Hello readers, welcome to the June edition of Technically Speaking.
As children, we start learning about the world by placing things in two buckets: good and bad. It’s not the best start, to be honest, but a start nonetheless. Growing up, we realise (hopefully) that it’s not that simple! Everything is not black or white. The world is actually just a giant palette of grey. That’s basically life, figuring all of this out.
So why are we talking about white and black and grey? Because experiences and perceptions make us what we are. We react to events, and circumstances based on our past experiences. And that’s the biggest point of polarity for traders to perceive the same market differently. To a large extent, we tend to carry the burden of the last success or failure into our next analysis/trade. It’s the journey of detachment from the outcome and heavy introspection of trades, that make up a majority of the early years in the market.
The point here is confidence. An analyst who identified the turning points of the market and prepared accordingly is mentally better prepared to face the next cycle. How have your past experiences been? Have you detached yourself from the ‘prior trade plague’? Share your experiences with us as at editor@cmtassociation.org as we all try to find our footing in the market.
So, Oil and Dollar are partying and the rest have gone to sleep. Is that right? Bonds, Equities, Commodities and Crypto currencies haven’t been able to catch a break. There’s been a minor pullback, but aside from that, the list of new lows keeps expanding and the list of new highs continues to dry up. Emerging markets struggle under the pressure of Crude oil and the Dollar index rally. These two variables are currently the driving forces of the market and quite possibly the most important variables to track. Where they go, would determine where the rest of the market would go. For now, it doesn’t seem like there’s going to be any respite with record inflationary numbers flowing in as more and more global indices breach their levels of support.
But well, we have some blogs for you that should hopefully provide some clarity with regards to the market and the trends.
To all those who appeared for the CMT exams this June, All the best! You’ll find a better version of yourself after every exam and that’s the goal!
Until next time, Think Technical!
Rashmi Bhatnagar, CMT
Editor
What's Inside...
President's Letter
by Brett Villaume, CMT, CAIAAs a dues-paying member of the CMT Association, you’ve probably received a lot of emails over the past few months related to CMT activities including the Annual Symposium, the winner of this...
Negative Divergences Often Warn of Impending Declines: Bitcoin Highlighted…. is Gold Next?
by Louise Yamada, CMTNegative divergences, occurring in a variety of indicators, often warn of impending price consolidations / declines. There are different implications with short- term, intermediate- term or...
4 steps to a bottoming process
For the last year, we have been warning that macro and fundamental tailwinds that had supported the bull market from the pandemic lows were shifting to becoming headwinds. Namely, the record monetary...
What's in a name?
by David Settle“What’s in a name? That which we call a rose By any other name would smell as sweet” Well, not exactly. Yes, a rose if called by any other name would still be a great smelling flower. But, what...
USDJPY: Is it the start of a Multi Year Bull trend?
by Jigar Mehta, CMTInvestor and trading community is aware that the Japanese Yen is one of the currencies which has depreciated sharply against the US Dollar since the start of 2021. Before going deeper, it is...
Seasonality Charts Indicate that “It’s To Time to Cover Your Shorts”
by Vinay Rajani, CMTYou all might have heard of a “Santa Claus rally” or the famous adage, “Sell in May and go away”. Both of these concepts came from the idea that there are certain times in the year when...
Bob Farrell’s “Ten Market Rules to Remember” & how they can help us today
by Stephen Suttmeier, CMT, CFA & Paul Ciana, CMTHow the pioneer of technical analysis can help us today Bob Farrell, one of the pioneers of technical analysis, worked at Merrill Lynch for over 45 years. We revisit his Ten Market Rules to Remember...
In Memoriam
by Brett Villaume, CMT, CAIA & George A. Schade, Jr., CMT & Julie Dahlquist, Ph.D., CMTOur colleague and fellow technician, Lawrence “Larry” Laterza, passed away in early May at the age of 74. Larry served on the Board of the Technical Analysis Educational Foundation for many...
As a dues-paying member of the CMT Association, you’ve probably received a lot of emails over the past few months related to CMT activities including the Annual Symposium, the winner of this year’s Dow Award, the upcoming annual member meeting, voting for the proposed slate of new Directors, new educational webinars, the monthly Fill the Gap Podcast, and local chapter meetings. While that is not necessarily an exhaustive list, it does highlight a lot of the valuable benefits you get from being a member of the CMT Association. That being said, do you sometimes consider whether or not to renew your CMT annual membership? Maybe you ask yourself, “is the $325 per year worth it?” As I’ve written in previous President’s Letters, maintaining your membership in the CMT Association is worthwhile if for no other reason than continuing to use the letters “CMT” as a professional designation after your name. But, there are
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)

