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Technically Speaking, March 2013

LETTER FROM THE EDITOR

The MTA has long recognized the value of diverse techniques in the field of technical analysis. In this month’s newsletter we try to live up to that tradition and present both visual and quantifiable approaches to analysis. We start with an overview of the career of John Bollinger, CFA, CMT. We then summarize the career of Susan Berger who has spent 45 years working in technical analysis (so far) using the techniques she learned from John Magee. It is fascinating to read how Susan did things when working with Magee. It is equally fascinating to think back at the advance that Bollinger Bands represented when they were introduced about 15 years into Susan’s career. Chart paper and grids for calculating indicators were being replaced by personal computers in the 1980’s and John Bollinger was among the first to recognize that new environment. He introduced an indicator that would have been unthinkably complex to implement in the 1970’s. Several newer techniques are also featured in articles by Scott Hathaway and Alan Hall who

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What's Inside...

JOHN BOLLINGER: A BRIDGE TO THE FUTURE OF TECHNICAL ANALYSIS

by Michael Carr, CMT & John Bollinger, CMT, CFA

There are always a number of ways to characterize a career. John Bollinger made a significant contribution to the Body of Knowledge and the practice of technical analysis with Bollinger Bands. This...

22 BOLLINGER BAND RULES

by John Bollinger, CMT, CFA

Editor’s note: In Bollinger on Bollinger Bands, there were “15 Basic Rules” included, a list that has grown to 22 as John incorporated new experience and insights into his work. Bollinger...

MORE MAJOR ACCOMPLISHMENTS OF GAIL DUDACK, CMT

Last month we highlighted the career of Gail Dudack, CMT, now the Managing Director of Dudack Research Group a division of Wellington Shields & Co. LLC. After the newsletter was released, George...

IN MEMORIAM: DR. MARTIN ZWEIG

The investment community lost one of its leaders in February when Dr. Martin Zweig passed away. Dr. Zweig contributed to the acceptance of market timing in the 1980’s. He achieved success with an...

DEFINING SUCCESS IN TECHNICAL ANALYSIS: SUSAN BERGER’S 45 YEARS IN TA

by Michael Carr, CMT

Technical analysis is still a relatively young field of study. Edwards and Magee first published Technical Analysis of Stock Trends in 1948. John Magee would continue his work for almost forty years...

CURRENT VIEWS OF CLASSIC TECHNICAL ANALYSIS TECHNIQUES

by Susan Berger

Editor’s note: this is an example of Susan’s work. It is interesting to see how it applies the fundamentals defined by Edwards and Magee. Dow Theory (prepared January 7, 2013) The Dow Theory is...

INTERVIEW WITH MUKUL PAL, CMT

THIS ARTICLE WAS EDITED.  REVISED ARTICLE IN NEXT MONTH’S...

THE PERFORMANCE OF INSTITUTIONAL PORTFOLIO MANAGERS WHO USE TECHNICAL ANALYSIS

by David Smith & Christophe Faugere & Ying Wang

Editor’s note: This paper was recently published at the Social Science Research Network, http://go.mta.org/3437. It presents an academic view of how technical analysis contributes to the...

MTA EDUCATIONAL FOUNDATION UPDATES

Mike Epstein Award. The MTAEF announced the presentation of the 2012 Mike Epstein Award to Julie R. Dahlquist, Ph.D, CMT and Charles D. Kirkpatrick II, CMT. The Mike Epstein Award, established in...

THE THIRD, PART TWO: TWO DISTINCT PARABOLIC POSSIBILITIES FOR THE S&P 500

by Scott Hathaway, CFTe

I offer this parabolic article exactly 1 year after my previous parabolic article in Technically Speaking, Mar 2012, which can be used as a reference for this article. INTRODUCTION As of this writing...

SOCIONOMICS AND THE ELLIOTT WAVE MODEL PROVIDE A FRAMEWORK FOR PROJECTING THE LAG TIME FOR NEWS

by Alan Hall

One of the most important things to understand about the stock market is its relationship to news. Aside from emotional reactions lasting just minutes, news does not cause the market to move in any...

JOHN BOLLINGER: A BRIDGE TO THE FUTURE OF TECHNICAL ANALYSIS

JOHN BOLLINGER: A BRIDGE TO THE FUTURE OF TECHNICAL ANALYSIS

There are always a number of ways to characterize a career. John Bollinger made a significant contribution to the Body of Knowledge and the practice of technical analysis with Bollinger Bands. This indicator adapts to the recent market action and helps answer the question of “when should we consider prices to be high or low?” With Bollinger Bands, the advice to “buy low, sell high” can be quantified and acted upon.

