Technically Speaking, July 2021

Hello there. As the newly elected President of the CMT Association, this is my inaugural letter in Technically Speaking. Right up front I’ll tell you that I’m a big fan of effective communication. Therefore, you should expect to see a meaningful message from me every month in this publication – something that directly affects you as a dues-paying member.

As for my credentials, I have been a member of the CMT Association since 2002 and I have served on the Board of Directors since 2014. I spent the first 15 years of my career writing technical analysis research on the sell-side for boutique investment banks with institutional clientele, then spent seven years as an investor relations officer inside a publicly traded company. For about 6 years I taught introductory and intermediate-level courses in technical analysis at Golden Gate University under the guidance of Dr. Henry Pruden. And I also served as co-chair of the CMT Association chapters in Atlanta, Los Angeles, and San Francisco over the years.

Serving on the Board has allowed me to be intimately involved in planning the strategic direction of the Association and maintaining oversight of our operations. For the past three years as Vice President, I organized and led the Board’s annual Long Range Planning meeting, in which Directors and Staff evaluate opportunities and challenges facing the Association and plan strategic initiatives. For example, one such initiative was the decision to open a Liaison Office in India and hire a fulltime staff member there. I have also previously served as the Chair of the Audit Committee and served on the Governance Committee, both of which serve key roles in governing the Association.

I am extremely honored to serve as President and it is a privilege for which I sincerely thank you. Moreover, during my tenure I will strive to execute the responsibilities that come with the office and leave my mark in the form of a positive accomplishments.

My goals as President include the following.

1. Maintain and improve the quality of the CMT Program. Since I became a CMT charter holder in 2005, the Program has improved tremendously. That being said, all CMT charterholders who dedicated themselves to achieving the designation deserve to see the credential’s reputation maintained in the marketplace with employers, clients, and among the various other professional designations. The key to accomplishing this is to support and promote our world-class CMT Program.
2. Improve the membership experience. As a CMT Member, I expect the Association to be a source of fresh educational content that keeps me informed of new methods and unique perspectives in technical analysis. Additionally, we technicians highly value the ability to meet others who practice our trade. The Association should provide members with exclusive networking opportunities, both in person and online.
3. Solidify the foundation of good governance of the Association. The CMT Association has gone global. Our largest growth market for new CMTs is India; it is very likely that this trend will continue and that the APAC Region will eventually contain the largest number of CMT Members. The Board and Staff have been working to establish a framework of governance that will adequately support an international association for years to come. As we look out decades into the future, establishing solid governance policies now will be key to successfully executing on the first two objectives listed above and will allow future Board members to effectively oversee continued growth.

Again, you have my sincere thanks and appreciation for this opportunity to serve as President of the CMT Association. There have been 33 Presidents before me, many of whom I look up to as mentors and technical analysis idols.

While our organization has changed (for the better) over the years, the more things have changed, the more the CMT Association has remained the same: a group of friends who are dedicated to technical analysis. Please consider me one of yours and feel free to reach out to me directly about your experience in the CMT Program or as a Member.

This is a reprint of an article that first appeared in Technically Speaking in May 1998. It is still very relevant today.

First of all, I want to formally applaud the editorial selection of this topic. I will take the liberty of including in it the “barrage of media attacks on technical analysis” that was noted here last month and has preoccupied the chat mails recently. The question whether technical analysis is under siege perhaps isn’t trivial given the recent legal ruling against purveyors of technical systems. It’s a complicated question nonetheless.

My own qualifications to examine of this subject are easily dispatched. I have worked variously in the commodity futures business over 20 years, as a writer, analyst, and CTA. I presently write three separate weekly technical analysis columns for Dow Jones Newswires. I also teach technical analysis to market reporters who are skeptical, but who also, I judge, really want to be convinced.

Gauging the sentiment of a profession is as difficult as judging the sentiment of a market. But it’s clear that intelligent market technicians with unimpeachable credentials are convinced that the media are out to destroy technical analysis. At a minimum, they believe that the detractors of technical analysis have used the media to gain tremendous leverage with the public and the schools.

Technical analysis and journalism have coexisted in this country for nearly a century and a half. Evidently neither profession has destroyed the other. One supposes that the example of Charles H. Dow, a founder of Dow Jones & Co., would make any technician reluctant to conclude that journalists are uniform enemies of technical analysis. On the other hand, journalists who take their creed of dispassionate observation seriously aren’t plotting the destruction of technical methods. Those journalists who are frankly bigoted would cease to be journalists if they could somehow forbid technicians from practicing. In that case they would have become a threat to the Republic. That is another matter involving far more than questions of technical analysis.

