public

Technically Speaking, July, 2006

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

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.

What's Inside...

Technical Analysis and the Economy

by Garry Rissman

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...

Martin Meaney, CMT, “Technical Analysis in Trading”

by Michael Carr, CMT & Martin Meaney, CMT

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...

Improving Technical Research

by Sam Levine, CMT, CFA

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...

How A Moving-Average Strategy Can Add Value

by Jean Paul van Straalen, CMT, FRM

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...

Chart of the Month

by Mukul Pal

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....

Technical Analysis and the Economy

Technical Analysis and the Economy

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 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)

Back to top
Martin Meaney, CMT, “Technical Analysis in Trading”

Martin Meaney, CMT, “Technical Analysis in Trading”

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

Michael Carr, CMT

Martin Meaney, CMT

Back to top
Improving Technical Research

Improving Technical Research

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)

Back to top
How A Moving-Average Strategy Can Add Value

How A Moving-Average Strategy Can Add Value

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

Back to top
Chart of the Month

Chart of the Month

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

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

Back to top

New Educational Content This Month

Back to top