While this contribution is significant and could characterize John’s career, we could also view his career as a bridge to the future. In the early 1980’s, Bollinger Bands used the new technology of personal computers to link the past with the future.

Technical analysis began as a visual tool, and Bollinger Bands help place what we see on a chart into context by defining high and low. Bollinger Bands are in a way a bridge from the visual age of technical

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Contributor(s)

Michael Carr, CMT

Michael Carr, CMT

John Bollinger

John Bollinger, CMT, CFA

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22 BOLLINGER BAND RULES

22 BOLLINGER BAND RULES

Editor’s note: In Bollinger on Bollinger Bands, there were “15 Basic Rules” included, a list that has grown to 22 as John incorporated new experience and insights into his work.

Bollinger Bands® were created by John Bollinger, CFA, CMT and published in 1983. They were developed in an effort to create fully-adaptive trading bands. The following rules covering the use of Bollinger Bands were gleaned from the questions users have asked most often and our experience over 30 years with Bollinger Bands.

  1. Bollinger Bands provide a relative definition of high and low. By definition price is high at the upper band and low at the lower band.
  2. That relative definition can be used to compare price action and indicator action to arrive at rigorous buy and sell decisions.
  3. Appropriate indicators can be derived from momentum, volume, sentiment, open interest, inter-market data, etc.
  4. If more than one indicator is used the indicators should not be directly

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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)

John Bollinger

John Bollinger, CMT, CFA

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MORE MAJOR ACCOMPLISHMENTS OF GAIL DUDACK, CMT

MORE MAJOR ACCOMPLISHMENTS OF GAIL DUDACK, CMT

Last month we highlighted the career of Gail Dudack, CMT, now the Managing Director of Dudack Research Group a division of Wellington Shields & Co. LLC.

After the newsletter was released, George Schade, Jr., CMT, pointed out that Gail was a recipient of the MTA Annual Award in 2007. Quoting from George’s presentation provides a more complete picture of Gail’s career:

“The Annual Award is the MTA’s highest honor intended to recognize those technical analysts who have significantly contributed to the advancement of our craft. Discovery and innovation are honored as well as having gained the pinnacle of professional reputation. Today, we honor Gail M. Dudack, CMT who exceeds those standards.

With us today, are Gail’s husband Pat and her son Ross. (Editor’s note: in the picture below are Pat, Ross, MTA President Phil Roth, Gail, and George Schade).

Gail’s distinguished career as a market strategist,

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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.

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IN MEMORIAM: DR. MARTIN ZWEIG

IN MEMORIAM: DR. MARTIN ZWEIG

The investment community lost one of its leaders in February when Dr. Martin Zweig passed away. Dr. Zweig contributed to the acceptance of market timing in the 1980’s. He achieved success with an advisory service and managing money in private accounts and closed end mutual funds. His award recognizes that, “He was one of the first practitioners of technical analysis to validate his research with solid statistical evaluation and subject his work to the rigors of academic challenge and debate. His testing work set the rigorous standard that we now employ in evaluating papers for the Journal and the Charles Dow Award.”

Dr. Zweig completed his bachelor’s degree at University of Pennsylvania’s Wharton School of Finance and then earned an MBA at the University of Miami before completing a Ph.D. in finance

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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.

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DEFINING SUCCESS IN TECHNICAL ANALYSIS: SUSAN BERGER’S 45 YEARS IN TA

DEFINING SUCCESS IN TECHNICAL ANALYSIS: SUSAN BERGER’S 45 YEARS IN TA

Technical analysis is still a relatively young field of study. Edwards and Magee first published Technical Analysis of Stock Trends in 1948. John Magee would continue his work for almost forty years after that. Recently, an analyst who learned technical analysis by working directly with him began an independent advisory service using the same techniques she learned from Magee.

Susan Berger is an example of what a successful career means in technical analysis. Although she entered the field in 1968, her story is far from dated and presents a guide to what is possible today.

Success came from:

  • Finding a mentor and working hard to learn from them.
  • Studying.
  • Paying attention to the details and mastering the fundamentals.
  • Being flexible and taking advantage of opportunities that presented themselves.

In 1968, Susan was hired at John Magee to chart stocks. This means she posted prices by hand on 11×17 inch

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

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CURRENT VIEWS OF CLASSIC TECHNICAL ANALYSIS TECHNIQUES

CURRENT VIEWS OF CLASSIC TECHNICAL ANALYSIS TECHNIQUES

Editor’s note: this is an example of Susan’s work. It is interesting to see how it applies the fundamentals defined by Edwards and Magee.

Dow Theory (prepared January 7, 2013)
The Dow Theory is supposed to be intermediate in nature. However, the possibility of a Major Base

Breakout in the Transportation Average seems to make it more significant.  A break above 13650 on the Dow Jones Industrial Average and a break above 5600 in the Transportation Average would qualify as a Dow Theory bullish signal.