The truth is that most journalists, indeed most people, aren’t familiar enough with technical analysis to affect the discipline one way or another. And this raises a serious point. Success brings publicity, including adverse publicity. It may be that technicians are hearing more of the latter because technical analysis is on the eve of its greatest accomplishments.

I guess that some technicians are truly hurt because technical analysis has lately drawn the fire of eminent and hugely successful traders. The gist of these traders’ criticism, so I take it, is the declaration that technical analysis simply doesn’t work; that is, technical analysis doesn’t make money. These critics have hit technicians where technicians are most vulnerable. It turns out that nearly all technicians likewise measure the legitimacy of technical analysis exclusively by its success in pulling money out of the markets. Profit is, of course, the overriding practical value of technical analysis. But I believe that an exclusive preoccupation with trading prowess could frustrate to some degree the Association’s laudable intention of attracting an academic following. It could frustrate a popular acceptance of technical analysis for the same reason.

The equation of technical analysis and trading is clearly reflected in the stock statement “technical analysis is an art.” The statement is probably intended to mean that technical analysis is risky because trading is risky, that technical analysis isn’t formulaic, it requires intuition, a “knack,” if you will. There’s only a baby step between the assertion that technical analysis is an art and the conclusion that technical analysis is dumb luck.

The technicians’ intellectual stance on the question whether technical analysis “works” is precisely the stance of their opponents. Both say to the outsider, albeit in contrary and more or less subtle ways, that the market is a casino. It’s self evident that those who effectively agree with their critics are incapable of effectively disagreeing. Debate in this circumstance tends to dissolve into pointless comparisons of money gained and money lost.  Most uninitiated people, if I read my students correctly, feel that the technicians haven’t proved their case.

Worse yet, the technicians’ typical explanation of things technical tends to be a variant of fear and greed: markets are patterned because human psychology never changes. Fear and greed may provoke this or that buy or sell order, but they are unlikely to exercise the mind of a gifted grad student looking for new worlds to conquer — certainly not a student with enough sense of history to know that human psychology can be revolutionary. It’s unlikely that the academics, whose watchword is rigor, are going to buy wholesale into a body of knowledge that is admitted to be only an art after all.

Trading, of course, is the greatest practical application of technical analysis. It’s obvious that every trader uses technical analysis to some extent, and to that extent technical analysis really needs no defense as a money maker. Nonetheless, if technical analysis is fenced with profit and loss then something crucial and wonderful has been turned outdoors to die, namely, the value of technical analysis as a tool for understanding the world. Technical analysis, by making sense of supposedly senseless data, touches on a paradigm, as they say in the schools. R. N. Elliott hinted at this when he presented nonmarket examples of his wave principle.

I tell my students that technical analysis awaits its Newton and its Einstein. Technical analysis doesn’t have a rigorous theoretical justification — yet — and this is precisely its intellectual dilemma for now. Some technicians might dismiss that idea of a logical foundation for technical analysis as absurd. That dismissal would be yet another confusion of technical analysis and trading. A theoretical discipline of technical analysis such as I have in mind wouldn’t be a trading system, a Holy Grail. It wouldn’t be just a collection of observations. Rather, it would apply logical methods to the general question of how supposedly random phenomena generate patterns.

The officers of the MTA have made a commitment to involving the academics in technical analysis. This, I believe, is proof of their realization that technical analysis is expanding to include this rigorous concept.

The serious critics of technical analysis will never be silent, and never should be. The technicians will do well to respond with the confidence that technical analysis will someday enjoy the prestige now accorded to economics. In that case, those who attack it out of spite will have been disgraced.

Please tell us what you do professionally.

I’m currently a portfolio manager with the Discretionary Portfolio Management (DPM) team in CGS-CIMB Securities Singapore. I was appointed to this newly created role in April after spending nearly 12 years with the firm.

My main responsibilities include managing discretionary investment mandates for the team, conducting quantitative research to uncover new sources of alpha; building proprietary strategic/tactical asset allocation models, multi-factor equity strategies and mutual fund selection models.

Prior to this, I was a market strategist for five years with CGS-CIMB Research. Being a member of the regional technical research team, I contributed to our daily TA publication “Trendspotter” covering Singapore, Hong Kong and Chinese equities. During this tenure, I pioneered the development of our proprietary CQM Dual Momentum models which we officially unveiled last year. These models can efficiently help our traders and clients screen through thousands of stocks across major equity markets to provide better quality alpha.

