Molly Schilling (MS): So are you a very visual person?
Gail Dudack (GD): Very visual. Yes, in fact, I have a hard time remembering names unless someone’s wearing a name tag.
MS: Me too… and did your visual intelligence lead you into TA?
GD: That’s a good question. When I was in college I had a summer job at Pershing & Company. I was the research assistant which, at the time meant that I got to “sit in everyone’s seat” when they were on vacation. I did everything — I worked in the library, I answered phones, I was a junior analyst, I went to research meetings — a wide variety of things. When I went back to school and started my senior thesis in economics, I chose two topics, both of which, again at that time in particular, were connected to technical analysis. One topic was the odd-lotter and the other was short interest.
I had an interest in technical analysis before I actually knew what it was. When I came back to Pershing, I took Ralph Acampora’s class at night, followed by Alan Shaw’s class. So I started doing technical analysis myself at night. And after a year or so, when the technical analyst at Pershing left, I asked my boss if I could take his place.
MS: That was bold.
GD: It was very bold. It’s kind of interesting when I think back on who I was then — and for me, that was a bold move. My boss said that I needed to replace myself at the Information Center. As it turned out, I hired Mary Farrell. So my boss said I could update the technician’s charts at night. He had walls full of charts and lots of them were breadth indicators. I updated charts at night, and I began to write an internal report and after about six months I actually started to publish. It was an interesting way to start because I was always completely on my own.
MS: There was no “glass ceiling”…
GD: Right. There was no senior technician. I just asked for the job and worked my way into it and developed it myself.
After six months, I started publishing to Pershing’s clients and became a market analyst. I did that for quite a few years. I think the interesting thing about that was that I worked in such a vacuum. I didn’t get to read other technical analysts very often. And I was never formally trained by one within the company. So I really kind of developed my own style.
I think as I’m older now, I see a great benefi t in that and because I came to my own conclusions and developed my own thinking I think I have more conviction behind my own views maybe more than other people. And that’s because I do it from scratch.
MS: Were you encouraged to forge ahead on your own thinking and analysis?
GD: My boss was head of research at Pershing. He did the economic writings, and I did the market technical writings. If anyone was my mentor, he was clearly my mentor, but he was not a technical analyst. I didn’t have anyone there influencing me. After a while, he actually told me he didn’t want me reading other technical pieces by other people; he didn’t want me influenced by someone else. I did create my own style and my own combination of indicators and so forth. It wasn’t until I was more established that I started to actually get other people’s work, and of course, you usually only get somebody else’s work when you’re a client, and I wasn’t a client to anybody. So it wasn’t that easy for me to actually get to see other people’s work. It just was what it was. To me, it wasn’t anything that I did on purpose; it just existed.
MS: Did you get involved with the MTA?
GD: I took Ralph’s class and Ralph is a great connector of people. And then I took Allen’s class. I remember those very early meetings when the MTA was first starting as an organization. When we first got into a room, there were about ten of us and we all wondered “What’s this group going to be? Who are we going to be?”
So I was invited into the MTA early in its own life and that was a great networking group. I remember having some wonderful conversations at those early conferences with Bob Farrell and Bill Doane. Everyone was wonderfully supportive, great people. And I was the youngster at that time.
MS: How did it feel to be a woman in that crowd back then?
GD: Well, that was 35 years ago so it was a very different world. I was very often the only woman in the room, in 99% of all meetings, anywhere. I think what saved me, on one level, was that I always saw myself as something of a tomboy. When I was growing up, I was always involved in sports. I was always very involved with the football teams, and I even became a cheerleader at one point. And I loved to talk to my dad about war stories. In the Wall Street world, there’s an awful lot of sports and, believe it or not, kind of a “war-thing.” I always felt comfortable in those kind of conversations. I just felt like “one of the guys.”
And back then, it was more common to run into little flirtations here and there from the men, which of course is not allowed in the work world today. But back then it was very much a part of the work world, and I never took it seriously. It didn’t bother me. Today the whole culture has changed, of course for the better, and managers are trained continuously on behavior around women.
MS: You’ve been president of the MTA?
GD: I’m not sure but I might have been the first person to do a double term. That was in the mid-eighties. I’ve also served for many years on the Board.
MS: And, you received the Annual Award at the MTA 2007 conference?
GD: Yes. When I was called about the award, I thought they were calling me to serve on a committee because I’ve served on the awards committee several times. I received the award for my work on “Price analysis and market forecasting.” I was surprised when they told me I was going to receive the award because having served so many times on the committee, we’d always chosen someone who had written a book or done some theory, or some historical figure. So I feel very humbled to have received the award. I’m not sure what made them choose me for the award, but I know I’ve been a technician at heart for a lot of years.
MS: Let’s talk for a minute about your research?