Brett Villaume, CMT, CAIA
Brett Villaume, CMT, CAIA, is Past President of the CMT Association, having served on the Board of Directors since from 2014 to 2023. Additionally, Brett is a Wealth Advisor at Dogpatch Capital, a registered investment advisor in San Francisco, CA. From 2015 to 2021, Brett...
Negative divergences, occurring in a variety of indicators, often warn of impending price consolidations / declines. There are different implications with short- term, intermediate- term or longer-term (more structural) divergences observed versus price action in an uptrending stock, commodity, index, etc.
A divergence occurs when price moves to a new reaction high but the indicator does not, rather failing at a lower high, creating a negative divergence to price, suggesting the momentum is waning.
Referencing here the MACD (moving average convergence divergence) indicator as an example, short-term (daily) divergences can indicate the potential for either a period of consolidation, or of a short-term pull back in an ongoing uptrend. A weekly divergence might suggest a more sustained consolidation / pullback, and even a reversal of trend, particularly if support is violated, offering an opportunity to lighten positions.
The monthly (more structural) divergences generally cover an extended period of time and should be taken more seriously for the potential of a more sustained decline; even an eventual end to an uptrend. These can offer a warning / opportunity to continue lightening / selling positions.
The event of a Sell signal in the MACD (the upper line crossing below the lower line), or a broken critical price support level, offer technical viability of the divergence. Monthly divergences need not always occur, but a monthly MACD Sell signal, even without a divergence, offers a more structural warning to sell.
We were watching the developing negative divergence in BITCOIN into Q1 of 2022, in all timeframes with a MACD divergence: The daily, the weekly price pattern (Fig. F-1) and also in the monthly.
Fig. F-1 Grayscale Bitcoin Trust (GBTC) (Top) & MACD (Bottom) (Weekly)
Source: Bloomberg and LY Advisors
The weekly price high in March 2021 was followed by an equal rally price high in November 2021. But the weekly MACD momentum (lower panel) was at a significantly lower high (see lower arrow), suggesting upward momentum was losing strength.
One can also note on the primary rally price high, the weekly MACD offered an initial Sell signal in April 2021 (as the upper line crossed below the lower line), worthy of acting defensively (lighten / sell positions) and from which price carried from 50 to 24, establishing an initial support level.
A weekly MACD Buy (lower line crossing up over the upper line), occurred in September 2021, carrying price toward the former high near 50, from which price declined again in February 2022 to the support established in July 2021 at
- But the MACD did not rally to its prior high (see declining arrow, lower panel), offering the negative momentum divergence, suggesting further risk might lie ahead.
The MACD itself also offered an early December 2021 Sell signal, suggesting one could lighten positions as price again retreated from 50 to the prior 24 support. (These weekly Sell signals offered participants 2 opportunities to capture rally profits.)
After a multi-week consolidation into March-April 2022, price gave up and broke the 24 support in mid-May 2022 (see horizontal red line). The MACD is still declining, suggesting the price depreciation may not be over, notwithstanding interim rallies. One ought to allow for evidence of stabilization at a low and the gradual reversal of the daily, weekly and eventually, monthly MACDs.
As a quick short-term 2022 reference, one can note even on the daily profile (Fig. F-2) that there is a divergence on the second MACD rally peak (see red arrow), which can offer a first alert to a possible similar development on the weekly and possibly eventually, the more structural monthly patterns.
Fig. F-2 Grayscale Bitcoin Trust (GBTC) (Top) & MACD (Bottom) (Daily)
Source: Bloomberg and LY Advisors
The monthly profile (Fig. F-3) depicts the equal price highs with a less obvious, but still diverging pattern in the momentum (see vertical and declining red arrows). Notice that on the second price high, the monthly MACD had not yet slipped to a Sell, but was beginning to flatten / roll over. The second price high was met with a slightly lower level in that flattening MACD period.
One can also see the falling histogram, as the MACD narrows (blue arrow), and the divergence progresses, until the December 31 2021 MACD Sell signal, at which point one should consider being fully defensive.
Fig. F-3 Grayscale Bitcoin Trust (GBTC) (Top) & MACD (Bottom) (Monthly)
Source: Bloomberg and LY Advisors
Price had yet to fall to the support at 24, and after doing so, lingered above 24 for several months, offering additional time, at a stable price, to lighten / sell before the May 2022 price breakdown.
The momentum is still declining, suggesting it is too soon to consider re-entry,
notwithstanding interim rallies which can carry into resistance, formerly support.
Fig. F-4 Grayscale Bitcoin Trust (GBTC) (Top) & Relative Strength to S&P 500 (Bottom) (Monthly)
Source: Bloomberg and LY Advisors
Interestingly, one can also note a similar warning in the weekly Relative Strength (RS) negative divergence (Fig. F-4), demonstrating evidence that multiple indicators can offer divergences; in this case the RS for BITCOIN was also suggesting a change of status, one of underperformance.
Contributor(s)