Three years ago, I was also involved in helping the firm to develop quantitative investment models for our defunct Digital Robo Advisory platform we called “eWealth.”

CGS-CIMB is a 50-50 joint venture between CGS (China Galaxy Securities), a leading Chinese brokerage and CIMB Group.

How did you get there?

I have always had a strategic plan for almost everything, since I’m an INTJ (explained below). Since my teenage years, I already knew that I wanted to be involved in the financial markets because it seemed like the biggest puzzle to solve. Plus, I was quite obsessed with numbers from a young age, preferring strategy games that involved statistics and the laws of probability.

Unfortunately, none of my family members were in the financial industry nor did I have friends or contacts who could help me, so I could only rely on myself to find a way in.

I believe in creating our own destinies through hard work; you are your only limit. As they say, “Luck is what happens when preparation meets opportunity.” Of course, I am equally fortunate to have met the right people in my career who saw my aspiration and helped to shape my path.

Being an INTJ (introverted, intuitive, thinking, judging); a Meyers-Brigg personality type who is hopelessly logical, I thrive on strategizing plans, tackling the most challenging goals through sheer willpower and making them work. I have to admit things were so fuzzy back then that I did not have the slightest idea how they would turn out. I only remembered that I must haul myself back on track during those times when I felt I was drifting off course.

I was in the business stream during my GCE “A levels” (high school equivalent in the U.S.) days, but being in the rebellious stage of my life, I would frequently skip classes that bored me, all except economics. I can still vividly remember that occasional awkwardly pleasing look on my economics tutor’s face when he knew I skipped all other classes for the entire day, just to show up for his. He is a definitely a passionate educator, now trying to save lost souls as a senior minister with a local Presbyterian Church.

After “A levels,” most boys in Singapore are called up to serve a two and a half years of mandatory national service and I served mine in the Police Force. Like most young adults, I got distracted from my plan when I took on a job in a local Telco. Although I exceled in my procurement work, without a bachelor’s degree, I soon hit a promotion obstacle. This was a turning point that helped me to re-evaluate my career goals as I had deviated away from my first passion; the markets.

To realign that deviation, I quit my job to pursue my bachelor’s degree at RMIT University. In 2003, I bought a one-way ticket to Melbourne, Australia to begin my adventure and four years later I graduated with a business degree majoring in Economics and Finance.

Graduating just when the global financial crisis was taking the bull by the horns, breaking into the financial industry proved to be more challenging for a fresh graduate with no connections. However, that didn’t stop me from coming back to Singapore in early 2008 to embark on my job hunting.

After many months of sending out resumes and attending interviews, my ex-girlfriend who was working on a branding campaign for CIMB found out about the recruitment exercise on the last day of submission and so I managed to submit my application right before it closed.

In September 2009, I almost signed on as a junior proprietary trader before making a last-minute switch to be a broker instead. My trading skills shone through during my rookie year and one of the top brokers in the firm took me under his wing. Soon I was helping him to manage his trading desk while he focused on client servicing. We were also managing active clients’ semi-discretionary trading portfolios and I am proud to have successfully coach one of our top clients to join the firm as a full-time proprietary trader.

I was also the first non-institutional broker in the firm to introduce algorithmic trading services to improve our clients’ execution efficiency.

I did this for six and the half years until I realized I needed a new challenge. Coincidentally there was an internal opening for the role of a market strategist and I went for it.

Who was an early mentor in your career?

My ex-boss Nelson Tan was a definitely an early mentor when I was working under him for five and the half years. Others included, Chung Joon Chai, a senior prop trader, who introduced me to algorithmic trading and Chan Chou Hing, my ex-departmental head, who gave me the opportunity to move to research.

What book/author was most influential in helping you understand TA?

John Murphy’s Trading with Intermarket analysis had the biggest influence on my understanding of the markets through the lens of TA. I think his ideas are very contemporary and much of my current work is leveraged on what I’ve learned from this book.

What do you like to do when you are not looking at markets?

I really enjoy cooking for my loved ones, which I find extremely therapeutic and meditative. My favorite is Italian cuisine but I am also equally adept at Japanese, French, and our local Asian staples.

Other than that, you will find me either reading up on a wide range of subjects from science to history or learning how to make soap on YouTube.

What brought you to the CMT Association?

