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Technically Speaking, June, 2006

From the Editor’s Desk

This issue focuses on the MTA Education Seminar. Attendees spent two days listening to the latest ideas on trading and learning the fundamentals of technical analysis. Some presentations are summarized in this issue; a few more will appear next month. We also hear about a recent LA chapter meeting, and we look forward to hearing about other meetings throughout the country. The success of the Seminar demonstrates the importance of volunteers to our organization. Look over the list of committees and regions on the back page of this newsletter, and consider what you can do to help. When you have some time this month, contact a committee chairperson or a regional point of contact and talk about what you can do. The leadership of tomorrow’s MTA is working in these groups today, and you’ll be glad you became involved. We’re also looking for someone to take on the task of newsletter editor. We’ve returned this to a volunteer position, in the spirit of every other MTA function. The editor is just another committee chairperson, soliciting help from volunteers and

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What's Inside...

From the President’s Desk

by Phil Roth, CMT

On behalf of all the officers and directors, I want to thank all those who voted (a little more than one third of our membership participated in the election) and supported the Nominating...

MTA Annual Award

Ian Notley, President of Yelton Fiscal Inc., was the winner of the 2006 MTA Annual Award, recognizing his lifetime contributions to the field of technical analysis. Yelton Fiscal was founded by Ian...

Commodities and the Fed Funds Rate

by Blethyn Hulton

Amidst the comments, actions, and retractions of the Bernanke Fed over the past month, market participants face greater uncertainty over the direction of interest rates than at any time since the...

NYSE Offers New Data Service

Prior to touring the New York Stock Exchange, MTA Seminar attendees learned about a new data  service being offered by the Exchange. NYSE InfoToolsTM offers more granular information about NYSE...

Fred G. Schutzman, CMT, “Mechanical Trading Strategies”

by Michael Carr, CMT & Fred Schutzman

Fred has a relatively simple approach to the markets; he believes that objective, disciplined trading and a strict risk management policy are the keys to success. His firm has more than $80 million...

V. John Palicka, CFA, CMT, “Fusion Analysis in Small-Cap Investing”

by John Palicka, CFA, CMT & Michael Carr, CMT

Technical analysis has played an important role in small-cap investing for John since 1980. However, he has found that above average performance requires more than technicals. He combines fundamental...

Robert Rossetti, “Trading Rules of the O’Neil CANSLIM Methodology”

by Robert Rossetti & Michael Carr, CMT

William O’Neil’s CANSLIM stock selection methodology is very well known and widely followed by readers of Investor’s Business Daily. Bob has employed this strategy since the early 1970’s and...

Rick Martin, CFP, CAIA, CMT, “Portfolio Simulation to Optimize Trading Systems”

by Rick J. Martin, CMT, CAIA, CFP & Michael Carr, CMT

Rick began his presentation by exploring some traders’ myths: “I have found the holy grail of indicators. They work great when I overlay them on a chart.” Unfortunately, he pointed out,...

Los Angeles Area Regional Chapter Meeting

The LA Regional Chapter of the MTA held their quarterly meeting May 9th at Spaghettini’s Bar & Grill in Seal Beach. We had 21 members, affiliates and guests in attendance. To begin the meeting,...

Chart of the Month

by Tom McClellan

The 20-week cycle is a half-period harmonic of the more dominant 40-week cycle, sometimes called a 9-month cycle. I currently track the actual length of that 40-week cycle at 185 trading days, which...

Market Forecast Panel

The MTA Education seminar kicked off on May 18th with a Market Forecast Panel at the Bloomberg World Headquarters in New York. The moderator was Vincent Catalano. Panelists were Gail Dudack, Michael...

From the President’s Desk

From the President’s Desk

On behalf of all the officers and directors, I want to thank all those who voted (a little more than one third of our membership participated in the election) and supported the Nominating Committee’s slate. We have been working hard already to maintain the continuity in all the MTA’s activities. Here are some brief comments on what we have been doing so far.

The seminar in New York was a fine success. I spoke to many attendees who said they liked the program of speakers and topics, and the venue. Barry Sine was responsible for putting it together before he stepped down from the Board, leaving us with a fairly easy time of carrying it off.

The CMT tests have been given and graded. While candidates seemed to have a harder time than usual with CMT 1, the success rate for CMT 2 was one of the highest. As I write this,

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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.

