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Technically Speaking, March 2014

LETTER FROM THE EDITOR

The MTA’s Annual Symposium will be held next month in New York City and this month we are previewing the work of two of the speakers. Ned Davis has been completing some of the most original and useful research in the field for decades and we can see several of his charts and studies included in a short article. He will provide many more charts to study in New York. In a separate article, Dr. Tucker Balch provides insights into how we can turn volatility into profits and he will be providing additional practical insights during his presentation. In the next few months we will be presenting summaries of speaker presentations but these will capture only a small part of the information available at the Symposium. If you haven’t made plans to attend yet, there is still time. It’s actually not too early to start planning for next year either. The Symposium Committee is already preparing for next year’s Symposium and it is their year-long planning efforts that result in a

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What's Inside...

VOLUME PRECEDES PRICE AND WHAT TREND FACTORS TO WATCH FOR REAL TROUBLE

by Ned Davis

Editor’s note: This was originally published as a research note for clients if Ned Davis Research on February 10, 2014 and is reprinted here with permission. Ned will be expanding on his work in a...

THE FIRST ECONOMIC FORECASTERS AND THEIR LEGACY

by George A. Schade, Jr., CMT

On April 16, 2014, the Educational Web Series will feature Harvard Business School historian Walter A. Friedman who will speak on his recent book Fortune Tellers: The Story of America’s First...

WHIPSAWS

by Thomas Vician, CMT

Editor’s note: This was originally published at TrendFollowing Trader and is reprinted here with permission. The charts in the article can be enlarged for easier viewing at the web site. What is...

INTERVIEW WITH R. BERNARD CLAY

by R. Bernard Clay & Amber Hestla-Barnhart

How would you describe your job? I am the owner of a Registered Investment Advisory Firm. As the Advisor I work with clients on income planning. The average age of my clients is around 55. I work...

ASYMETRIC BETA: A CLUE TO LOW VOLATILITY OUTPERFORMANCE

by Tucker Balch, Ph.D.

Editor’s note: This was previously published at The Augmented Trader on January 8, 2014 and is reprinted here with permission. Dr. Balch will be a presenter at the MTA Annual Symposium in...

VOLUME PRECEDES PRICE AND WHAT TREND FACTORS TO WATCH FOR REAL TROUBLE

VOLUME PRECEDES PRICE AND WHAT TREND FACTORS TO WATCH FOR REAL TROUBLE

Editor’s note: This was originally published as a research note for clients if Ned Davis Research on February 10, 2014 and is reprinted here with permission. Ned will be expanding on his work in a presentation at the MTA Annual Symposium in April.

Our work shows that volume (particularly, demand volume) precedes price. Demand volume peaked on 5/21/2013 well before the DJIA peak on 12/31/2013. Then the NDR Volume Demand Index broke an uptrend line going back to the 2011 lows. If volume precedes price, this is a warning sign that the bull market is at risk.

While I consider the violation of the uptrend line on volume demand to be a warning sign, I do not consider it a sell signal yet for two reasons:

  1. Demand is still above supply, and
  2. As shown in the next chart, on a short-term basis, volume supply so overwhelmed demand last week that the market got very

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)

Ned Davis

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THE FIRST ECONOMIC FORECASTERS AND THEIR LEGACY

THE FIRST ECONOMIC FORECASTERS AND THEIR LEGACY

On April 16, 2014, the Educational Web Series will feature Harvard Business School historian Walter A. Friedman who will speak on his recent book Fortune Tellers: The Story of America’s First Economic Forecasters.

The modern field of economic forecasting traces its beginnings to earlier times, but it sprouted rapidly after 1900. Advancements in science, economic theory, and business data gathering spurred economic forecasting. For example, the term “barometer” was adopted from the science of meteorology to name some early business indicators.

At one time, over 40 companies, most located in New York City, were engaged in forecasting analytics. Mr. Friedman, the HBS Director of the Business History Initiative, focuses on seven forecasters who shaped the field – Roger W. Babson, John Moody, academicians Irving Fisher (Yale) and Charles J. Bullock (Harvard), statistician Warren M. Persons, economist Wesley C. Mitchell, and politician Herbert Hoover.

Babson and Moody owned large publishing enterprises. Bullock and Persons

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)

George A. Schade, Jr., CMT

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WHIPSAWS

WHIPSAWS

Editor’s note: This was originally published at TrendFollowing Trader and is reprinted here with permission. The charts in the article can be enlarged for easier viewing at the web site.

What is it?

Taking a loss is a typical definition of whipsaw. If you manage financial risk using protective stops, you’ve experienced it. People generally don’t like the feelings that arise when whipsawed in the markets. You’re losing money.  What’s to like about that? People view these feelings negatively. We tend to avoid what we dislike. People tend to avoid taking losses, fail to re-enter a winning position, or entrain some combination of both in order to avoid whipsaw.

Negative whipsaw feelings intensify through the combination of the following: speed of loss, numbers of losses, and overall loss amount. A negative emotional turbo-boost occurs when you take a loss on a position before it turns tail and trends in your direction. The feeling

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)

Thomas Vician

Thomas Vician, CMT

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INTERVIEW WITH R. BERNARD CLAY

INTERVIEW WITH R. BERNARD CLAY

How would you describe your job?

I am the owner of a Registered Investment Advisory Firm. As the Advisor I work with clients on income planning. The average age of my clients is around 55. I work with managed money and fixed products to help them achieve realistic returns so that they do not outlive their Income. I use technical analysis to provide alpha and trend analysis to determine when to go on defense with any moneys they have that would be subject to market risk.

What led you to look at the particular markets you specialize in?

I work with baby boomers, because they are at a time in their life when they are nearing retirement. They have spent decades saving and investing and now they have a large pile of money. Now they need advice on how to keep that pile of money and create a stream of income that will

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)

R. Bernard Clay

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ASYMETRIC BETA: A CLUE TO LOW VOLATILITY OUTPERFORMANCE

ASYMETRIC BETA: A CLUE TO LOW VOLATILITY OUTPERFORMANCE

Editor’s note: This was previously published at The Augmented Trader on January 8, 2014 and is reprinted here with permission. Dr. Balch will be a presenter at the MTA Annual Symposium in April.

Low volatility stocks and ETFs seem to perform better than they ought to. In recent years they have provided similar returns to the overall market, but with lower risk. This phenomenon is referred to as “the low volatility anomaly.” We take a statistical look at the question to see if we can find clues to explain it.

What is the Low Volatility Anomaly?

Everybody knows that higher rewards can only come from higher risk, right?  That principle is enshrined in one of the most respected models of stock pricing: The Capital Assets Pricing Model (CAPM). This model says, essentially, that in an up market, the excess return of a portfolio is proportional to the Beta of the portfolio to 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)

Tucker Balch

Tucker Balch, Ph.D.

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New Educational Content This Month

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