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Technically Speaking, May, 2005

From the Editor’s Desk

This month’s issue of Technically Speaking can be thought of as a supplement to the Education Seminar 2005 being held in New York. All of the articles are related to presentation being given at that event. For those unable to attend the Seminar, the articles should provide useful trading ideas. To contribute articles for possible publication in a future issue of this newsletter, please send your ideas to editor@mta.org. Cordially, Mike Carr, CMT Technically Speaking Editor

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What's Inside...

The Gateway to India

by Jordan Kotick, CMT

I have been mentioning the growing demand for our CMT from Europe and Asia over the last few months. This continues and we should be very pleased, especially fresh off the heels of our SRO success...

Technology Update

by John R. Kirby

Over the past several years your MTA has been working with a custom software solution developed internally by Len MacDonell and Shelley Lebeck to operate the administrative and the member side of the...

Technical Review of the Philadelphia/KBW Bank Index (BKX)

by Peter Martin, CMT

The Philadelphia/Keefe, Bruyette & Woods Bank Index (BKX) is a capitalization weighted benchmark consisting of 24 stocks representing national money-center banks and leading regional...

Volatility Normalization

by Jeff Parent

A market technicians’ studies involve observing and testing for persistence of conditions in price data. Persistence can manifest itself as a strongly correlated relationship between markets or a...

Technical Analysis for Bond Geeks

by Rob Kepler, MKP

As an old commodity/bond guy, one disappointment I have had with some of the prior MTA conferences was that the central educational, or market-related, theme has tended to be on the equity market....

Real World Portfolio Management

by Chris Ruspi, CMT

Chris is President of Applied Financial Wisdom and uses technical analysis in the real world. Chris isn’t able to summarize his presentation prior to the Seminar because he will require audience...

MTA BUSINESS - Book Review

by Bruce Kamich, CMT

Mean Markets and Lizard Brains How to Profit From the New Science of Irrationality by Terry Burnham On Friday March 11th I took an Amtrak train up to Boston to a unique seminar organized by Andrew Lo...

MTA BUSINESS - MTA Board of Directors - Quarterly Report April 2005

One initiative implemented at the December 2004 Board of Directors planning meeting was to increase communications to the membership. We have already started regular reports in the newsletter in an...

The Gateway to India

The Gateway to India

I have been mentioning the growing demand for our CMT from Europe and Asia over the last few months. This continues and we should be very pleased, especially fresh off the heels of our SRO success and the increasing interest in our now psychometrically valid CMT.

My business takes me to Asia and India, it would seem, 2-3 times a year. So ahead of my current trip, I was contacted, to my surprise, from a few members in India. While in Mumbai recently, I met with these gentlemen.

I want to report to you what I think is very exciting. These gentlemen told me that technical analysis is very popular in India. Further, they told me that there have been other “organizations” that have been trying to make inroads in the technical community of India but the interest was not there. Why? Because, to quote them directly, “the CMT is the gold

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Technology Update

Technology Update

Over the past several years your MTA has been working with a custom software solution developed internally by Len MacDonell and Shelley Lebeck to operate the administrative and the member side of the MTA website. Very advanced for its time, the software that we used grew from a germ of an idea to a fully integrated virtual online environment that served the organization very well.

However, with the recent approval of CMT 1 and 2 by the NYSE/ NASD/SEC to be accepted as an alternative to the series 86 qualifying exam, your board realized that the time had come for a generation change in the association management system (AMS) that would give the organization greater control, transparency, and absolute GAAP compliance to the operation the SRO compliance regulations would demand.

A technology committee with John Kosar, and Duke Jones worked many hours and looked at many alternatives before coming to a conclusion

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Technical Review of the Philadelphia/KBW Bank Index (BKX)

Technical Review of the Philadelphia/KBW Bank Index (BKX)

The Philadelphia/Keefe, Bruyette & Woods Bank Index (BKX) is a capitalization weighted benchmark consisting of 24 stocks representing national money-center banks and leading regional institutions. The weightings range from 10.27% at the top for Citigroup (C-$45.46; rated Neutral Weight by Prudential Equity Group fundamental research) down to 1.92% for Zions Bancorp. (ZION- $69.29; not rated by Prudential Equity Group fundamental research) at the low end. We note that the top-five components of the index carry almost 50% (44.2%) of its total weight. In this report, we provide a technical review of the index and its top-five-weighted components.

