Technically Speaking, June 2020

As I write this, the Nasdaq has completely erased its pandemic drop and most everything else looks pretty good. Overbought, but better than any of the so-called economists had predicted.

There is one thing we technicians need to watch and that is trying to put the market’s action since February in a neat little box. I am not saying that this time is different – because it never is different – but that really only applies to the forces that govern free markets. What happened was entirely created by the governments around the world. Don’t get me wrong – with the information we had at the time, it seemed like the right move.

In other words, to avoid being political, it was not the free market that caused the market to fall. We did not see breadth divergences that tipped off the arrival of the bear. We did not see any “nifty fifty” behavior where the entire market’s gain was due to a handful of stocks (don’t debate me on this; I know the extended FANG bunch was responsible for large percentages). The yield curve was right again. And money was still flowing – liquidity is bullish.

What we had were businesses being forced to close and people getting laid off through no fault of the companies for which they worked. But that is all starting to reverse, as we knew it would.

So why, then, should we be able to look at a chart pattern and expect it to predict as similar patterns created by true market forces? No, I am not saying supply and demand don’t work – they do. What troubles me is looking at trendlines and support and resistance levels and hoping they will work in the same way as they would during “normal” volatility, free market times.

Use your tools. Just remember the environment we are all in, and give them a little slack.

This month, we are light on content from chapters and committees, thanks to the lockdown, although the Minnesota Chapter remained quite active. However, you will see that the Association is implementing virtual meetings, which means that any member can attend any chapter meeting. That is a good idea!

This month’s interview is with Theodore Krintas, co-chair of the Hellenic Chapter in Greece. We’ve got an article connecting seasonality with the pandemic, which is very interesting but a little off of our technical analysis mission. And we also have to say goodbye to another long-time member and CMT contributor, Dick Dickson, who passed away suddenly on June 1.

Don’t forget to check out the new educational content in the video archives with links at the bottom of this edition.

We hope you are all coping with the lockdown and the slow reopening. Be safe.

What's Inside...

President’s Letter

Technically Speaking Readers – Join the exclusive “Uptrend” Discussions Starting in July!

In last month’s issue, I suggested that I...

Read More

In Memoriam – Richard “Dick” Dickson

Editor’s Note – Portions of the following were taken from a Technically Speaking interview he did for us in the...

Read More

Bear Markets and Winter Flu Season: Chronobiology of Financial Market Distress

Editor’s Note – The subject matter here is outside of the Association’s purview; the views and opinions expressed are solely...

Read More

The Association Deals with the New Normal

The CMT Association has been putting into place the infrastructure and policies to conduct our “new normal” Chapter Meetings. We...

Read More

Member Interview

Please tell us what you do professionally.

I head a boutique behavioral consulting partnership called Koubaras Ltd, in Cyprus and...

Read More

Minnesota Chapter Speaker Summary

The Twin Cities Chapter was pleased to host Doug Ramsey, CFA CMT, as our guest speaker for our May 19th...

Read More

"Wall Street Bound” Founder Connects Students With Finance Opportunities

Troy Prince, CAIA, is a member of the CMT Association community and CEO of the nonprofit organization Wall Street Bound,...

Read More

Membership News

Members on the Move

The CMT Association would like to congratulate the following members on their new positions:

Michael A....

Read More

President’s Letter

Technically Speaking Readers – Join the exclusive “Uptrend” Discussions Starting in July!

In last month’s issue, I suggested that I wanted to give you more of an incentive to read Technically Speaking and give the CMT Association some feedback.  Here is your opportunity to do just that and have some real fun doing it.

Starting in July, I will be launching a new and exclusive event – “Uptrend.”  These short and engaging meetings will occur on the monthly basis and be an open forum to discuss markets, investing, trading, the industry, and careers.  If the subject matter is in the realm of technical analysis and markets then no questions or discussion will be off limits.  Sessions will be approximately 45 minutes long.

I will be hosting guests from all over the industry and the world. In our discussions we will provide you with answers to your questions, insights to markets, and a view inside the minds that shape the calls on global markets.