A few years into my broking career around 2011, I decided to upgrade my TA skills and knowledge by taking a structured program, so I spent the next year searching for available options. My research concluded that the CMT program stood out from existing options with better learning resources and also it is also held in higher regards to competing programs. I made my choice and the rest is history.

What it the most useful benefit of membership for you?

The CMT chartership definitely helps to open more doors for me in terms of career progression. It gives me the opportunity to explore more roles within the firm, from broker to research and now investment management. It also gives me more credibility in the workplace, as I can demonstrate the application of technical toolkits to analyze the demand and supply imbalances to win over the doubters; especially the fundamentally driven peers.

The CMT program altered my perspective on how human behavior is constantly shaping the market dynamics, it also explored the profound nature/relationship between technical and fundamental analysis; leading me to adopt a fully systematic and quantitative approach in my current work.

When I first started the program in 2013, many of my colleagues had not heard of the CMT. Driven by that, I’ve decided to volunteer and help out with the local chapter to promote the chartership. The chapter helped me to connect with fellow CMTs and I am fortunate to know ex-chapter chair James Brodie before he stepped down to return to the U.K. Now we have a team of three; Jamie Coutts, Isaac Lim and I co-chair the chapter and actively oversee the CMT initiatives in Singapore.  The involvement with the chapter rewarded me with the network and friendships of like-minded peers in the industry that are invaluable.

Singapore top analyst recognition

I was elated when my regional head of research told me late last December that I’ve won the “Best analyst/commentator” category in Singapore by the AsiaMoney poll 2020, as this is the first major award that I’ve won. I’m always grateful that my management is involving me in challenging projects that gave me plenty of opportunities to stretch myself and apply my skillsets.

I’m also extremely honored to have the kind of active support from our clients and I cannot thank them enough for casting their votes in my favor. There were many doubters earlier in my career but I’ve proven them wrong by reaching my goal of becoming a portfolio manager. If you can dream it, you can do it. I am definitively proud to be a CMT charterholder.

The recently concluded 2021 CMT European Summit offered excellent insights on topics that are relevant to the present time. The topics covered in the sessions by various speakers left the audience discussing and conversing several days after the Summit’s conclusion. A couple of sessions that stood out were on the topics of Behavioral Feedback and Biases. Specifically, Behavioral Biases: Our Battle with Ourselves as Traders with Steven Goldstein and Behavioral Feedback & Control from Essentia Analytics with Clare Flynn Levy offered a lot to think about.

The presentations by both Steven and Clare provided deep insights into the human mind and the Investor/Traders mindset. The speakers highlighted how our brains are able to use context to make predictions about what’s to come, and how we jump to conclusions based on patterns we perceive frequently.

Steven in particular covered insights from various books and publications and discussed how they are relevant to the investors today. His explanation on how the human mind works; how it subconsciously builds and acts on biases was extremely relevant, and makes one think about how they have biases built into their daily lives. His insight from Thinking Fast and Slow brought to our notice how we are geared subconsciously towards Loss Aversion and how fears are a far greater motivator than our aspirations.

Steven’s explanation of the Dunning-Kruger Effect also highlights the pitfalls most amateur and new traders make and how we need to be cognizant of the journey. The case study he presented on the extraneous factors in judicial decisions was an eye opener. It brought to light that the rational application of legal reasons does not sufficiently explain the decisions of judges, and it underscored the reality that psychological, political, and social factors influence judicial rulings. His explanation of the Theoretical vs Actual Decision Making Process, which brings into play various biases, helped explain more clearly the gap between Real Return and Potential Return.

Even our emphasis on the technical pillar to improve our performance and lack of focus on the self-improvement pillar explains how we take risks and over rely on information and analysis. Clare’s illustration of the markets and our actions in the markets as arrows shot at a target helped articulate how performance is an outcome of our decision making process, especially in a biased and noisy market. Her presentation of the study with 60 portfolio managers and explanation of matrix mapping various trading behaviors to biases fueled the discussion on behavioral alpha, highlighting the importance of reviewing trades, establishing set processes, and reviewing the decisions taken.

If you have missed the sessions, I highly recommend that you watch the recordings as they help bring to light biases that we hold, whether conscious or unconscious, that affect our own workflow and processes daily.

One of our India volunteers, Mohit Handa, offered the following review: “The European Summit had a very interesting lineup of guests. Though the event was scheduled on a weekday, I was able to attend a few sessions. I was particularly intrigued by the presentation which showcased Behavioral Feedback, and how it is deployed to assist portfolio managers overcome their biases. To earn credit and respect for such a process deployed over the long-term was great to see.

