public

Technically Speaking, June 2014

LETTER FROM THE EDITOR

You probably noticed we changed the format of Technically Speaking. The new one-column format is in response to feedback from readers. This format should make it easier to read and print the newsletter. Hopefully you have not noticed any change in the quality of the content.  Each month, we strive to bring you useful information and our focus on highquality content will never change. We will continue fine tuning the format over the next few months and each small change should make the newsletter more readable. Please let us know what you think of the new style and also, please continue sending your submissions to editor@mta.org. Sincerely, Michael Carr

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.

What's Inside...

THE SEVEN YEAR GLITCH

by Dick Arms

Every seven years the stock markets take a hit. Or at least they have done so consistently for the last three quarters of a century. Sometimes it is small but usually it is large. The last two down...

A CONTINUOUS IMPROVEMENT PROCESS: THE CHARTERED MARKET TECHNICIAN (CMT) PROGRAM

by Michael Carr, CMT

Gordon Scott, CMT, is the Managing Director of the CMT Program. Recently I had the chance to ask about him about his vision for the CMT program, the path he plans to follow to implement that vision...

SHORT INTEREST AS A FACTOR

by Ernest Chan, PhD

Editor’s note: This was originally posted at Quantitative Trading and is reprinted here with permission. Dr. Chan will be providing more information about this topic in an upcoming MTA Educational...

INTERVIEW WITH MARTHA STOKES, CMT

by Martha Stokes, CMT & Amber Hestla-Barnhart

How would you describe your job? Mostly my job involves the study of cycles, how cycles are changing as the internal market structure is continuing to change at an accelerated pace. I study the...

THE NINE FACES OF THE STOCK MARKET

by Martha Stokes, CMT

Most retail investors and traders think of the stock market or financial markets as “Main Street” and “Wall Street.” The Professionals of the market view the markets as Buy Side, Sell Side,...

TRIPLE TREND OSCILLATOR-TECHNICAL INSIGHTS

by Sanjay Khandelwal

The Triple Trend Oscillator (TTO) is a trend following oscillator I developed to identify an exact level of technical strength of a stock or index over multiple timeframes. It can be used as a trend...

CHART OF THE MONTH

This long-term perspective shows that investors should follow specific markets instead of general ideas. The BRICs (Brazil, Russia, India and China) are an important investment theme. While it is...

THE SEVEN YEAR GLITCH

THE SEVEN YEAR GLITCH

Every seven years the stock markets take a hit. Or at least they have done so consistently for the last three quarters of a century. Sometimes it is small but usually it is large. The last two down cycles have taken away about 35% and 55% of the value of the Dow Industrials, respectively. The last time this happened it started in 2007, so now in 2014, the next down glitch appears to be due.

As I watch the stock market and start the writing this paper on this Tuesday May 13, 2014, the Dow and the S&P 500 are hitting all time highs.  The complacency is obvious, with the VIX at 12.13 and the Arms Index at 0.49.  Yesterday there was a large gain in the
averages, especially the Nasdaq, reflecting a lack of concern, even though the Nasdaq, unlike the other averages, had been sliding for over two months.

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)

Dick Arms

Back to top
A CONTINUOUS IMPROVEMENT PROCESS: THE CHARTERED MARKET TECHNICIAN (CMT) PROGRAM

A CONTINUOUS IMPROVEMENT PROCESS: THE CHARTERED MARKET TECHNICIAN (CMT) PROGRAM

Gordon Scott, CMT, is the Managing Director of the CMT Program. Recently I had the chance to ask about him about his vision for the CMT program, the path he plans to follow to implement that vision and what makes him qualified to fill this important role.

Gordon’s vision is simply to make the CMT the gold standard of recognition in the field of technical analysis.

In many ways, the CMT is already the gold standard of recognition in TA. The designation is recognized around the world and FINRA allows candidates who have passed Levels I and II to request an exemption from the Series 86 (Analysis) exam.