Russell 2000 Small Cap Index
There is no other way to classify the chart than Strong. This is backed up by the growing list of individual stocks that are also very attractive.

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Contributor(s)

Susan Berger

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INTERVIEW WITH MUKUL PAL, CMT

INTERVIEW WITH MUKUL PAL, CMT

THIS ARTICLE WAS EDITED.  REVISED ARTICLE IN NEXT MONTH’S ISSUE

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.

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THE PERFORMANCE OF INSTITUTIONAL PORTFOLIO MANAGERS WHO USE TECHNICAL ANALYSIS

THE PERFORMANCE OF INSTITUTIONAL PORTFOLIO MANAGERS WHO USE TECHNICAL ANALYSIS

Editor’s note: This paper was recently published at the Social Science Research Network, http://go.mta.org/3437. It presents an academic view of how technical analysis contributes to the performance of professional money managers. An experienced money manager who uses technical analysis reviewed the paper and commented that, “The really striking thing about the results is how much higher skew and kurtosis are with managers using technical analysis. So, while the returns are slightly better, the shape of the returns is very different.

Positive skew basically means that the losers are small, while there are occasional big winners. More of the distribution is positive. It suggests to me that technically oriented managers are cutting their losses and letting their profits run.

High kurtosis (leptokurtic) indicates a high, narrow distribution of returns. It means that a lot of trades are clustered around the mean return. It suggests to me that technical traders have a lot of

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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)

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MTA EDUCATIONAL FOUNDATION UPDATES

MTA EDUCATIONAL FOUNDATION UPDATES

Mike Epstein Award. The MTAEF announced the presentation of the 2012 Mike Epstein Award to Julie R. Dahlquist, Ph.D, CMT and Charles D. Kirkpatrick II, CMT. The Mike Epstein Award, established in honor of the work Mike Epstein did on behalf of the Foundation, is given to people who best exemplify Mike’s goals of supporting technical analysis in academia and in practice. Ms. Dahlquist and Mr. Kirkpatrick are perhaps best known for their outstanding book, Technical Analysis: The Complete Resource for Financial Market Technicians. Their book, revised in 2010, has been an integral part of the CMT program since shortly after its original publication.  Both Julie and Charles spent many years teaching and promoting technical analysis on the college campus prior to writing the book. Julie, who received her Ph.D from the Texas A&M, is currently senior lecturer, Department of Finance, at the University of Texas at San Antonio College

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.

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THE THIRD, PART TWO: TWO DISTINCT PARABOLIC POSSIBILITIES FOR THE S&P 500

THE THIRD, PART TWO: TWO DISTINCT PARABOLIC POSSIBILITIES FOR THE S&P 500

I offer this parabolic article exactly 1 year after my previous parabolic article in Technically Speaking, Mar 2012, which can be used as a reference for this article.

INTRODUCTION
As of this writing (February 25, 2013), the S&P 500 is precariously dancing just underneath massive resistance from the preceding towering highs of 2000 and 2007. It is only natural to conjure several, or perhaps many, realistic possibilities for the market at this juncture, such as a triple top with a crushing downtrend back to major support (with a parallel double-top for the Dow), or perhaps a lesser correction followed by a successful break of resistance and a new extended bull run.

In this article, I’ll offer a parabolic perspective utilizing ‘the third’ which graphically outlines both of these possibilities by:

  1. Clearly identifying current price and all major reversals (and some minor) as harmonically tied to the low of 102.00 of Aug 1982 via

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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)

Scott Hathaway, CFTe

Scott Hathaway, CFTe

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SOCIONOMICS AND THE ELLIOTT WAVE MODEL PROVIDE A FRAMEWORK FOR PROJECTING THE LAG TIME FOR NEWS

SOCIONOMICS AND THE ELLIOTT WAVE MODEL PROVIDE A FRAMEWORK FOR PROJECTING THE LAG TIME FOR NEWS

One of the most important things to understand about the stock market is its relationship to news. Aside from emotional reactions
lasting just minutes, news does not cause the market to move in any meaningful sense. News is the result of trends in social mood.
Many people who say they understand this idea nevertheless continue to monitor news as if it is meaningful to their investment
decisions. This belief is deadly. Alan Hall, a researcher at the Socionomics Institute, has visually depicted the hypothesis of mood causality so that you will get it. For pure practical value, this is one of the most useful reports about markets you will ever read.

—Robert Prechter

The Wave Principle regulates expressions of social mood, which manifest in social actions with various lag times. This study
proposes that we can use knowledge of these lag times to anticipate fundamental news. To understand socionomic forecasting,

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Contributor(s)

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New Educational Content This Month

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