Basically, this is a short “think tank” discussion on our industry by exclusive invitation.

What does it take to get invited to the “Uptrend” meetings?  Well, the first 25 people to provide me with a thoughtful review of any of the latest issues of Technically Speaking from 2020 will be invited to the session. So far, there have been 5 past issues of Technically Speaking in 2020 plus the current edition. To participate, just pick one monthly issue of Technically Speaking and share your opinion or thoughts.

What am I looking for in a thoughtful review?  It’s simple!

  1. What content did you like in the issue? Why?
  2. What content didn’t you like in the issue? Why?
  3. How would you rate the articles on a scale of one star to five stars, with five being the best?
  4. Where you are from? (Country/Time Zone)
  5. What is your occupation?
  6. How long you have been a member, affiliate, candidate, or other.
  7. What time would you prefer we do the meeting?

You can reach out to me by sending your review and comments to president@cmtassocation.org.

Our first guest on “Uptrend” in July will be Tony Dwyer, Chief Market Strategist from Canaccord Genuity.  He’s seen over 30 years of action in the investment world and he’s seen it from many different angles – you will want to be there to participate.

Hope to see you at the meeting!  Get me your feedback and be a part of “Uptrend”.

Contributor(s)

Scott G. Richter, CMT, CFA, CHP

Scott Richter, CMT, CFA, CHP is a senior portfolio manager for Westfield, which manages over $4B in AUM.  He is the lead portfolio manager for alternative assets and is also responsible for investments in the energy and utility sectors.  He was formerly...

In Memoriam – Richard “Dick” Dickson

Editor’s Note – Portions of the following were taken from a Technically Speaking interview he did for us in the April 2019 issue. Read the full text in the newsletter archive.

Dick Dickson passed away suddenly on June 1. After a career spanning nearly four decades as a technical analyst and strategist, he was only a few weeks into his partial retirement. However, even on his days off he was still the overriding presence at Lowry Research, often sending in his thoughts via email. When the other analysts were having disagreements on the interpretation of market conditions, it was not unusual to end with “What would Dick do?”

After serving in the U.S. Air Force and a few years in graduate school, he started working as a broker in 1979 with Thomson McKinnon Securities in Richmond, Va. During his first year, he decided to begin working toward the CFA designation.  Using the S&P Stock Guide, he looked for stocks that met the fundamental criteria for value. He went through the resulting list of stocks looking for the one that appeared to offer the best value, which he then bought – and proceeded to watch it go down.  “I figured I must have done something wrong so went back to drawing board and picked another stock – and watched it go down,” he said.

A broker in his office asked if he looked at the chart, then told him to get a copy of Edwards & Magee. The rest is history.

Prior to joining Lowry in 2002, Dick was Senior Technical Equity Strategist at two major regional brokerage firms. He served on the Board of Directors of the CMT Association as Treasurer, when it was known as the Market Technicians Association. Before that, he chaired the Education Committee and the Long-Range Planning Committee and served on the Board of Directors of the Educational Foundation.

In 1995, as head of the Education Committee, he initiated and taught the first full credit course on technical analysis at the University of Richmond. In 1997, Dick received the MTA’s “Best of the Best” award for his work in education. Dick was also a member of AAPTA (the American Association of Professional Technical Analysts).

He also co-wrote the book, Mastering Market Timing: Using the Works of L.M. Lowry and R.D. Wyckoff to Identify Market Turning Points in 2011.

On a personal note, Dick was responsible for bringing me to Lowry, wanting to keep continuity there by getting someone fully up to speed before he stepped back a bit. After more than three decades in the business, he was my mentor, and I will miss him deeply.

Contributor(s)

Michael Kahn, CMT

Michael Kahn, who holds a Chartered Market Technician (CMT) designation, is a seasoned financial services strategist, analyst, columnist, educator and speaker.  Michael has been working with charts and technical analysis since 1986. He is the author of three books on technical analysis...

