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Technically Speaking, July 2014

LETTER FROM THE EDITOR

In 1994, the MTA recognized Don Worden’s achievements with the MTA Annual Award. This award recognizes lifelong outstanding contribution to the development and widespread acceptance of technical analysis by institutional practitioners and individual investors. Don Worden truly did spend his lifetime making technical analysis accessible to institutions and individuals. Sadly, Don passed away on May 31, 2014 at the age of 82. He was born before technical analysis was a formal field of study. His work from the 1950’s has led to a number of advances in technical analysis. He was a pioneer in the analysis of volume and his thoughts on how to interpret volume evolved as the markets changed. That might be Don’s greatest contribution to technical analysis – his ability to think about the markets as they are and to change his approach when the markets changed. Too many analysts impose rigid beliefs on the market and apply indicators with strict rules, ignoring changes in the market environment and risking losses as those changes render indicators less

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What's Inside...

DON WORDEN

by Michael Carr, CMT

Don Worden founded Worden & Worden, Inc., a stock market newsletter publishing company, in 1960 and continued providing tools for institutional and individual investors over the next six decades....

TAPE READING IN THE SLEEPY FIFTIES

by Don Worden

Editor’s note: The best explanation of Don Worden’s work comes from Don Worden himself. For many years, he provided newsletter readers and users of TC2000 with his thoughts on the market and...

PRICE AND VOLUME, DIGGING DEEPER

by Buff Dormeier, CMT & Michael Carr, CMT

Buff Dormeier, CMT, has written extensively about how to incorporate volume into a comprehensive analysis. His work on Price & Volume, Digging Deeper was recognized with the Dow Award in 2007....

THE DOW AWARD

by Buff Dormeier, CMT

Editor’s note: This was originally published in December 2008. The Market Technicians Association established the Charles H. Dow Award to encourage technically based research and strengthen the...

BLOOMBERG BRIEF HIGHLIGHTS VALUE OF FIBONACCI RATIOS

In the June 26 issue of Bloomberg Brief Technical Strategies, Bloomberg’s analysts offered insights into how traders could use Fibonacci ratios to develop trading strategies. In Technicals Show...

TRADERMADE, AN FX SERVICE

by Michael Carr, CMT

Most charting services attempt to deliver everything a trader could possibly dream of. TraderMade has taken a different approach and provides forex traders with what they actually need. TraderMade is...

INTERVIEW WITH JAMES DANIEL, CMT

by James A. Daniel, CFP, CMT, EA & Amber Hestla-Barnhart

How would you describe your job? I run a small RIA and serve retail clientele as a financial planner and investment manager. I pursued the CMT designation as a way to differentiate myself from other...

MARRIED TO A MISER

by James A. Daniel, CFP, CMT, EA

Editor’s note: MarriedToAMiser.com is a blog by James Daniel that he has maintained since October of 2009. He notes that the site is regularly “updated with a little help from his wife to give...

THE DENT METHOD

by Michael Carr, CMT

Editor’s note: Recently, Dent Research posted a position in the MTA’s Career Development Center. If you are actively seeking a new position, the Career Development Center could be among your most...

CHART OF THE MONTH

Volatility, as measured by the VIX, is low and is now at levels last seen in 2007 and previously in the mid-1990’s. Although low volatility is often associated with market tops, there is no...

DON WORDEN

DON WORDEN

Don Worden founded Worden & Worden, Inc., a stock market newsletter publishing company, in 1960 and continued providing tools for institutional and individual investors over the next six decades. He was a pioneer and leader in stock market research. In the first part of his career, he delivered his thoughts through newsletters. When computers became available, he immediately began to write programs that would produce charts for his newsletters. His experimentation with computers led to the development of a chart service that provided individual investors with access to market data accessible through dial-up modems.

Don spent much of his life on the leading edge of market analysis and technology. All of his work was dedicated to helping investors think for themselves, a philosophy his son Peter Worden described as based on 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)

Michael Carr, CMT

Michael Carr, CMT

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TAPE READING IN THE SLEEPY FIFTIES

TAPE READING IN THE SLEEPY FIFTIES

Editor’s note: The best explanation of Don Worden’s work comes from Don Worden himself. For many years, he provided newsletter readers and users of TC2000 with his thoughts on the market and insights into how he thought about the stock market. This article was originally posted by Don in 1994 and is available at http://go.mta.org/7353.

The really big changes in technical analysis came with the computer, though a change of attitude for some reason began to stir before its use became commonplace in market analysis. Joseph Granville’s book Fifty-Five Daily Indicators for Stock Market Timing was an immense success. Looking back, I see the wide acceptance of the new ideas in this book as a milestone in breaking away from the doctrinaire edicts of Edwards and Magee (The Technical Analysis of Stock Trends).

I personally served as a catalyst in the development of a totally new and ambitious tool. At the time

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)

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PRICE AND VOLUME, DIGGING DEEPER

PRICE AND VOLUME, DIGGING DEEPER

Buff Dormeier, CMT, has written extensively about how to incorporate volume into a comprehensive analysis. His work on Price & Volume, Digging Deeper was recognized with the Dow Award in 2007. The complete paper can be downloaded by clicking here.