GD: I do strategy, market strategy, for institutions. My clients are mutual fund managers, hedge funds, chief investment officers at big organizations. So my research is geared to that audience. I publish a weekly piece, I publish two different monthlies, and I put out what’s called, “Direct from Dudack” which is a quickie based on some immediate kind of information. I did one today on the employment numbers, and what I think today’s employment numbers mean in the larger scheme of things.
MS: So you address several time frames.
GD: I’m looking out the next three to six months, which is where I think you can really forecast. Of course everybody talks about the six to twelve month forecast, but I think that the further out in time you go, the more it becomes guesswork. What my clients look for from me is relatively near term market direction, the various risks to that call, and the sector leadership within the moves.
I try to capture the most important themes for a manager right now. I draw on economic data, on evaluation, and of course, technicals. Then I focus on which of those three, in my opinion, will play the most important role at any given time.
For example, we’re seeing that the world of trading has and is changing so much. We have an environment where hedge funds and day traders create a lot of what will be called “noise” to the longer term trend. But noise can be a pretty sizeable correction from time to time, and so we can get a series of what I call “liquidity crisis”, where there are really margin calls going on. We seem to get some of these types of pull-backs about that every six months, and in times like that, I think it’s purely technical analysis that can help determine direction.
In defining the longer term trends, what’s going to drive the market generally higher or lower, I look at technicals, but I also look at valuation. The valuation is a great part of how low the market could go, or high it could go.
MS: Can you say anything about the current market?
GD: Well, here’s something that I actually talked about when I got my award, I think that one of the things that I try to do, and it probably comes from my economic background, is I try to look at the market from the big, big picture, starting off with some kind of economic framework, but also, what’s driving the market and who’s driving the market? And in that regard, every market has a different character, depending upon who the big buyer or seller is.
In the 70s and 80s, the big growth in money under investment was in pension funds and mutual funds. The mutual fund industry started off as a money market fund, and from there it grew to equity funds, and 401(K)s and pension funds. Those are the root drivers. When I say drivers, that’s where the greatest number of dollars were being placed, and those money managers drove the markets. And those players in the market were very fundamentally driven, PEs and dividend yields, etc…
In the 1990s, we saw that the big driver of the market actually turned out to be the household sector because the household sector discovered stocks, and they bought them, either through their broker, or through their 401(k). And if you take a look at what helped to drive the NASDAQ in 1997 through 1999, it was the fact that all the money fl owing in the mutual fund industry went into technology sector funds. That created a very different market, and it was not driven by anything fundamental. And to some extent, not technical either, because a lot of stocks went straight up. They were hard to predict. And that’s really how we got that mania. So my economic background helped, because a mania is an economic event. As we changed centuries now, we’re in another and different environment where the big pools of liquidity are really in the hands of hedge funds who also use a tremendous amount of leverage and other kinds of alternative investments. But we’re also seeing the development of the Sovereign Wealth Funds. And these are the new drivers of the markets.
I forgot to add, we still have some very large pools of money that are professionally day-traded. Day traders have not disappeared, but they have become professional. So there are quite a few large pools of money moving in and out through day trading.
This is changing the character of the market. And day traders and hedge funds tend to be very technically oriented, and so we technicians might say this is a great thing. They may not be CMTs, but they’re in tune with the charts. And because they know their charts and can see how to use them creatively, I see a lot of false breakouts and breakdowns because they get in, generate the breakout, and then ride the wave. So I’m seeing more and more false breakouts which tend to be less predictable.
I find this to be a time when technical analysis is very popular, but it’s also very challenging.
MS: Because it can be manipulated?
GD: Yes, because there are some very short-term players who are playing those breakouts, and they have a decent amount of capital.
MS: Is there anything else that is uniquely “you” that you’d like to include?
GD: Well, I guess one thing is that I’ve gone from being just an analyst to being an entrepreneur. It’s independent research. Wall Street seems to have a difficult time knowing how to get paid for research, and we see that there’s been, in the last five years, a continuous cut back in analysts and research departments, because there’s just not a good understanding of how to get paid. So the independent research industry, which I’m now a part of, is taking a lot of, I think, dollars from institutions. I mean, I get paid by institutions. So I’m actually an entrepreneur. My research is not readily available, it’s only available to clients who pay for it, and I do run my business within the Midwood umbrella. Dudack Research Group is a division of Midwood Securities, Inc. They love the publicity. They are my trading arm, compliance arm, and administration. But I still have my own PR.
MS: How do people learn about your research?
GD: Well we have a website that’s going to be revamped in 2008, to be more modern. But there are certain kinds of portfolio managers who might be, chief investment officers as well, who need to get a look at macro, or who are making sector decisions. I’ve found that a lot of global asset allocators really want the US view and the US sector view. The Dudack Research Group is a small group. There are three of us, but again, we are part of Midwood which is a group of 50. I could not do this without them. Midwood provides backup in really, a lot of ways.
MS: I’m so happy to meet you. This has been a pleasure. Thanks for your time.
GD: Thank you.