Bear Markets and Winter Flu Season: Chronobiology of Financial Market Distress

Editor’s Note – The subject matter here is outside of the Association’s purview; the views and opinions expressed are solely those of the author. Be forewarned that it makes claims on market performance that haven’t been empirically tested. However, I found it to be quite interesting and timely, making it fodder for further discussion.

Introduction

In this article, I wish to explain the interrelated nature of seasonal patterns of climate and weather, chronobiological cycles (how solar activity effects human behavior) with respect to economic activity, and financial market cycles, in view of recent winter trends of a pandemic, leading to a great recession and even depression in social and economic life.

Chronobiology is the science that studies how our natural hormonal cycles are synchronized in response to changes in solar activity, such as the circadian rhythm of day-night, or even seasonal patterns of sunshine during summer versus cold winter conditions.

In financial markets, bear markets is a term coined to describe periods of significant economic decline caused by distress in financial conditions, similar to the bear in nature going into winter hibernation. Bull markets, on the other hand, depict the nature of a raging bull, filled with testosterone and jumping higher with energy. The nature of animal spirits driving financial markets actually originates in our hormones, providing an impetus for social mood trends and the seasonal nature of financial cycles through human history

History of Bear Markets

The current bear market of 2020 occurred as a result of the Coronavirus-19 (COVID-19) pandemic engulfing the globe during winter flu season, starting in December of 2019 in China. The pandemic has caused global lockdowns of economic activity, leading to mass unemployment and depression-like conditions. The financial panic culminated in March 2020, as the Federal Reserve announced unlimited monetary easing, and even the unprecedented step of buying high-yield corporate bonds (junk bonds) in order to “save the economy” from collapse due to the almost complete shutdown of economic activity.

This follows the last great recession of 2009, also occurring with a financial collapse of October 2008, leading the Federal Reserve to initiate a quantitative easing program of money printing. That led to a recovery after the stock market bottomed in March 2009 during the end of the winter season. It also coincided with H1N1, Swine Flu epidemic of 2009.

If we look further back in history, the great depression of 1929 also began with the crash of October 29, and similarly the great crash of October 1987 occurred during autumn, leading the cold winter season.

Origins of Seasonal Patterns in Chronobiology

This historically well-known pattern of great bear markets, starting with a financial crash around the month of October, the autumn transition season between sunshine of the summer months and the cold winter, is rooted in our hormonal cycles transitioning from raging bull mode during the summer season into hibernating bear during winter.

After winter usually comes the rally in springtime, as the sun begins the shine again in the northern hemisphere during March and April. The bear market of 2009 bottomed out in March, and the current financial panic of 2020 has also diminished since March as stock markets are recovering into May. After the crash of October 1929, stock markets also bounced back for five months, until April, early spring.

In Wall Street there is also a well-known adage, “Sell in May and go away,” which has been time tested as demonstrating surprisingly highly-significant results. If we examine this saying from a chronobiological perspective it makes absolute sense, as the spring period shows the greatest rise of solar activity after low UV radiation during winter.

Long-term Solar Cycles and Financial Trends

Kondratiev waves is a theory introduced by Soviet economist Nikolai Kondratiev in 1925, suggesting a hypothesized cycle-like phenomenon in the modern world economy ranging in waves of about sixty years. Kondratiev identified three phases in the cycle, namely expansion, stagnation, and recession, which are based on seasonal patterns. These waves are also associated with changes in social mood:

The first stage of expansion and growth, the “Spring” stage, encompasses a social shift in which the wealth, accumulation, and innovation that are present in this first period of the cycle create upheavals and displacements in society. The economic changes result in redefining work and the role of participants in society.

In the next phase, the “Summer” stagflation, there is a mood of affluence from the previous growth stage that change the attitude towards work in society, creating inefficiencies. After this stage comes the season of deflationary growth, or the plateau period. The popular mood changes during this period as well. It shifts toward stability, normalcy, and isolationism after the policies and economics during unpopular excesses of war.

Finally, the “Winter” stage, that of severe depression, includes the integration of previous social shifts and changes into the social fabric of society, supported by the shifts in innovation and technology.

