From the President’s Desk
Your new officers and board members for the 2006-2007 year are now all in place and have already dug in and begun to work. I want to welcome the two new directors, Sherman McClellan and Bruce Kamich, who joined the Board on July 1. Sherman is a long-time technician and first time Board member. Bruce is a past President of the MTA.
Since our last newsletter the certification committee has completed the grading of the CMT 3 tests, and the results are quite gratifying for all of us involved in the accreditation process, as well as the candidates. Two-thirds of the candidates passed the demanding four-hour essay examination and are now in line for their Chartered Market Technician designation. The solid pass rate is a testimony to the quality of the candidates and to their knowledge and preparation. On behalf of the Board of Directors, I congratulate them. If they are already members or when they complete the membership process, they will be awarded their CMT’s.
Our annual long range planning meeting is scheduled for September 9 in New York. You will be reminded of the precise location and time on the MTA web site and in the newsletter. The long range planning meeting is one of the few times the MTA Board can get together face-to-face to discuss at length the important issues facing the MTA and the profession of technical analysis. Our Board members are scattered across the U.S. (and Canada). The meeting is, of course, open to the whole membership, and the Board encourages participation from all members. If you want to offer your opinions, you can attend or you can make your wishes known to the Board. You can email me or any other Board member with questions or comments if you are not able to attend in person.
The search for a new Executive Director goes on. The Search Committee has additional applicants to consider. However, the MTA Board would like to make it clear that it is still open to suggestions for new candidates. If you have experience in running a small business (the MTA has a five-person staff), especially if you have experience with not-for-profit organizations, or if you know someone with that background, let us know. Knowledge and interest in technical analysis are important criteria, but the ability to manage, and to work with and encourage volunteers are critical. We are looking for someone with good verbal and written communication skills and the ability to analyze financial data and make business strategy decisions. There is some travel involved, including visiting chapters and prospective chapters, and in seminar planning and execution. We are offering competitive compensation with comparable not-for-profit organizations in the New York metropolitan area. As you know, the MTA office is presently in Woodbridge, New Jersey (less than an hour from New York), but we remain committed to moving the office back to New York as soon as possible. Cover letters and bios can be sent to me at the MTA office by email or regular mail.
The vacation season is in full force. But the MTA is a year-round operation and the Board members and committee chairs will be working hard. There will be monthly educational meetings, regular Board meetings, and normal committee functions throughout the summer. The seminar committee is working on the agenda for the winter getaway and is planning the spring seminar in New York. If you have suggestions for speakers and topics, please let us know. In the meantime, it is business as usual for the staff in Woodbridge. If your summer plans take you to the New York-New Jersey area, then stop in our office, say hello, and browse in the library.
Sincerely,
Phil Roth, CMT
President
What's Inside...
Technical Analysis and the Economy
by Garry RissmanThomas R. Keene, CFA, is an Editor-at-Large for Bloomberg News. He provides investment and economic perspective to Bloomberg’s radio, TV and print divisions. He is a member of the Association for...
Martin Meaney, CMT, “Technical Analysis in Trading”
by Michael Carr, CMT & Martin Meaney, CMTCMT test preparation involves learning a lot of theory, and trading requires successful application of that theory to dynamic markets. In the final hour of the 2006 MTA Education Seminar, Martin...
Improving Technical Research
by Sam Levine, CMT, CFAApologies, Accusations, and Accolades Readers of technical analysis are fortunate to peek over the shoulders of some intellectual giants. With apologies to those mega-technicians, I suggest that all...
How A Moving-Average Strategy Can Add Value
by Jean Paul van Straalen, CMT, FRMCan simple technical indicators assist portfolio managers in creating alpha? Our research on moving averages shows that stocks with positive signals do outperform. Jean Paul van Straalen...
Chart of the Month
by Mukul PalElliott Count and Fibonacci Proportions on SENSEX India Illustrated above is the 5 wave impulse for Sensex, the Indian benchmark. The impulse started on 21 Sep 01 and lasted for roughly 1,693 days....
Thomas R. Keene, CFA, is an Editor-at-Large for Bloomberg News. He provides investment and economic perspective to Bloomberg’s radio, TV and print divisions. He is a member of the Association for Investment Management and Research and the National Association for Business Economics He spoke at the New York Region monthly meeting on June 12, 2006. Members can see the video link of this lecture at http://209.114.199.248/VideoArchive/index.cfm. Mr. Keene began his presentation by explaining that he believes, as does John Murphy, that technical analysis is best used in conjunction with fundamental analysis and economic analysis. In his opinion, those relying solely on fundamental analysis are doomed to failure at some point. Applying technical analysis to fundamentals or economic data provides valuable insights. As an example, he explained that his analysis of the US/China trade deficit begins with a look at the raw data compared to its twelve-month moving average. On behalf of 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.
Contributor(s)

