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,
President's Letterby 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 Positionby 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 Recessionby 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 Compositeby 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 Aheadby 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 VIXby 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 Aheadby 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?...
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...
Brett Villaume, CMT, CAIA
Brett Villaume, CMT, CAIA, is President of the CMT Association and has served on the Board of Directors since 2014. Additionally, Brett is a Wealth Advisor at Dogpatch Capital, a registered investment advisor in San Francisco, CA. From 2015 to 2021, Brett served as Senior...
Stanley Dash, CMT
Stanley Dash is the CMT Program Director at the CMT Association, a global credentialing body. In this role, Mr. Dash works with subject matter experts, candidates, and the Association's members to maintain and improve the curriculum, the test experience, and the value of the...
Martin J. Pring
Martin J. Pring is the president of Pring Research and Chairman of Pring Turner Capital Group (PTG), a money management and sub-advisory firm, located in Walnut Creek, CA. He is also the president of Pring.com, the research arm of PTG, which provides research to individuals and...
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.
Larry Thompson, CPA
Larry has been a student of the markets over the past decade. It started as a teenager collecting and reading his grandfather’s stock newsletter subscriptions, which eventually led to technical analysis. He currently works as an Assistant Controller for an international...
Foram Chheda, CMT
Foram Chheda, CMT is a Technical Research Analyst and founder of chartanalytics.co.in. Besides being a high-impact financial specialist with a strong ability to identify initiatives and spot opportunities, she has a steadfast focus on equities and commodities. A savvy and...
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.
Piyush Chaudhry, Founder of Wave Analytics, a firm that focuses on practicing objective and scientific forms of analysis with defined parameters that generate consistently higher grade pay-offs through superlative accuracy rates, shunning any form of randomness. With that...
Douglas Busch, CMT
Doug Busch is Founder and Proprietary Trader at Chartsmarter.com. He is an independent sell-side equity research analyst with a focus on technical analysis. With over 30 years of investment experience, Busch has held diverse roles on Wall Street, including market making,...
New Educational Content This Month
March 24, 2023
CMT Level III Informational Session
Presenter(s): Stanley Dash, CMT, Tyler Wood, CMT
March 15, 2023
Why the Dow Theory? Multimarket application, Outperformance, Drawdown reduction, and a 120+ years record
Presenter(s): Manuel Blay
March 8, 2023
Money and the Fork in the Road for the Year Ahead
Presenter(s): Brendan McCarty, CMT