The theory of chronobiology, which I develop in my two books, The Testosterone Hypothesis: How Hormones Regulate the Life Cycles of Civilization, and Sex Wars, provides the framework to understand how Kondratiev waves are driven by solar and hormonal seasonal cycles.

If we observe the chart of sunspots since the 1950s, we can see that solar activity is on a declining trend for the last 70 years, leading to the Great Recession of 2009 and 2020, both right at the bottom of the 11-year solar cycle:

Conclusion

As it seems probable that solar activity is declining into a grand solar minimum over the next few decades, similar to the Dalton minimum in the early 19th century that led to the Napoleonic Wars. We may be at the cusp of long period of winter-like conditions. Furthermore, because winter flu conditions are also a product of low solar radiation during the winter period, when more clouds block UV radiation that is known to kill germs during the summertime, we may face more infectious diseases that cause much disruption to economics activity.

Hence, understanding the interconnected nature of solar cycles, climate, and human chronobiology, may provide us with a guide to better adapt to our natural, social and, economic environment in the future.

Contributor(s)

Roy Barzilai

Roy Barzilai is an independent scholar and the author of several books, including The Testosterone Hypothesis: How Hormones Regulate the Life Cycles of Civilization. As a financial analyst for more than a decade, Roy became aware of the herd mentality in financial...

The Association Deals with the New Normal

The CMT Association has been putting into place the infrastructure and policies to conduct our “new normal” Chapter Meetings. We will have virtual meetings until at least August, depending on the re-opening plans for the world.  Everyone’s safety is very important to us.  Working with our chapter chairs, we are monitoring government mandates regarding group meeting limits.

New information regarding Chapter Meetings:

  • We will be using the GoToWebinar platform to hold the meetings
  • Meetings will begin in June

The following future Chapter Meetings have been scheduled:

  • June 16th – Minnesota Chapter Meeting w/ Rob Sluymer, CFA
  • June 23rd – Richmond Chapter Meeting
  • June 24th – No. Ohio Meeting w/ Katie Stockton, CMT
  • July 14th – Hong Kong & Singapore Joint Chapter Meeting
  • July 21st – Minnesota Chapter Meeting w/ Sam Stovall, CFP

Process of Chapter Meetings on the administration side:

  • Registration will be the same as with live face-to-face meetings
  • Registration will close two hours before each event
  • An email will be sent one hour in advance of meetings with call-in/link information.  This is for the security of the virtual platform to eliminate “unwanted bombings of inappropriate interruptions”
  • Monthly roundup emails with the events listed
  • Fewer reminder emails
  • We will continue to utilize social media for our events
  • Members and affiliates will have access to the recordings in our archives

The main advantage to the virtual meetings is that you will now be able to attend any Chapter Meeting in the world without travelling from your home, office, or home office!

The CMT community is still strong and vibrant.  Thank you for your continued support of the CMT Association!

Contributor(s)

Barbara Terry

Barbara Terry is the CMT Association’s volunteer coordinator, based in New York. She has close to 20 years of experience in large-scale project management and account management roles, and is an invaluable resource for the CMT Association’s event planning team.  Barbara holds...

Member Interview

Please tell us what you do professionally.

I head a boutique behavioral consulting partnership called Koubaras Ltd, in Cyprus and Greece. We offer management services, corporate finance and estate planning.

How did you get there?

During my time in high school, I was lucky enough to meet a professor at Athens University of Economics and Business, so I worked towards my first degree in business administration (1988). It was followed by an MBA with Marketing specialization (1990) and then I started serving my military service in the Greek Navy. Once again, my good angel was there and when I decided to work in parallel, a fellow MBA colleague introduced me to my first boss, Phaedon Tamvakakis at Alpha Trust Investment Services.

Finally, completing my studies, I earned my PhD in Behavioral Economics from University of Thessaly in 2006.

Who was an early mentor in your career?

Phaedon Tamvakakis was and still is my mentor. His work still inspires me. He now holds the position of Vice Chair, at Alpha Trust Mutual Funds M.F.M.C.

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

Steve Nison’s Beyond Candlesticks was a big influence. The book offers a great combination of cultural and technical aspects of market analysis. Its historical account of the methods of trading well before the existence of computers made me realize the importance of the analyst from the very beginning.

