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Technically Speaking, July 2023

Hello Readers, and welcome to another edition of Technically Speaking! 

 

We’ve been experiencing a raging bull market this year, but one that has remained rather subtle (some would say). I say this because the public is used to experiencing the bull market (and recognizing it) when the economic indicators are obviously bullish as well. But we have had a mixed bag of economic indicators that seems to be confusing market participants about future moves in the market. While that may work as an approach, these lagging indicators are too often distracting, stealing the focus from the price action. The most significant advantage of following the practice of technical analysis is that risk management is given top priority. With that as a prerequisite, it is much easier to take market positions based on price movements, ignoring all the noise surrounding it. Ignoring the noise makes sure of early identification of trends.  

What are some of the easiest ways to ensure you don’t miss the early trends?- Maintaining scans. When I began my journey in the market, I tracked multiple timeframes for multiple clients. To be on top of things, I had scans ranging from 3-day highs/lows to 52-week highs/lows, multiple timeframes moving averages, and crossovers. I would then create a score based on the number of scans in green or red and paint a relatively clear picture of where the market stands. While that can get quite overwhelming quite fast (been there), it would be easier to focus on a specific time frame and track the scans to identify how they change during a market cycle. This is as basic as it gets when it comes to a system. But I have found it to be helpful to me over the years.  

 

Even if you track indices globally, numerous countries are making new 52-week highs or on the verge of big base breakouts. And that is a wonderful place to start as well! With the Dollar Index correcting lower in the downward sloping pattern and making lower highs and lower lows, equities will feel the tailwind of that correction that could propel the market higher. All this, with the doomsday chatter going on in the background. Nobody knows what tomorrow brings. But as a market participant, you need to know your risk appetite and strategy. Fortune teller was never part of the job description! So if you are wading through this market trying to find your way, you can start with the simple exercises mentioned above to find your footing and build from there!  

 

Until we meet again, Think Technically! 

 

Rashmi Bhatnagar 

 

Editor  

 

What's Inside...

President's Letter

by Robert Palladino, CMT

President’s Letter from Rob Palladino, CMT Greetings. I would like to introduce myself as the newly elected President of the CMT Association to you, our dues-paying members globally. I am honored...

Read More

Second Half Setup

by Adam Turnquist, CMT

Key Takeaways: Most major averages are coming into the second half with some impressive returns. History suggests the momentum could continue. Since 1950, the S&P 500 has followed up a positive...

Read More

Is the Market on Life Support?

by Sam McCallum

I keep hearing the market’s on life support, but June has been another really terrific month that’s rewarded investors yet again for buying stocks. I hope everyone’s done well. With June in the...

Read More

The Paroli System of Betting for Trading: Amplifying Success Through Positive Progression

by Dhwani Patel

In the world of trading, where fortunes can be made and lost, the importance of employing a sound strategy cannot be overstated. Traders are constantly seeking effective methods to increase their...

Read More

Dumb Money Hates Bonds

by JC Parets, CMT

We interrupt this raging bull market to update you on some historic positioning in the bond market that is sure to impact your portfolio, whether you like it or not. Even if you don’t trade bonds,...

Read More
President's Letter

President's Letter

President’s Letter from Rob Palladino, CMT Greetings. I would like to introduce myself as the newly elected President of the CMT Association to you, our dues-paying members globally. I am honored to succeed the 34 Past Presidents who have brought forward the Association over the past six decades. Without their leadership and the outstanding work of our Staff and long line of volunteers, we would not have achieved the international success that has made us the gold standard of technical analysis and quantitative finance.  As for my background, I have been a member of the CMT Association since 2013 and have served on the Board of Directors since 2018. After graduating from Middlebury College (VT) in 2009 during the heart of the GFC, I went to work at State Street Bank in Hong Kong as a foreign exchange trader. I have stuck to foreign exchange ever since, continuing the craft at State

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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.

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Contributor(s)

Robert Palladino

Robert Palladino, CMT

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Second Half Setup

Second Half Setup

Key Takeaways: Most major averages are coming into the second half with some impressive returns. History suggests the momentum could continue. Since 1950, the S&P 500 has followed up a positive first half with an average second half gain of 6.0%. Furthermore, when first half gains were 10% or higher, the index posted average gains of 7.7% in the second half, with 82% of occurrences producing positive results. Despite the bullish inclinations from a positive first half, bull markets are not linear, and pullbacks or even a correction should be expected in the second half. The average maximum drawdown for the S&P 500 during any calendar year dating back to 1950 has been -13.8%, well below this year’s current maximum drawdown of only -7.8%. Given the performance gap between the Russell 1000 Growth and Value indexes this year, many investors are asking if and when value will start catching up to growth. Since 1979,

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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Contributor(s)

Adam Turnquist, CMT

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Is the Market on Life Support?

