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Technically Speaking, January 2013

LETTER FROM THE EDITOR

This year marks the fortieth anniversary of the founding of the MTA and presents an opportunity to review the work of some of the giants of technical analysis.  Each month, we will feature the work of at least one of the individuals who have had a large impact on the study of technical analysis, starting with an in-depth look at the work of Bernadette Murphy, CMT, who was one of the first to note the importance that options trading would have in market analysis. We have reprinted an article she prepared for the MTA Journal in 1980 that serves as a primer to the options markets and shows an example of the thought process that has allowed her to stay ahead of the markets for almost fifty years.

Bernadette was also among the first to understand the importance of professional certification and was instrumental in the development of the CMT program. She also understood the limitations of the CMT and in November 1981 wrote, “The principles, philosophy and measurement tools of the technical analyst make analysis of the stock market viable. The effectiveness of the conclusions depends upon the talent of the user. Medical, legal and accounting disciplines are tested regularly. Many pass the examinations but only a handful becomes outstanding practitioners. The talents of the user make the difference. I believe the same applies in the world of technical analysis.”

Interestingly, her niece Mary Ann Bartels has also become an outstanding practitioner, continuing the family tradition of identifying new market trends and developed sentiment indicators based on more recent market changes. Mary Ann is one of the exceptional speakers scheduled to make a presentation at the Annual Symposium in April offering current insights into the markets. 

Please tell us about the thought leaders you think we should feature in upcoming issues of Technically Speaking by emailing editor@mta.org.

MIKE CARR

What's Inside...

A FAMILY OF UNIQUE INDICATORS

Technical analysis includes a review of the action in a market to understand the trend. Many technicians limit themselves to price but there is also a family of indicators that looks at who is...

THE OPTION MARKET – EARLY TRENDS

by Bernadette Bartels Murphy, CMT

Editor’s note: This article was published in the MTA Journal in 1980 and looked at exchange-traded options trading less than ten years after they were introduced. A full copy of that Journal is...

A NEW SCREENER

by David Steckler

Editor’s note: This article is extracted from a daily review of the trading action in ETFs that was originally posted at Dave’s ETF RoundUp on December 10, 2012. It is reprinted here with...

A TECHNICAL GUIDE FOR ENERGY TRADERS

by Jonathan Beck

Editor’s note: A Technical Guide for Energy Traders is a daily newsletter that provides astute and intelligible technical commentary backed up with crystal clear charts that aim to help you make...

AN EXAMPLE OF ADVANCED TRADING SYSTEMS

by David Aronson, CMT

Editor’s note: David Aronson’s “Evidence Based Technical Analysis” is required reading for CMT candidates. It is a book that details how to apply the philosophy of the scientific method to...

A FAMILY OF UNIQUE INDICATORS

A FAMILY OF UNIQUE INDICATORS

Technical analysis includes a review of the action in a market to understand the trend. Many technicians limit themselves to price but there is also a family of indicators that looks at who is creating the price action. This is a form of sentiment analysis and analysts can use data on who is buying and selling to gain a deeper understanding of the trend. In some cases, skilled analysts can spot turning based on this type of analysis. Many of the market-based sentiment indicators have lost their usefulness.  Fifty years ago, technicians could study odd-lot trades (buy or sell orders of less than 100 shares) to see what small, individual traders were doing. This indicator was often interpreted in a contrarian manner because large amounts of odd-lot buying often accompanied market tops and odd-lot sellers often closed positions at market bottoms. Another contrary indicator was the public/specialist short sales ratio which compared

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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THE OPTION MARKET – EARLY TRENDS

THE OPTION MARKET – EARLY TRENDS

Editor’s note: This article was published in the MTA Journal in 1980 and looked at exchange-traded options trading less than ten years after they were introduced. A full copy of that Journal is available at http://go.mta.org/3149. Bernadette M. Murphy, MTA President 1977-1978, has pioneered in the collection and technical analysis of options data since the very inception of listed options trading. She has been instrumental in persuading the Options Clearing Corporation and the various exchanges to provide data which the stock market technician can utilize. She has developed a number of techniques for the analysis of options data and has been instrumental in assisting others in the development of such techniques. Despite the expansive growth in options trading, technical analysis of options data remains in its infancy. In this article, Bernadette gives an overview of the options trading mechanisms, the data currently available, and outlines some analytical techniques which have proved

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)

Bernadette Bartels Murphy, CMT

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A NEW SCREENER

A NEW SCREENER

Editor’s note: This article is extracted from a daily review of the trading action in ETFs that was originally posted at Dave’s ETF RoundUp on December 10, 2012. It is reprinted here with permission. The complete article can be read at http://go.mta.org/3148. For additional examples of timely market summaries, reviews of trading systems and information about back tested strategies that are available at http://www.etfroundup.com/. At the end of the day, what we’re all looking for is an efficient method for finding ETF’s that are set up for a buy. Oh, and is it too much to ask that the setup comes from a methodology that has back tested out with a positive bias? Theses methodologies are out there, if you know where to look. The newest methodology I’ve come across comes from Larry Connors, Cesar Alvarez, and Matt Radtke, and it’s called the “ConnorsRSI” system. ConnorsRSI is a composite indicator consisting of

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)

David Steckler

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A TECHNICAL GUIDE FOR ENERGY TRADERS

A TECHNICAL GUIDE FOR ENERGY TRADERS

Editor’s note: A Technical Guide for Energy Traders is a daily newsletter that provides astute and intelligible technical commentary backed up with crystal clear charts that aim to help you make confident investment decisions. This was originally sent to subscribers in mid-December and is reprinted here with permission. For more information, please visit jbeckinvestments.com Crude Oil (WTI): It is this large symmetrical triangle pattern that is driving my intermediate to longer-term technical outlook. I always believed that these patterns represent the increasing tenseness of a coil being tightened.  The result can be explosive; however the direction of the break is not so easily determined. We need to wait for this pattern to resolve of its own volition before making that big call. Unfortunately this pattern may not resolve itself until later 2013. We will focus on the shorter-term trends/pattern to profit throughout the year. Crude Oil (Brent): Although we think that WTI may

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)

Jonathan Beck

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AN EXAMPLE OF ADVANCED TRADING SYSTEMS

AN EXAMPLE OF ADVANCED TRADING SYSTEMS

Editor’s note: David Aronson’s “Evidence Based Technical Analysis” is required reading for CMT candidates. It is a book that details how to apply the philosophy of the scientific method to trading system development.  Much of the text is devoted to theory but David is not a theoretician as much as he is a practitioner of technical analysis. He has developed a concept to “purify VIX” which compares the actual level of the VIX index with the indicator’s expected level based on the price action. The process of purifying sentiment indicators is detailed in a paper David coauthored, which can be downloaded at http://go.mta.org/3151. Purified VIX has proven to be a useful indicator. It is not widely available and it requires some degree of programming skill to add the indicator to most trading platforms. David is addressing that by creating a unique trading platform called Trading System Synthesis & Boosting (TSSB). This

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)

David Aronson, CMT

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New Educational Content This Month

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