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

Spending time with my wife Alexandra and our three kids, playing the piano and sailing.

What brought you to the CMT Association?

The CMT Association, known then as the MTA when I discovered TA in 1992, was for me a source of knowledge. Bear in mind this was the 1990s; the Association and Technical Analysis of Stocks and Commodities magazine were the only sources of wealth in this subject. I found a couple of magazines at the library of the Athens University of Economics and Business at that time and that was enough to encourage me to become a subscriber and one of the few followers of the method in Greece. I still have the newspaper with my charts on the Athens Stock Exchange and my analysis on the trend channel appearing on them.

What is the most useful benefit of membership for you?

Belonging to the same club with the legends of my youth, being close to my dear friends Alex Spiroglou and Elena Pateropoulou and to have the opportunity to offer my trading colleagues in Hellas (Greece) some great talks. I am currently studying for my CMT and cannot wait to achieve it.

Contributor(s)

Theodore N. Krintas, Ph.D

Theodore Krintas is a C-level executive working in finance and technology industries since 1991. Experienced in developing, growing and expanding businesses, has closely worked with some legends of both industries in Greece and enjoys the appreciation of his colleagues and peers. As an...

Minnesota Chapter Speaker Summary

The Twin Cities Chapter was pleased to host Doug Ramsey, CFA CMT, as our guest speaker for our May 19th meeting.  Doug is the Chief Investment Officer of the Leuthold Group.  For some context, the S&P 500 was near 2900 on May 19th.

Doug highlighted the unique nature of this decline, which was caused by a “sudden stop” of economic activity due to pandemic shutdowns.  The sharp recovery reflects the view that business activity will recover as businesses continue to reopen throughout May and June.  Prior to the downturn, the yield curve, credit spreads, and other leading economic indicators had been warning of a cyclical decline.

During the decline, equity valuations remained higher on March 23rd than the highest historical bear market lows.  Doug was troubled by the idea that a bear market bottom could be formed at such a high valuation level within the first month of a decline.  However, all times but one since 1900 that the market has rallied 30% after bear market type losses it has signaled the start of a new bull phase.  The 1929-1932 market was the only exception.

This year, the best strategy has been to buy and hold the high P/E winners.  The NASDAQ/NYSE relative strength ratio is back to 2000 highs.  Doug playfully suggested that perhaps NASDAQ is the new defensive play.  The NASDAQ/NYSE volume ratio is also very high, which to Doug suggests high enthusiasm for speculative stocks.  While NASDAQ/NYSE ratios are normally a sentiment indicator, Doug was open to the possibility that this time they indicated a structural shift – perhaps towards greater adoption of new technologies.

There are some other unusual trends in the normal proxies of cyclical leadership.  The groups that would be expected to outperform in a cyclical recovery have not shown behavior that matches their historical norms on bear market exits.

Credit has continued to underperform equities.  The spread between Moody’s BAA credit and 10-year Treasuries has diverged from the bullish behavior of the S&P 500.  From 2007-2010, credit was leading in and out of the bear market.  This episode seems different.

Bear markets of the last 40 years generally saw small caps leading on the way up.  The Russell 2000 almost always rallies up 30% off the lows before the S&P 500.  This time it has been different with the S&P 500 leading most of the way up.  Transports and financials are two other sectors that generally lead on the way up.  This time those sectors have lagged.

Part of the reason many sectors have lagged is that the advance from the lows has been quite narrow.  Historically a “breadth thrust” indicated by expanding market breadth has been coincident with the first leg of an upswing.  Market breadth recently has been nowhere near high enough to indicate a breadth thrust.  Since the Fed intervened in the repo market last fall, gains have been concentrated in the NASDAQ 100.  It’s as if Fed intervention has amplified the disparities between the big and the small and those disparities are seen in prices as evidenced by the above-mentioned anomalies.  A broad advance as indicated by a breadth thrust generally yields positive returns over the coming year.