Garry Rissman
Bio
CMT test preparation involves learning a lot of theory, and trading requires successful application of that theory to dynamic markets. In the final hour of the 2006 MTA Education Seminar, Martin brought the reality of trading into sharp focus, and demonstrated exactly how to apply theory to trading. In particular, he demonstrated how Elliott Wave theory can be used to enter trades with very well defined risk limits. A basic principle of Elliot Wave theory is that wave 2 can never retrace more than 100% of wave 1. This allows Martin to initiate countertend trades with a positive expectancy, as shown in Figure 1, “2 Wave Test.” The buy zone is between the 38% to 62% retracement levels of wave 1, generally a 50% retracement offers a good entry. The initial stop is at the bottom of wave 1. For profitable trades, Martin takes half his position off at the price
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
Mike Carr, who holds a Chartered Market Technician (CMT) designation, is a full-time trader and contributing editor for Banyan Hill Publishing, a leading investment newsletter service. He is an instructor at the New York Institute of Finance and a contributor to various...

Martin Meaney, CMT
Martin Meaney, CMT, has been a member of the MTA since 1990, and is employed by Cantor Fitzgerald & Co. where he is responsible for the trading, marketing, and underwriting of GSE debt. He has degrees from Adelphi University and the University of Virginia, McIntire School of...
Apologies, Accusations, and Accolades Readers of technical analysis are fortunate to peek over the shoulders of some intellectual giants. With apologies to those mega-technicians, I suggest that all of us attend carefully to the presentation of both our individual opinions and the tools of our discipline. A rigorous approach to language and science will increase acceptance of our work and future employment opportunities for technicians. This article will discuss the casual habits of style and thinking many technicians have adopted at the peril of imprecision at best and inaccuracy at worst. This is not to attack previous authors and pioneers but rather to stimulate thought about the general quality of our writing and research methods. The inspiration for this article came from reading Thomas Bulkowski’s Encyclopedia of Chart Patterns (Wiley, 2005), which sets a commendable standard for TA research. Correlation Does Not Prove Causality Establishing that one event causes another is a difficult proposition
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)

Sam Levine, CMT, CFA
BIO
Can simple technical indicators assist portfolio managers in creating alpha? Our research on moving averages shows that stocks with positive signals do outperform. Jean Paul van Straalen explains. The moving average (MA) captures the average value of a security or an indicator over a period of time. Moving averages are typically used to compare a security’s current price with the average price over a preceding period. If the security’s price rises above its MA, investors typically buy. If it remains there or moves higher, investors are becoming more bullish. By contrast, when the security’s price crosses below its MA, investors are becoming more bearish and they typically sell. It is possible to use an MA as an indication of a support or resistance level. The relationship between two MAs can also be used as a buying or selling signal. For example, when a shorter-term MA moves above its longer-term counterpart, it triggers
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)

Jean Paul van Straalen, CMT, FRM
Jean Paul van Straalen CMT FRM, was Vice President of ABN AMRO Asset Management/ Fortis Investments. His activities were focused on quantitative research and managing a Global Equity Value portfolio driven by quantitative models. Currently he and his colleague John Galakis are...
Elliott Count and Fibonacci Proportions on SENSEX India Illustrated above is the 5 wave impulse for Sensex, the Indian benchmark. The impulse started on 21 Sep 01 and lasted for roughly 1,693 days. The current move can potentially be labeled as an end of CYCLE V wave, which took nearly half of the time compared to the CYCLE III (Nov 84 – 12 Sep 94). Incidentally the time taken by the CYCLE V also registered a Fibonacci proportion at 0.66 of time taken by CYCLE IV (12 Sep 94 – 21 Sep 01). The chart above also highlights a clear Elliott diagonal impulsive structure with Wave 1 and Wave 2 forming a base channel; Wave 4 resting on the respective channel taking a support in May 04; and finally accelerating in the channel formed by Wave 4 and Wave 2 lows. We also have a thrust outside the respective channel giving 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)

Mukul Pal
Mukul Pal, a technical analyst who holds the Chartered Market Technician (CMT) designation, is the founder of AlphaBlock, a technology group focused on bringing the predictive mapping characteristics of AI to the market mechanisms that use blockchain to create an adaptive...
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