In that paper, Buff wrote, “When securities change hands on a securities auction market, the volume of shares bought always matches the volume sold on executed orders. When the price rises, the upward movement reflects demand exceeds supply or that buyers are in control. Likewise, when the price falls it implies supply exceeds demand or that sellers are in control. Over time, these trends of supply and demand form accumulation and distribution patterns. What if there was a way to look deep inside price and volume trends to determine if current prices were supported by volume.  This is the objective of the Volume Price Confirmation Indicator (VPCI), a methodology that measures

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)

Buff Dormeier, CMT

Michael Carr, CMT

Michael Carr, CMT

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THE DOW AWARD

THE DOW AWARD

Editor’s note: This was originally published in December 2008.

The Market Technicians Association established the Charles H. Dow Award to encourage technically based research and strengthen the credibility of technical research. The Charles H. Dow Award has become the most significant and prestigious recognition in the field of technical analysis.

The Award is named after Charles H. Dow, the modern era pioneer of technical analysis, and the creator of the Dow Jones Industrial Average. In accordance with the MTA’s mission of educating the investment community, participant’s works are judged under stringent criteria by a judging panel consisting of some of the industry’s most respected practitioners.

Prior recipients of the Award include an outstanding group of researchers and authors who have creatively broken new ground while demonstrating the richness and depth of technical research.

The Award provides an incentive to share that which may be determined to be this year’s most noteworthy contribution to 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)

Buff Dormeier, CMT

Back to top
BLOOMBERG BRIEF HIGHLIGHTS VALUE OF FIBONACCI RATIOS

BLOOMBERG BRIEF HIGHLIGHTS VALUE OF FIBONACCI RATIOS

In the June 26 issue of Bloomberg Brief Technical Strategies, Bloomberg’s analysts offered insights into how traders could use Fibonacci ratios to develop trading strategies.

In Technicals Show Shanghai Composite Index Nearing Inflection Point, Paul Ciana, CMT wrote:

“The Shanghai Stock Exchange Composite index has seen gains of more than 500 percent during the last 10 years and declines of as much as 72 percent. While these rallies and declines seem to happen fast with little time for investors to act, technicals can offer clues about the direction of the next move.”

The chart highlights the technical

Ciana concludes:

“To the upside, there are two near-term resistance levels. There is a

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.

Back to top
TRADERMADE, AN FX SERVICE

TRADERMADE, AN FX SERVICE

Most charting services attempt to deliver everything a trader could possibly dream of. TraderMade has taken a different approach and provides forex traders with what they actually need.

TraderMade is a portal providing advanced charting capabilities, news feeds and professional quality research. The site is designed for forex traders and it takes just one click to move between currency pairs or to obtain different perspectives. The service covers all major currency pairs. An example of a typical screen is shown below.

David Upton, the company’s founder, describes TraderMade as ideal for the “prosumer” or an information consumer with the need for a professional level of knowledge. Ninety percent of 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)

Michael Carr, CMT

Michael Carr, CMT

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INTERVIEW WITH JAMES DANIEL, CMT

INTERVIEW WITH JAMES DANIEL, CMT

How would you describe your job?

I run a small RIA and serve retail clientele as a financial planner and investment manager. I pursued the CMT designation as a way to differentiate myself from other financial advisors. It’s my belief that after 2 market meltdowns in the last 14 years, the retail public is tired of the buy and hold mantra.

What led you to look at the particular markets you specialize in?

I take a broad look across all asset classes. In building client portfolios you have a fiduciary duty to adhere to the constraints that each client agrees to, however as a technician I tell clients that we will adapt to the market depending on conditions.

Do you look at any fundamental or economic inputs to develop your opinions?

I do pay attention to GDP, P/E ratios and analyst projections of S&P targets for year end.

What advice would you have for someone starting

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)

James A. Daniel, CFP, CMT, EA

MARRIED TO A MISER

MARRIED TO A MISER

Editor’s note: MarriedToAMiser.com is a blog by James Daniel that he has maintained since October of 2009. He notes that the site is regularly “updated with a little help from his wife to give two perspectives on a married couples finances.”  Two recent posts are republished here to demonstrate the range of topics a financial professional can be required to address.

GDP and Stock Prices

This article was originally published on April 30th, 2014.

Top Down security analysis starts with GDP which is the overall growth in the economy (gross domestic product is all goods and service produced within the US geographic boundaries) and then flows down to sectors and finally stocks to see how they would benefit from economic growth. In the long run, stock price growth should correspond to GDP. In the short run you will always have supernormal growth periods in new industries, technology advances or companies that are leading

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)

James A. Daniel, CFP, CMT, EA

THE DENT METHOD

THE DENT METHOD

Editor’s note: Recently, Dent Research posted a position in the MTA’s Career Development Center. If you are actively seeking a new position, the Career Development Center could be among your most valuable MTA membership benefits. This brief note simply highlights some information about Dent Research.

The core of the work at Dent Research is based on the Dent Method, which was developed in the late 1980’s by the firm’s founder, economic expert Harry S. Dent Jr.

According to Dent Research, “The Dent Method has the only documented record of success at forecasting long-term economic trends based on the study of and changes in demographic trends and their impact on our economy and the markets. It works by showing how predictable consumer spending patterns, when combined with demographic trends, allow us to forecast the economy years or even decades in advance.”

The method is based on five key precepts:

  • Predictable spending patterns at different ages

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

CHART OF THE MONTH

CHART OF THE MONTH

Volatility, as measured by the VIX, is low and is now at levels last seen in 2007 and previously in the mid-1990’s. Although low volatility is often associated with market tops, there is no consistent pattern as to when the top will occur. Low volatility can and has persisted for months and years at a time.

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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