Technically Speaking, June 2015

LETTER FROM THE EDITOR

Technical analysis has always been focused on the application of knowledge. In the early editions of Edwards and Magee’s Technical Analysis of Stock Trends, they focused on how to trade chart patterns. But these pioneers of the field also included a theory explaining why the pattern should work.  While applying the ideas of technical analysis is still the important consideration to practitioners, many academic researchers are working to uncover why the techniques work. In this month’s newsletter, we provide articles highlighting both the application of technical analysis and the research that technical analysis is stimulating in the academic community.  This month’s newsletter also includes a summary of Tom Dorsey’s presentation at the Annual Symposium. The Symposium truly does provide a year’s worth of ideas and we will be presenting summaries of those ideas in the months ahead. Videos of this year’s presentations and the previous four years are available at http://symposium.mta.org/ and can be viewed at anytime.

As always, we welcome your feedback. Please let us know what you think of Technically Speaking, the MTA magazine, by emailing us at editor@mta.org.

Sincerely,
Michael Carr

What's Inside...

RELATIVE STRENGTH: A CORNERSTONE OF TECHNICAL ANALYSIS

Tom Dorsey opened the 2015 Annual Symposium with a presentation on the process that helped him build a $6 billion...

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YOUR TRADING CHARTS WORK BETTER WHEN MARKETS GET FROTHY

Editor’s note: In an article by Oliver Renick, Bloomberg recently featured the work of Dr. Edward J. Zychowicz which demonstrated...

Read More

BETA ROTATION INDEX LAUNCHED BY S&P DOW JONES INDICES BASED ON 2014 DOW AWARD- WINNING PAPER

The Charles H. Dow Award is presented annually for outstanding research in technical analysis. The 2014 winners, Michael Gayed, CFA,...

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INTERVIEW WITH PASCAL ZINGG, CFTe, CMT, CAIA

How would you describe your job?

I am working as a Technical Strategist in the Private Banking & Wealth Management...

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WHEN DO STOP-LOSS RULES STOP LOSSES?

Editor’s note: This article is an extract of a paper originally published at the MIT web site. All references and...

Read More

AUGUST 1914: WHEN GLOBAL STOCK MARKETS CLOSED

On June 28, 1914, Austrian Archduke Franz Ferdinand was assassinated in Sarajevo. This event led to a month of failed...

Read More

ACROSS WORLD CURRENCIES

Editor’s note: This article was originally published in the May 21 issue of Bloomberg Brief: Technical Strategies. Below is an...

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ETHICS CORNER: PROFESSIONAL CONDUCT STATEMENTS

Every year, members are required to complete a Professional Conduct Statement (PCS) when they renew their membership. Prospective members and...

Read More

CHART OF THE MONTH

Editor’s note: This article was originally published in the May 21 issue of Bloomberg Brief: Technical Strategies. Below is an...

Read More

RELATIVE STRENGTH: A CORNERSTONE OF TECHNICAL ANALYSIS

Tom Dorsey opened the 2015 Annual Symposium with a presentation on the process that helped him build a $6 billion asset management firm. The complete presentation is available at the MTA’s Knowledge Base, the web’s free repository for everything related to technical analysis.

Tom explained how Dorsey Wright and Associates (DWA) has always focused on the price of a security because it is 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)

Tom Dorsey

Tom Dorsey is the Co-Founder & Chief Executive Officer of Dorsey, Wright & Associates, a registered investment advisory firm that provides quality equity analysis and options strategies to member firms and institutions. Formerly a senior vice president and director of Options Strategies with...

Michael Carr, CMT

Mike Carr, who holds a Chartered Market Technician (CMT) designation, is a full-time trader and contributing editor for Banyan Hill Publishing, a leading investment newsletter service. He is an instructor at the New York Institute of Finance and a contributor to various additional...

YOUR TRADING CHARTS WORK BETTER WHEN MARKETS GET FROTHY

Editor’s note: In an article by Oliver Renick, Bloomberg recently featured the work of Dr. Edward J. Zychowicz which demonstrated the value of technical analysis. The original article is available at Bloomberg.com.

The Bloomberg article began with an oft-repeated criticism of technical analysis:

“To critics, technical analysis is snake oil, purporting to find order in markets when none exists. New research says...

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)

Edward J. Zychowicz, Ph.D, CFA, CMT

Dr. Edward Zychowicz earned a BA in economics from the Maxwell School of Citizenship and Public Policy at Syracuse University, and MA and PhD degrees in economics and finance from SUNY-Binghamton. Since joining the faculty of the Frank G. Zarb School of...

