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Technically Speaking, July 2007

* Due to time sensitive submissions, there will not be a letter from the Executive Director or Editor this month. *

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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...

Review of Basics The Purity of Price

by Martha Stokes, CMT

Thirty-five years ago, technical analysis was simple. It was the analysis of stock charts in the most basic of forms: the purity of price, the clarity of time, and the validity of quantity. Emphasis...

Optimal Trading Strategies: Quantitative Approaches for Managing Market Impact and Trading Risk by Robert Kissell & Morton Glantz

by Michael Carr, CMT & Robert Kissell & Morton Glantz

When I test an idea for futures trading, I deduct $45 per trade for slippage and commissions. An old futures trader taught me to do this, and I assumed that an old futures trader must know what...

In Depth Tom McClellan

by Molly Schilling & Tom McClellan

Tom McClellan is the editor of “The McClellan Market Report” a comprehensive daily, as well as bimonthly analysis of market activity and trends. Tom’s work is characterized by a succinct...

Active CMTs as of June 30, 2007

...

Technical Analysis, and MTA Members, Gaining Recognition

Readers of Forbes magazine might have been surprised to see a picture of long-time MTA Member Robert W. Colby, CMT, on page 136 of the June 4, 2007 issue. It’s not that Colby’s work isn’t...

The Great Bust Ahead by Daniel A. Arnold

by Michael Carr, CMT & Daniel A. Arnold

With a subtitle of “The Greatest Depression in American and UK History is Just Several Short Years Away,” this short book gives away the ending on the front cover. The interesting part, from a...

Review of Basics The Purity of Price

Thirty-five years ago, technical analysis was simple. It was the analysis of stock charts in the most basic of forms: the purity of price, the clarity of time, and the validity of quantity.

Emphasis since then has been on developing indicators that would reveal more about the stock chart in an easier way. Many excellent indicators have been written in the pursuit of creating an improved method for stock chart analysis. In placing so much importance on indicators the art of reading price in its pure form is being lost in the next generation of technical analysts.

In the early 1990’s a revival of price analysis study occurred when Steven Nison, CMT introduced candlesticks to western technical analysts. Yet even then, price took a back seat to indicators when it came to entry or exit signals. Recently, there has been a return to the mentality that all things about a chart should

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)

Martha Stokes

Martha Stokes, CMT

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Optimal Trading Strategies: Quantitative Approaches for Managing Market Impact and Trading Risk by Robert Kissell & Morton Glantz

Optimal Trading Strategies: Quantitative Approaches for Managing Market Impact and Trading Risk by Robert Kissell & Morton Glantz

When I test an idea for futures trading, I deduct $45 per trade for slippage and commissions. An old futures trader taught me to do this, and I assumed that an old futures trader must know what he’s talking about since there are so few of them. After reading Optimal Trading Strategies, I now realize that there much more to estimating trading costs than simply following a rule of thumb provided by a voice of experience.

A number of factors can influence transaction costs, including overall market conditions, order size, liquidity and the market where the order is executed. They present research to show that transaction costs average 87 basis points (bp) for listed stocks and 134 bp for NASDAQ orders. Large orders (greater than 250,000 shares) incur higher costs of 101 bp for listed stocks and 152 bp for NASDAQ stocks. No

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

Robert Kissell

Morton Glantz

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In Depth Tom McClellan

In Depth Tom McClellan

Tom McClellan is the editor of “The McClellan Market Report” a comprehensive daily, as well as bimonthly analysis of market activity and trends. Tom’s work is characterized by a succinct articulation of an elaborate array of technical tools and barometers, and is invariably punctuated by insightful, informative and historically relevant anecdotes. Tom’s style of writing has an unmistakable charm, with touches of humor and irony, ever endearing him to his many readers. He is the son of the legendary Sherman McClellan and his late wife, Marian McClellan, both of whom were honored in 2004 with a Lifetime Achievement Award by the Market Technicians Association.

Editors note: You can read Sherman’s remarks from that awards ceremony at http://www.mcoscillator.com/reports/special/MTA_speech.html, and also read a booklet that was given to attendees about the McClellans’ work at http://www.mcoscillator.com/reports/special/McClellan_MTAaward.pdf] Sherman McClellan is currently a member of the Board of Directors for the Market Technicians Association, and

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)

Molly Schilling

Tom McClellan

Active CMTs as of June 30, 2007

Active CMTs as of June 30, 2007

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.

Technical Analysis, and MTA Members, Gaining Recognition

Technical Analysis, and MTA Members, Gaining Recognition

Readers of Forbes magazine might have been surprised to see a picture of long-time MTA Member Robert W. Colby, CMT, on page 136 of the June 4, 2007 issue. It’s not that Colby’s work isn’t worthy of national attention, it most certainly is. The surprise is that Forbes would give so much space to an article about technical analysis. Forbes Senior Editor Daniel Fisher, CFA, wrote a fair and balanced article about trading ETFs using Colby’s relative strength strategy. The article also quotes another long-time MTA Member, John Bollinger, CFA, CMT, explaining some of the benefits individual investors obtain from using ETFs. Technicians are quite familiar with the concept of relative strength portfolios, of course, since we invented it! Colby always credits MTA Director Charles D. Kirkpatrick II, CMT, for publishing (in the MTA’s own Journal of Technical Analysis) compelling data showing that relative strength portfolios consistently outperform.

[I can’t find

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.

The Great Bust Ahead by Daniel A. Arnold

The Great Bust Ahead by Daniel A. Arnold

With a subtitle of “The Greatest Depression in American and UK History is Just Several Short Years Away,” this short book gives away the ending on the front cover. The interesting part, from a technical analysis perspective, is that in less than 60 pages the author presents a coherent argument for the reasons underlying long-term cycles in markets and the economy. In Arnold’s opinion, demographics are the unseen 800-pound gorilla in the room determining stock prices.

The argument is simple and straightforward

  • Consumer spending accounts for 60-70% of Gross Domestic Product.
  • Stocks, and other assets, reflect economic growth.
  • In the United States and the United Kingdom, the biggest spenders are those aged 45-54 years old.
  • The secular trend of stock prices shows a strong correlation with the size of this demographic cohort.
  • Changes in direction of growth within 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)

Michael Carr, CMT

Michael Carr, CMT

Daniel A. Arnold

New Educational Content This Month

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