Louise Yamada, CMT
Louise Yamada is the Managing Director of Louise Yamada Technical Research Advisors (LYA), which she founded in 2005. Previously, she was Managing Director and Head of Technical Research for Smith Barney (Citigroup), and while there, was a perennial leader in the Institutional...
For the last year, we have been warning that macro and fundamental tailwinds that had supported the bull market from the pandemic lows were shifting to becoming headwinds. Namely, the record monetary and fiscal stimuli were flipping to be record contractions, and the fastest earnings growth since 2010 was transitioning to the biggest earnings deceleration since 2011. With the S&P 500 down as much as 18.7% on a closing basis, the question from here becomes whether the bad news is priced in. NDR Chief U.S. Strategist Ed Clissold addressed this question from a macro/fundamental perspective land in the latest update, he outlined the four steps to a market bottoming process. Financial markets are forward looking, so price-based, or technical, indicators are likely to be the first to signal the downtrend has turned into an uptrend. Typically, the market follows a four-step bottoming process:1) Hitting oversold levels; 2) Rebounding; 3) Retesting; and 4) Triggering breadth thrusts. The bottom
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 in a name? That which we call a rose By any other name would smell as sweet” Well, not exactly. Yes, a rose if called by any other name would still be a great smelling flower. But, what we call a market decline does not have the same connotations. Pullbacks versus corrections versus bear markets. The different names appear synonymous. They all imply stocks or indexes declining from the more recent highs. Most financial media pundits lazily assign different numerical values for each whereas others will use the terms interchangeably, like 10% for corrections or 20% for bear markets. But, this fails to account for the rallies that preceded the declines (see Figure 1). The danger lies in investor expectations. One of our more recent 20% or more declines occurred in March 2020. The S&P 500 fell 35.6% with most of those losses happening over the course of only four weeks
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)

David Settle
David started in the investor education world in 2004 with Investools, the former education affiliate of TD Ameritrade and thinkorswim. During this time, he has coached hundreds of individuals through 1-on-1 interactions and group webinars on how to invest and trade in the...
Investor and trading community is aware that the Japanese Yen is one of the currencies which has depreciated sharply against the US Dollar since the start of 2021. Before going deeper, it is important to look at the stance of the Central bank of Japan and the US FED to get more clues. As we know, majority of Countries like US, Europe, India, etc. are battling with higher inflation. To keep the inflation under control, the Central banks have started to increase the interest rates. Thus, there is a reversal in the interest rate cycles. However, the story of Japan is different because it has gone through severe deflation for many decades. Since 1989 Japan’s Inflation rate has failed to surpass above 4.5%. Due to this, the Japanese Central banks have continued with an easy monetary policy although globally the rate cycle had started to reverse. The Japanese economy is an ‘export
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)

