imminent recession that we ever recall. Contrary opinion theory says that when people start to think alike it is time to look in a different direction. After all, if businesspeople and investment advisors think a recession is on the way, is it not logical that they will already have taken steps to protect themselves from such a downturn? At Pring Turner we are very data driven and agree that at first glance, it looks as if the economy is headed for a recession. Several of the leading economic indicators we follow are literally right at recession triggering levels, on the edge of a cliff if you will. Given the expectation of rising short-term interest rates and the reality of an inverted yield curve, it is not difficult to project a weaker economy. Indicators On the Threshold of a Recession For example, our Pring

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)

Martin J. Pring - 2023

Martin J. Pring

Back to top
NASDAQ Composite

NASDAQ Composite

In terms of the market, 2022 was a year many want to put in their rearview mirror including the NASDAQ, which finished down over 30%. So far in 2023, we are seeing the index pick itself up off the ground. Starting the year with five consecutive positive weeks and up more than 10% YTD. Is this just a bear market rally or does this move have sustainability? With hostility increasing between the bulls and the bears let’s evaluate both sides.

The Bull Case (see above) – Starting with price, you can see the follow through in a bullish RSI divergence, where price made new lows in October, but RSI managed to make a higher low. Market breadth has also been supportive. In just 28 trading days the index made more consecutive days of net new highs than all of last year combined. This rally also managed to get price back above the 40-week simple moving average (SMA), which followed through into the percentage of stocks above their 200 day SMA reaching levels not seen in over a year.

The Bear Case (see above) – 2023 has been a promising start for the NASDAQ, but logical skepticism remains. During this rally we have yet to see the September and May highs of 2022 eclipsed and less than 50% of stocks in the index are above their 200-day SMA. Although we are back above the 40-week SMA, the slope remains negative. Lastly, the concentration of growth exposure in the NASDAQ lends itself to relative underperformance to the broader market when headwinds around growth surface like higher interest rates, which many believe are here to stay.

Intermarket Implications (see above) – The two market wrecking balls this past year started 2023 off slow, aiding in the most recent rally. We are now seeing the dollar ($UUP) and yields ($TNX) finding support at the same time the NASDAQ struggles to get through resistance at that pesky 12,000 level. 

The Verdict – I remain cautiously optimistic, but until we get above 12,000 (September and May 2022 highs) or below 11,500 (downtrend line and 40-week SMA) I think the bulls and bears will continue fighting. Patience will pay and the implications of the dollar and yields cannot be understated. 

Contributor(s)

Lawrence Thompson

Larry Thompson, CPA

Back to top
Breadth Data Signals Buoyant Days For Dow Ahead

Breadth Data Signals Buoyant Days For Dow Ahead

The previous year proved to be a troubled year for global equities. The equity markets underwent a lot of turmoil; there were many events throughout the year that affected in one way or the other. This included events like.  The major indexes in the US like Dow Jones, Nasdaq, Dow Transportation, and the broader market S&P 500 Index ended with losses.  As it is clearly visible from the above Performance Chart; the Dow Jones Industrial Average and Dow Transportation Index performed in line with each other; they lost 19.44% and 18.73% respectively. While the broad market index S&P500 lost just 8.78% in 2022, the technology pack had remained under pressure where Nasdaq Composite Index lost 33.10% of its value during the last year.  The beginning of 2023 has been in sharp contrast to the previous year. All the major indexes started on a front foot; all have closed positive returns in 2023

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)

Foram Chheda, CMT - 2023

Foram Chheda, CMT

Back to top
Time Cycles - INDIA VIX

Time Cycles - INDIA VIX

As technicians the area we focus on primarily is price action. While that is the most important variable, time acts as another variable that one can incorporate in their research. It is important to note that just as the market ebbs and flows, there are certain cycles that are always at play. The identification of these cycles, based on your preferred time frame, can help understand their impact on the market.

The Time Cycles of Volatility determined from Volatility’s past behavior have pretty much been a leading indicator of its turning points going forward. 

This Chart is not India VIX, but IndiaVIX/NIFTY ratio. Though the chart difference between India VIX and IndiaVIX/NIFTY ratio is only apparently subtle, it shuns out all the noisy moves of India VIX that failed to translate into any credible inverse NIFTY’s movements. 

Back in 80’s and 90’s, several Technical Analysts came up with the concept of Cycles in financial markets on various instruments and the books were then flooded with them. The Time Cycles themselves have been questioned several times for their efficacy. Primary question raised on them being, how can Cycles, so static, work on Markets, so dynamic? The dynamic part of these Cycles is that one may never be able to project the magnitude of impact that can happen during the turning points of these Cycles. 

Time Cycles are never measured Peak to Peak or Peak to Trough or Trough to Peak, they are always measured Trough to Trough. They are drawn through Sine Waves. 

In the post-2020 era, IndiaVIX/NIFTY ratio is witnessing two concurrent Time Cycles of varying timeframes. A larger Cycle (Blue) is of 89 Days, coincidentally also a Fibonacci number, and a smaller Cycle (Orange) is of 46 Days. These Cycles generally stay intact till some major event, and post that new cycles emerge. Their life is only till the next significant event.  

The smaller Cycle is expected to make its Trough in coming March (vertical line) and both the Cycles are then expected to confluence their Troughs in May.  

While this makes a strong case for increasing complacency during their Trough phases and therefore, risk in Markets, these Cycles are at best combined with price studies for benefitting from the larger turns in the Markets. 

    

Contributor(s)

Piyush Chaudhry - 2023

Piyush Chaudhry

Back to top
The Week Ahead

The Week Ahead

“These expressions of emotion have within them the seeds of destruction.” Victor Neiderhoffer   Silver Lining:   Can the PRICE of silver be a good sign for the stock market? Although it is thought of as a precious metal, more than half of its use comes from “industrial purposes” which shows a possible positive development for the global economy (silver will be found in semiconductors of all things which I did not realize). Gold, which is seen as more of a store of value, has been acting a bit better than silver with the GLD off by 3% YTD and the SLV is down by 9% in 2023 so far. Looking at the chart below of the SLV shows some distribution as it is on a current 5 week losing streak with the week ending 2/3 off more than 5%. It has been under pressure as the greenback tries to steady itself above 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)

Doug Busch headshot

Douglas Busch, CMT

Back to top
Job Posting

Job Posting

CMT Charter holders, new opportunities beckon you across various markets. Look below and reach out to the email IDs or contact links below for more information. Koyfin We are looking for a salesperson focused on RIAs and FAs to build on our traction with the advisor community. This is a unique opportunity for someone who wants to be part of a fast-growing startup and take a leading role in developing our sales efforts. As the first salesperson for our company, this person will have the autonomy to take advantage of the biggest opportunities to expand our business in the FA and RIA community. We are looking for someone who can take the initiative and make things happen.  The description of the role is here: https://www.linkedin.com/jobs/view/3448961821   CIBC Asset Management We are looking for an Assistant Portfolio Manager, Global Beta to join our Montreal team. Message Glen Martin, CMT, for more details! https://www.linkedin.com/in/1glenmartin/ or Apply here: https://lnkd.in/gzJhWZ5m

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

New Educational Content This Month

Back to top