BKX Index–we begin our analysis with a look at a short-term chart. Figure 1 shows a six-month daily bar chart with a stochastic indicator in the lower panel. A downtrend off the January high remains intact. The downtrend line comes into play just above the 100 level, and both the 50-day and 200-day moving

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Volatility Normalization

Volatility Normalization

A market technicians’ studies involve observing and testing for persistence of conditions in price data. Persistence can manifest itself as a strongly correlated relationship between markets or a repeated chart pattern or cycles of low and high volatility. Persistence is information and information is profit, therefore, persistence is a mantra. This article describes weaknesses in common methods used to seek out persistence and suggests an improvement.

Probably the most common form of persistence is in price change. If the quantity or quality of up days outnumber down, then we’re likely in an uptrend, or vice versa. The trend line, or its statistical equivalent, the moving average is used to identify trends. With these tools we can judge the condition of the trend and see turning points. Ideally, money flows steadily in to or out of a stock over long periods of time and trends are clear. More realistically, news, market volatility

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Technical Analysis for Bond Geeks

Technical Analysis for Bond Geeks

As an old commodity/bond guy, one disappointment I have had with some of the prior MTA conferences was that the central educational, or market-related, theme has tended to be on the equity market. While I recognize the size, popularity, and globalization of equities will always warrant key attention at our conferences, I always felt as if I was the only one in the MTA who applied the principles of technical analysis to FX, commodities, and fixed income.

As each asset class competes for investment dollars we can use intermarket relationships to help us make various investment decisions. Equity investors can draw value from analyzing where interest rates might be going, or where certain commodity markets are headed. FX traders in commodity sensitive currencies need to have a general view on where those commodities are headed. Fixed investors should want to know if equities are moving through key support or resistance levels,

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Contributor(s)

Rob Kepler, MKP

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Real World Portfolio Management

Real World Portfolio Management

Chris is President of Applied Financial Wisdom and uses technical analysis in the real world. Chris isn’t able to summarize his presentation prior to the Seminar because he will require audience participation to illustrate how portfolio managers actively employ the principles of technical analysis. He describes the concept behind this exciting presentation below:

After I joined the MTA a few years ago, I noticed that the organization seemed to be dominated by analysts and traders. It was and is my opinion that a huge number of portfolio managers use technical analysis. Therefore portfolio managers will have an interest in MTA membership if we can offer content and services that would be of interest to them.

In particular I feel that real world technical Real World Portfolio Management Chris Ruspi, CMT analysis differs for portfolio managers than for analysts or traders. With the kind help of Barry Sine CMT, CFA, this idea was

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MTA BUSINESS - Book Review

MTA BUSINESS - Book Review

Mean Markets and Lizard Brains
How to Profit From the New Science of Irrationality
by Terry Burnham

On Friday March 11th I took an Amtrak train up to Boston to a unique seminar organized by Andrew Lo of the MIT Sloan School of Management and sponsored by the MTA.

I caught the earliest train available but still missed the first speaker, Terry Burnham, PhD. When I came into the conference hall and greeted my fellow MTA colleagues, everyone told me what a great presentation I had just missed, almost in the same breadth as “Hi! Good to see you.”

Mr. Burnham was nice enough to donate a copy of his latest book to the MTA and I took it back on the train. Though everyone told me I had missed a great presentation, I had a “clean canvas” in my mind about the book.

My reading tends to fall into three categories

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Contributor(s)

Bruce Kamich, CMT

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MTA BUSINESS - MTA Board of Directors - Quarterly Report April 2005

MTA BUSINESS - MTA Board of Directors - Quarterly Report April 2005

One initiative implemented at the December 2004 Board of Directors planning meeting was to increase communications to the membership. We have already started regular reports in the newsletter in an interview format. The following list covers the most important activities of the first quarter of 2005.

It has been a continued year of change for the MTA with the Board welcoming two new members (Larry Berman, Treasurer and Barry Sine, Director). We have stopped many of the political problems and personality conflicts that plagued the Board throughout most of 2004.

The most important accomplishment has been the successful completion of CMT recognition from the NYSE and Nasdaq. Now, all analysts doing solely technical work and passing the CMT 1 and 2 exams will be exempt from taking the Series 86 exams given to all financial analysts in member firms. This is a huge step in elevating the status of technical analysis, the

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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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New Educational Content This Month

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