BETA ROTATION INDEX LAUNCHED BY S&P DOW JONES INDICES BASED ON 2014 DOW AWARD- WINNING PAPER

The Charles H. Dow Award is presented annually for outstanding research in technical analysis. The 2014 winners, Michael Gayed, CFA, and Charles Bilello, J.D., CPA, CMT, demonstrated research can be put to practical use. They have used the analysis presented in their paper to manage mutual funds and separately managed accounts. They have now created an index to track the results of their analysis.

...
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)

INTERVIEW WITH PASCAL ZINGG, CFTe, CMT, CAIA

How would you describe your job?

I am working as a Technical Strategist in the Private Banking & Wealth Management division of Credit Suisse. My main task is to deliver a technical view on all asset classes to the Credit Suisse Investment Committee. Furthermore, I publish regularly technical views in various Credit Suisse Investment Strategy publications and I also communicate the technical views directly...

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)

Amber Hestla-Barnhart

Bio coming soon.

Pascal Zingg, CMT, CFTe, CAIA

Pascal Zingg is working as a Technical Strategist within the Private Banking & Wealth Management division of Credit Suisse, where he delivers a technical analysis input on all asset classes to the Credit Suisse Investment Committee. He joined Credit Suisse in 2004...

WHEN DO STOP-LOSS RULES STOP LOSSES?

Editor’s note: This article is an extract of a paper originally published at the MIT web site. All references and additional support for the ideas tested can be found in the original.

Abstract

Stop-loss rules—predetermined policies that reduce a portfolio’s exposure after reaching a certain threshold of cumulative losses—are commonly used by retail and institutional investors to manage the risks of their investments, but...

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)

Kathryn Kaminski, PhD, CAIA

Kathryn M. Kaminski is a Chief Research Strategist and Portfolio Manager at AlphaSimplex Group. She is an author and specialist in systematic investing. She co-authored the book Trend Following with Managed Futures: The Search for Crisis Alpha published by Wiley Trading in 2014....

Andrew W. Lo, PhD

Andrew W. Lo is the Charles E. and Susan T. Harris Professor at the MIT Sloan School of Management and director of the MIT Laboratory for Financial Engineering. He received his Ph.D. in economics from Harvard University in 1984. Before joining MIT’s...

AUGUST 1914: WHEN GLOBAL STOCK MARKETS CLOSED

On June 28, 1914, Austrian Archduke Franz Ferdinand was assassinated in Sarajevo. This event led to a month of failed diplomatic maneuvering between Austria-Hungary, Germany, France, Russia, and Britain which ended with the onset of the Great War, as it was originally called.

Austria-Hungary declared war on Serbia on July 28, causing Germany and Russia to mobilize their armies on July 30.  When Russia...

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)

Dr. Bryan Taylor

Dr. Bryan Taylor President & Chief Economist, Global Financial Data Dr. Bryan Taylor serves as President and Chief Economist for Global Financial Data. He received his B.A. from Rhodes College, his M.A. from the University of South Carolina in International Relations, and...

ACROSS WORLD CURRENCIES

Editor’s note: This article was originally published in the May 21 issue of Bloomberg Brief: Technical Strategies. Below is an extract of that article.

In Bloomberg Briefs, Paul Ciana, CMT, demonstrated the value of charting a commodity in multiple currencies....

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)

Paul Ciana, CMT

Paul Ciana is a Managing Director and Chief Technical Strategist at Bank of America, based in New York. He publishes his short- and long-term technical views on Rates, FX, Commodities and emerging markets in the coveted and most read Technical Advantage report...

ETHICS CORNER: PROFESSIONAL CONDUCT STATEMENTS

Every year, members are required to complete a Professional Conduct Statement (PCS) when they renew their membership. Prospective members and affiliates are also required to complete the PCS. This document has been the source of many questions to the Ethics and Standards Committee. In this article, we review the PCS and address some of the most frequently asked questions.

In general terms, the PCS...

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)

CHART OF THE MONTH

Editor’s note: This article was originally published in the May 21 issue of Bloomberg Brief: Technical Strategies. Below is an extract of that article.

Alex Cole has put together a screen to show the trend of major currencies, sovereign yields, commodities and global stock market averages. Based on the charts, he concludes:

  • The dollar held support while the British pound extended its breakout.
  • ...
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)

Alex Cole

Alex Cole is a Technical Analysis and Charting product specialist. With almost 20 years of financial market experience, Alex has led Technical Analysis and data visualization teams, frequently contributed to financial news/ industry organizations such as Bloomberg and the Chartered Market Technicians...