Is the Market on Life Support?

I keep hearing the market’s on life support, but June has been another really terrific month that’s rewarded investors yet again for buying stocks.

I hope everyone’s done well.

With June in the books, I’m continuing to keep a close eye on many of the possible rotations (and possible rebound levels) developing out there, whilst I know many would like me to cover Tech again, I don’t see the point in going over old ground.

Today, I’m just going to get into some areas of the market I currently find interesting, so let’s just get into it.

June – Month to Date

Something I tend to notice much more than most, is when the market decides to move out of 1 area and into another.

From the 10 ETF’s above, do you also notice less growth and more value?

When 1 area goes down, another area tends to go up, I don’t make up the rules, that’s just how investor behaviour (price) works.

S&P500 Value ETF (IVE)

The S&P500 Value ETF, which as you can see has a fair amount of technology exposure, is on the cusp of breaking out to new all time highs, and this is information I want to pay attention to.

ARK Fintech Innovation ETF (ARKF)

Or how about Auntie Cathie and her Fintech ETF?

She’s taken a lot of flak over the last couple of years, but with the out-performance in growth over value this year, there’s probably a comeback story in there somewhere.

A break out on both an absolute and a relative basis, what’s not to like?

Social Media (SOCL)

We’re seeing charts like this setting up absolutely everywhere just now.

If Social Media is above $39 and breaking out on a relative basis, again, what’s not to like?

Bitcoin

Let me be clear about my thoughts on Bitcoin and crypto in general.

I don’t buy it and I don’t like it and I couldn’t care less if Blackrock are getting involved.

I much prefer sleeping soundly at night.

That said, I do of course have many professional clients and members who want my thoughts on Bitcoin, and this is the chart I’m working with just now.

Maybe that $31k-32k level offers something?

In Conclusion

I keep hearing it’s just 5 stocks driving the market performance this year, and if you’re hearing it too, you should pay close attention to who you’re listening to.

These folks continue to be downright lazy and just aren’t putting in the hard yards.

It takes a special kind of economic analyst to tell everyone else they’re wrong, and to continually push out confirmation biased narratives when stocks have offered the returns of a lifetime this year.

Thankfully I like to pay attention to price, because it’s the only data that matters.

If the market crashes / corrects tomorrow, next week, next month or next year, it’s not a problem, that’s why we manage risk around here.

Contributor(s)

Sam McCallum - 2023

Sam McCallum

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The Paroli System of Betting for Trading: Amplifying Success Through Positive Progression

The Paroli System of Betting for Trading: Amplifying Success Through Positive Progression

In the world of trading, where fortunes can be made and lost, the importance of employing a sound strategy cannot be overstated. Traders are constantly seeking effective methods to increase their profitability and minimize losses. One such strategy that has gained attention is the Paroli system of betting, which originates from the world of gambling but can be adapted for trading purposes. In this article, we will explore the Paroli system and its potential application in trading, using a real-life example to highlight its benefits and considerations. The Paroli system is a positive progression betting strategy that focuses on maximizing wins while minimizing potential losses. Traditionally, it has been used in games like roulette or blackjack, where players increase their wagers after each win. However, the same concept can be applied to trading, helping traders to capitalize on winning streaks while limiting potential losses during losing streaks. Applying the Paroli System in

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.

Upgrade Your Membership

Contributor(s)

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Dumb Money Hates Bonds

Dumb Money Hates Bonds

We interrupt this raging bull market to update you on some historic positioning in the bond market that is sure to impact your portfolio, whether you like it or not. Even if you don’t trade bonds, this is really really important. You see, I know it’s easy to sit back and chill out with the S&P500 making new 52-week highs, the Dow Jones Industrial Average and Dow Transportation Average making new 52-week highs and, of course, the Nasdaq100 making new 52-week highs after posting its best first half to a year EVER. Market breadth continues to expand and sector rotation is frustrating the hell out of anyone trying to short this market. The thing is, what even changed? What happened that stocks have absolutely been ripping higher since last year? Positioning. It’s not the economy that drives stocks. It certainly isn’t fundamentals. It’s positioning. Or mispositioning in the case of many hedge funds and other investors coming into 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.

Upgrade Your Membership

Contributor(s)

JC Parets, CMT - 2023

JC Parets, CMT

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New Educational Content This Month

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