Jigar Mehta, CMT
Jigar Mehta, CMT,CFTe is founder of Sitaram Investments LLC in UAE. Prior to starting his own company, he has worked with Family offices where he has managed funds. He has also worked with many renowned research firms and held the key designation. He has more...
You all might have heard of a “Santa Claus rally” or the famous adage, “Sell in May and go away”. Both of these concepts came from the idea that there are certain times in the year when the stock market tends to over or underperform. Another term from this stock market occurrence is “seasonality.” Markets as a whole can be seasonal, including individual stocks, which can outperform during winter months, summer months, or other times. By definition, Seasonality is a characteristic of a time series in which the data experiences regular and predictable changes which reappear every calendar year. Any predictable change or pattern in a time series that recurs or repeats can be said to be seasonal. Every market undergoes periods of supply and demand throughout a year, and it is these forces that drive seasonal patterns. Seasonality allows us to establish these periods to give us an indication ahead of
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)

Vinay Rajani, CMT
Mr. Vinay Rajani is a CMT charter holder and M.B.A. He has more than 16 years of rich experience in the Financial Markets. He is born and brought up in Ahmadabad, Gujarat, India. He has been working as a Senior Technical and Derivative Analyst in Retail Research of HDFC...
Bob Farrell’s “Ten Market Rules to Remember” & how they can help us today
- Rule1: Markets tend to return to the mean over time
- Rule 2: Excesses in one direction will lead to an opposite excess in the other direction
- Rule 3: There are no new eras — excesses are never permanent
- Rule 4: Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways
- Rule 5: The public buys the most at the top and the least at the bottom
- Rule 6: Fear and greed are stronger than long-term resolve
- Rule 7: Markets are strongest when they are broad and weakest when they narrow to a handful of blue chip names
- Rule 8: Bear markets have three stages — sharp down — reflexive rebound — a drawn-out fundamental downtrend
- Rule 9: When all the experts and forecasts agree – something else is going to happen
- Rule 10: Bull markets are more fun than bear markets
Contributor(s)

Stephen Suttmeier, CMT, CFA
Stephen Suttmeier is a director and the Chief Equity Technical Strategist at Merrill Lynch, based in New York. His regular research publications include the Monthly Chart Portfolio of Global Markets, Market Analysis Comment, Sectors and Stocks on the Move, Thematic Stock Charts,...

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 series. To explain...
In Memoriam
Our colleague and fellow technician, Lawrence “Larry” Laterza, passed away in early May at the age of 74. Larry served on the Board of the Technical Analysis Educational Foundation for many years and was a passionate advocate of Technical Analysis. He had a successful career on Wall Street as a broker for Merrill Lynch and Prudential Bache Securities, and was an adjunct professor at Rutgers University where he taught graduate classes in Technical Analysis and commodities markets. He also taught at Baruch College in Manhattan, where the Library of Technical Analysis is housed. I wish my sincere condolences to Larry’s family, friends and all who knew him. -Brett Villaume Larry was a longtime member of the foundation’s Library Committee, tasked with maintaining a collection of nearly 5,000 publications that constitute a significant portion of the body of knowledge of technical analysis. Larry always had a suggestion, a comment, or an observation that
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)

Brett Villaume, CMT, CAIA
Brett Villaume, CMT, CAIA, is Past President of the CMT Association, having served on the Board of Directors since from 2014 to 2023. Additionally, Brett is a Wealth Advisor at Dogpatch Capital, a registered investment advisor in San Francisco, CA. From 2015 to 2021, Brett...

George A. Schade, Jr., CMT
George A. Schade, Jr., who holds a Chartered Market Technician (CMT) designation, has written extensively about the people and innovations that have advanced the field of technical analysis within financial markets. A member of the CMT Association since 1987, he has written...

Julie Dahlquist, Ph.D., CMT
Julie Dahlquist, Ph.D., CMT is Professor of Professional Practice in the Finance Department at Texas Christian University (TCU). Previously, she served on the faculty in the business schools at University of Texas at San Antonio and at St. Mary’s University. Her teaching...
New Educational Content This Month
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November 22, 2023
Utilizing Trend & Mean Reversion in Breadth Studies to Gauge Market Conditions
Presenter(s): Victor Riesco
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November 18, 2023
Beating the Bench
Presenter(s): Scott Brown, CMT
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October 25, 2023
Equity Risk & Potential – Q4, ’24 & Beyond
Presenter(s): Timothy Hayes, CMT