Contributor(s)

Philip J. Roth, CMT

Phil Roth, CMT

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MTA Annual Award

MTA Annual Award

Ian Notley, President of Yelton Fiscal Inc., was the winner of the 2006 MTA Annual Award, recognizing his lifetime contributions to the field of technical analysis. Yelton Fiscal was founded by Ian in 1987 and covers more than 80 global markets including equities, bonds, rates, commodities, currencies, business and credit cycle, etc. The service is designed specifically for the institutional fund manager seeking the use of a global database with a longer term outlook. The company has offices in the United States, Canada, Great Britain, Switzerland and Hong Kong.

Well known for conducting walkabouts at technical analysis seminars around the world, Ian is recognized as an expert in long-term cycles. Ian has conducted studies for over 38 years into price fluctuating phenomena. His specialty is long-term studies of secular and cyclical movements and their impact on money management style and in particular investment

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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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Commodities and the Fed Funds Rate

Commodities and the Fed Funds Rate

Amidst the comments, actions, and retractions of the Bernanke Fed over the past month, market participants face greater uncertainty over the direction of interest rates than at any time since the start of the tightening cycle in 2004.

To reduce the uncertainty, this article argues for the use of commodity-prices as a meaningful indicator of Fed policy. Granted, commodity prices may not be appropriate for the FOMC, whose decisions take several months to fully impact the economy. However, traders and investors have the luxury of being able to effect their decisions more quickly than the central bank; and so trends in commodity prices are practically as well as theoretically useful.

First, whether or not the FOMC raises the Funds rate in June, I argue that it is the start of an “easing cycle,” not the end of a “tightening cycle” that produces the beneficial effects of a relaxed Fed policy. Either pausing

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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.

Contributor(s)

Blethyn Hulton

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NYSE Offers New Data Service

NYSE Offers New Data Service

Prior to touring the New York Stock Exchange, MTA Seminar attendees learned about a new data  service being offered by the Exchange. NYSE InfoToolsTM offers more granular information about NYSE trading with minimum latency. There are currently four different products available: Retail Trading Activity

1. Real-Time Datafeed – ReTracSM is a real-time datafeed that allows investors to identify retail trading behaviors by monitoring the retail share volume as it is executed. Immediately upon execution, the Symbol, Volume, and Time of each retail execution will be disseminated as a realtime message.

2. End-of-Day File – ReTrac EODSM At approximately 8:00PM each day, a file will be made available that contains a summary of the ReTrac activity during the day for each stock and identifies the volume of retail buy and sell shares executed on  the NYSE. The file will be made available to recipients of the ReTrac datafeed (at no additional charge) or

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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Fred G. Schutzman, CMT, “Mechanical Trading Strategies”

Fred G. Schutzman, CMT, “Mechanical Trading Strategies”

Fred has a relatively simple approach to the markets; he believes that objective, disciplined trading and a strict risk management policy are the keys to success. His firm has more than $80 million under management, and he employs mechanical systems to achieve steady returns with low drawdowns. Fred has followed the same general techniques for more than fifteen years, and finds the best way to improve performance is to refine his exit techniques and strictly adhere to his money management disciplines.

Traders don’t have to enter a market, but once they do, they must make an exit decision at some point. To Fred, exits are more difficult and more important than entries. He likes to use the same technique across many markets, demonstrating in his mind that the exit is based upon a good concept. Initially, he employs a money management stop, risking

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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.

Contributor(s)

Michael Carr, CMT

Michael Carr, CMT

Fred Schutzman

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V. John Palicka, CFA, CMT, “Fusion Analysis in Small-Cap Investing”

V. John Palicka, CFA, CMT, “Fusion Analysis in Small-Cap Investing”

Technical analysis has played an important role in small-cap investing for John since 1980. However, he has found that above average performance requires more than technicals. He combines fundamental analysis and behavioral finance with technicals to form a quantitative model which has been the backbone of his success.

In his opinion, an increasing number of portfolio managers have realized that fundamental analysis alone does not deliver the best investment returns. Distrust of corporate accounting and other fundamental issues has led more investors to explore the opportunities available in technical analysis. At the same time, increasing academic evidence supports the use of technical analysis, and a recent Nobel Prize in Economics recognized the contributions to the field of behavioral finance. John has observed that these events have driven portfolio managers to increasingly consider the benefits of technical analysis along with behavioral finance as these two fields intersect each other due to their

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)

John Palicka, CFA, CMT

Michael Carr, CMT

Michael Carr, CMT

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Robert Rossetti, “Trading Rules of the O’Neil CANSLIM Methodology”

Robert Rossetti, “Trading Rules of the O’Neil CANSLIM Methodology”

William O’Neil’s CANSLIM stock selection methodology is very well known and widely followed by readers of Investor’s Business Daily. Bob has employed this strategy since the early 1970’s and provided Seminar attendees with unique insights into using this technique. 