Many members are aware of this exemption but might not be familiar with the details. FINRA administers the Research Analyst Qualification Examination (Series 86/87) to ensure research analysts are competent to perform their jobs. The tests

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

Back to top
SHORT INTEREST AS A FACTOR

SHORT INTEREST AS A FACTOR

Editor’s note: This was originally posted at Quantitative Trading and is reprinted here with permission. Dr. Chan will be providing more information about this topic in an upcoming MTA Educational Web Series presentation scheduled for July 9.

Readers of zerohedge.com will no doubt be impressed by this chart and the accompanying article:

Cumulative Returns of Most Shorted Stocks in 2013

Indeed, short interest (expressed as the number of shares shorted divided by the total number of shares outstanding) has long been thought to be a useful factor. To me, the counter-intuitive wisdom is that the more a stock is shorted, the better is its performance. You might explain that by saying this is a result of the “short squeeze”, when there is jump in price

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)

Ernest Chan, PhD

Back to top
INTERVIEW WITH MARTHA STOKES, CMT

INTERVIEW WITH MARTHA STOKES, CMT

How would you describe your job?

Mostly my job involves the study of cycles, how cycles are changing as the internal market structure is continuing to change at an accelerated pace. I study the market participant groups and those cycles as an example. Currently, there are nine distinct market participant groups. When Charles Dow wrote his theory he identified three market participant groups. There are now nine unique market participant groups. This changes technical patterns in significant ways. In addition, how a groups trades also impacts technical patterns.

A group is defined by:

  1. The venues they trade on and use.
  2. The types of orders they use, as an example buy-side institutions might use dark pools and they have many new customized orders that bracket price into a specific range. HFTs also have custom orders they can use.
  3. The share lot size they generally use.
  4. Whether they employ fundamental, quantitative, or technical analysis or a combination thereof.
  5. 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)

Martha Stokes

Martha Stokes, CMT

Back to top
THE NINE FACES OF THE STOCK MARKET

THE NINE FACES OF THE STOCK MARKET

Most retail investors and traders think of the stock market or financial markets as “Main Street” and “Wall Street.” The Professionals of the market view the markets as Buy Side, Sell Side, and Retail.

This is the stereotypical impression of the market with a mere three Market Participant Groups:

  • Sell Side Institutions are Money Center Banks like Citigroup, JP Morgan, and Bank of America, or Financial Services, market makers such as Goldman Sachs, Morgan Stanley, and State Street.
  • Buy Side Institutions are those like Northern Trust, Vanguard, and CALSTRS, Mutual Funds and Pension funds.
  • Retail Investors are anyone who is not a professional trading the markets.

Unfortunately, this type of Market Participant Group Cycle, which is a mild modification of the original Dow Theory, doesn’t include the full contingent of Market Participant Groups present in the automated, institution dominated market structure of today. The Market Participant Cycle, one of the most substantial financial cycles, has

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

Back to top
TRIPLE TREND OSCILLATOR-TECHNICAL INSIGHTS

TRIPLE TREND OSCILLATOR-TECHNICAL INSIGHTS

The Triple Trend Oscillator (TTO) is a trend following oscillator I developed to identify an exact level of technical strength of a stock or index over multiple timeframes. It can be used as a trend and momentum indicator. Because it identifies precise entry and exit points, TTO can also be used a standalone trading system.

Every trend carries within itself several sub-trends of various lower degrees. These lower degree trends are hidden but play an important role in shaping the trend quality.

“Integrated trend analysis” is an attempt to study and analyze these diverse forces. TTO puts the multiple trends on the screen simultaneously to present an overall picture.

The position of the trend oscillators plays an important role in determining the trend strength. When all trend oscillators remain above the major trend, the security should rise rapidly. The reverse is true for a highly bearish security, when all of the trend oscillators

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)

Sanjay Khandelwal

Back to top
CHART OF THE MONTH

CHART OF THE MONTH

This long-term perspective shows that investors should follow specific markets instead of general ideas. The BRICs (Brazil, Russia, India and China) are an important investment theme. While it is common to think of the countries as an economic unit (the BRICs), since 2000, stock markets of the BRIC nations have not moved in unison. India has tracked the Dow Jones Industrial Average more than the other countries. Brazil, Russia and China have yet to recover from the global bear market.

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

New Educational Content This Month

Back to top