In summary, Doug’s concerns about the current market center around broadening disparities in the stock market.  The narrow advance in a few tech winners has left most other stocks lagging badly and that behavior is not typical of broad cyclical recoveries.

Contributor(s)

Mahesh Johari, CFA

Mahesh Johari is an independent investor based in the Minneapolis area. He holds degress in mathematics and economics from the University of Illinois and the University of Arizona.

"Wall Street Bound” Founder Connects Students With Finance Opportunities

Troy Prince, CAIA, is a member of the CMT Association community and CEO of the nonprofit organization Wall Street Bound, recently featured on CNBC. Wall Street Bound seeks to connect underserved young adults in urban areas with the financial training and internship experience they need to land entry-level jobs in the industry.

“We know that talent and IQ is equally distributed,” said Prince in a recent CNBC interview. “Opportunity is not.”

“This demographic, they do have the innate hunger [and] behavioral and cognitive abilities to succeed [… ] It is only a matter of connecting them with the opportunities through education and access,” Prince added. Wall Street Bound works with recent graduates and college students to develop the technical skills required to succeed as data and equity analysts, discretionary & quant traders and investors.

Josh Brown, CEO of Ritholtz Wealth Management, featured Troy Prince on his blog earlier this month to discuss some of the challenges faced by the majority-minority communities that are the target of Wall Street Bound’s outreach.

“A lot of people say they want to see change, and more equality of opportunity. Troy is someone who is actually doing something about it,” concluded Brown. “He is looking for mentorship from professionals as well as financial support from people who think this is a good cause.”

You can find more information about Wall Street Bound on the organization’s website, https://wallstreetbound.org/, or by watching this recent CNBC feature or Josh Brown’s blog post.

Contributor(s)

Marianna Tessello

Marianna Tessello served as the CMT Association’s digital producer from 2018 until 2021. She was responsible for the management of most of the association’s front-end digital assets during that time, including social media production, current website information and updates, and various communication...

Membership News

Members on the Move

The CMT Association would like to congratulate the following members on their new positions:

Michael A. Gayed, Portfolio Manager at Toroso Asset Management

Ehtesham Khan, CMT, Founder RoboCaprahul Mudliar, Algo Strategy Quant at Tradetron

While working from home due, please take a few minutes to update your information at the CMT Association website.

CMT

Standard registration is open for the December 2020 test administration until August 31, 2020.

If you need assistance registering for a CMT exam, please email admin@cmtassociation.org; in the email include your first and last name, and the exam for which you are registering.

Online remote proctoring for all levels of the CMT exams is now available, for more information about remote proctoring, please click on the following link:  https://cmtassociation.org/chartered-market-technician/cmt-exams-remote-proctoring/.

Should you need assistance with scheduling/rescheduling your exam, please email your questions to admin@cmtassociation.org.  Please include your first and last name and the exam you want to schedule in the email.

If you have completed the CMT Level III exam or are presently registered for the exam and have the necessary professional work experience, do not forget to apply for the Professional Member status. Please forward your questions about the Professional Membership process to admin@cmtassociation.org.

The CMT Association would like to congratulate the following members who received their CMT Designation in May 2020.

  • Manuel Arce
  • Edward Booth
  • Michael Ellingsen
  • Wisnu Karto
  • Christian Lenk
  • Xinshan Lin
  • Thanh Tung Nguyen
  • Davide Pandini
  • Kevin Pietrzyk
  • Dhaval Saikar
  • Remus Sotelo
  • Martin Tobias
  • David Zarling

Member Discounts & Resources

Have you visited the Member Discounts & Resources page recently? This page features a variety of products and services that are relevant to members at a discounted rate. It also highlights products created and offered by members, like the Investment Portfolio Analysis PRO offered by LayLine ToolKit or a basic subscription to Fairlead Strategies.

While you’re there, you can also find information on how to claim your digital badge to highlight your achievements on social media and in your email signatures.

The page is updated regularly. If you have any recommendations on products you would like to see offered, please connect with us at admin@cmtassociation.org.

Contributor(s)

Marie Penza

Marie Penza serves as the Director of Member Services for the CMT Association.