Bob began his presentation with a short summary of CANSLIM:

C = Current earnings per share should be up 25% or more and in many cases accelerating in recent quarters. Quarterly sales should also be up 25% or more or accelerating over prior quarters.

A = Annual earnings should be up 25% or more in each of the last three years. Annual return on equity should be 17% or more.

N = A company should have a new product or service that’s fueling earnings growth. The stock should be emerging from a proper chart pattern and about to make a new high in price.

S = Supply and demand. Shares outstanding can be large or small,

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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.

Contributor(s)

Robert Rossetti

Michael Carr, CMT

Michael Carr, CMT

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Rick Martin, CFP, CAIA, CMT, “Portfolio Simulation to Optimize Trading Systems”

Rick Martin, CFP, CAIA, CMT, “Portfolio Simulation to Optimize Trading Systems”

Rick began his presentation by exploring some traders’ myths:

  • “I have found the holy grail of indicators. They work great when I overlay them on a chart.” Unfortunately, he pointed out, weaknesses with this indicator will show up when it is tested under different market conditions.
  • “I have been trading this system for a year and it is profitable…it can’t lose.” He explained that market conditions change with time, and a year is not long enough to adequately assess the long-term performance of any system.
  • “I have optimized a new entry system that will improve my results.” It is his opinion, which was shared by several other speakers, that we all spend too much time trying to find the perfect entry technique. Exit strategies are more important to returns, as illustrated by the old market adage, “cut your losses and let your profits run.”
  • “Only systems

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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.

Contributor(s)

Rick J. Martin, CMT, CAIA, CFP

Michael Carr, CMT

Michael Carr, CMT

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Los Angeles Area Regional Chapter Meeting

Los Angeles Area Regional Chapter Meeting

The LA Regional Chapter of the MTA held their quarterly meeting May 9th at Spaghettini’s Bar & Grill in Seal Beach. We had 21 members, affiliates and guests in attendance. To begin the meeting, Julia Bussie gave an overview of the upcoming election and the successful transition the new slate of officers had recently completed.

George Senge followed this with a presentation entitled “The True Strength Index (TSI) and The Price Oscillator.” The TSI was developed by William Blau and is designed to determine both trend and overbought/oversold conditions; the TSI is applicable to intraday time frames as well as long term trading. TSI helps traders determine overbought and oversold conditions of a security by incorporating the short-term purchasing momentum of the market with the lagging benefits of moving averages. George explained that the serial composition of the TSI (a version of Wilder’s Relative Strength Index) can also be expressed as

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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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Chart of the Month

Chart of the Month

The 20-week cycle is a half-period harmonic of the more dominant 40-week cycle, sometimes called a 9-month cycle. I currently track the actual length of that 40-week cycle at 185 trading days, which is about 38.5 weeks, but the phrase “40-eek
cycle” rolls off the tongue more easily. So far as I know, no one has come up with a reasonable explanation for WHY the 40-week cycle exists, since it does not comport well enough to fiscal or earnings cycles. Some people claim its length is related to the human gestation period, but I don’t place a lot of faith in that explanation. The existence of half-period harmonics of this and other cycles is an easier concept to understand, as harmonics is a phenomenon which exists in physics.

The lows of the

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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.

Contributor(s)

Tom McClellan

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Market Forecast Panel

Market Forecast Panel

The MTA Education seminar kicked off on May 18th with a Market Forecast Panel at the Bloomberg World Headquarters in New York.

The moderator was Vincent Catalano. Panelists were Gail Dudack, Michael Kahn, John Kosar, and Louise Yamada.

Vincent Catalano, CFA, is president and founder of iViewResearch, a research and consulting firm, and Get Smart Quick, a contract research company. Mr. Catalano is a past president of the New York Society of Security Analysts (NYSSA) and  served as a board member from 1991 to 2005.

Gail Dudack, CMT is co-partner of Dudack Research Group LLC (DRG), an investment research firm that provides economic, fundamental, quantitative and technical strategy and tools for institutional money managers. Prior to DRG, Ms. Dudack was the Managing Director of Research and the Chief Investment Strategist for SunGard Institutional Brokerage Inc. Earlier, she

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New Educational Content This Month

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