The presentation on Relative Rotation Graphs was a delight; RRG is becoming a sought-after tool to assess the financial markets. I also really enjoyed listening to Alejandra Grindal and Tim Hayes’ session.

And finally, I was delighted to see the recovery phase of the CMT Association showcased by Alvin Kressler, where India is shining high in terms of candidate numbers.”

Chief Investment Officer of Zurich-based Acies Asset Management, critically acclaimed author, and systematic trend-following expert Andreas Clenow, CMT brings decades of asset management experience to the podcast this month. Episode #7 of Fill the Gap focuses on the process and precision of strategy development and so much more.

Challenging the very definitions of commonly held terms in the investment industry, Andreas brought wit and candor to this interview while engaging honestly with the debate around systematic vs discretionary money management. We encourage all of our listeners to check their assumptions as Andreas helped define these approaches through terms such as mechanical and unsupervised.

Digging into the common pitfalls of the business, Andreas spoke authentically about lessons he has learned personally as a trader, fund manager, strategy developer, and allocator of hedge funds across all asset classes. Perhaps most important for listeners this month is the concept that managers will inevitably find periods where their strategy is out of style with the market, but as Andreas says “You can lose money by following your rules, or by breaking your rules. One is just much easier to explain to investors.”

A lifelong learner and investigator of markets, Andreas is forever exploring new concepts and approaches. Have you ever built a trading strategy completely void of historical price data? Want to better understand the commercial business of trading strategies as product development? Longing to read a novelized account of the dark underbelly of Swiss financiers? We explore all of this and more with Andreas Clenow, CMT in episode #7 of Fill the Gap!

To better understand the concepts covered, we recommend reviewing the supplemental resources accompanying this episode using this link: go.staging.cmtassociation.org/ftge7 Subscribe and listen to the podcast at https://cmtassociation.buzzsprout.com/

Tune in on your favorite listening service – each monthly episode will be released on the first Friday of the month and will be available on Apple, Spotify, Google Podcasts and wherever podcasts are found.

This is an occasional series revisiting the Association in pictures, just to offer a glimpse into our past, and in-person events as a reminder of what we aspire to in the future.

If you have any pictures from seminars, meetings or after work get-togethers please submit them (in digital form, if possible) and include the date, location, and people in the photo. Better yet, if you remember presentations or topics of conversation that relevant to the current markets, let us know. There’s nothing like revisiting market history as it relates to the current environment.

Caption Contest!

This was originally published in the April 1976 newsletter. See below for the cover.

Name as many of these technicians as you can. There are 6 rows with between 5 and 7 people. For example, Row 4, Number 3 is John Brooks (This one was already labeled in the picture.)

Winner gets a free market forecast from the TV pundit of their choice, filled with “howevers” and “maybes!”

Members on the Move

• Harish Srivastava, CMT, Senior Executive Director at Kotak Securities
• Jake Damien Chow, CMT, Portfolio Manager at CGS-CIMB Securities
• Matthew Caire, CFA, CFP, CMT, Senior Portfolio Manager at Vaughan Nelson Investment Management
• Kevin Hefferman, CMT, Head Trader at Coinsquare
• Bob Sheehan, CMT, Associate Portfolio Manager at Coastal Bridge Advisors
• Craig Fullen, CMT, Mindset / Mental Performance Coach at Joyful Mindset LLC
• Prakash Prabhu, Manager – Product Management Team (Base Metals) at Multi Commodity Exchange of India Ltd.

CMT

Early registration for the December 2021 test administration is open until August 9.  CMT Level I & II exams will take place December 2-12, 2021, with the Level III exam on December 9.

Don’t forget to schedule an appointment for your exam at Prometric as early as possible.  Candidates have the choice of taking the exam at a Prometric test center or scheduling an appointment for remote proctoring.  Be sure to test your computer, read the User’s Guide, the FAQs and learn how to temporarily disable your firewalls and antivirus software before scheduling a remote proctored exam: https://cmtassociation.org/chartered-market-technician/cmt-exams-remote-proctoring/.

If you encounter any problems registering for the exam or scheduling an appointment at Prometric, please contact [email protected].

The CMT Association would like to congratulate the following members who received their CMT Designation in June 2021.

• Nikhil Bhatia
• Philip Lee
• Hardik Upadhyay