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Technically Speaking, November 2013

LETTER FROM THE EDITOR

Magazine covers are a widely followed market indicator. Paul MacRae Montgomery first noted the link between covers and markets and explained that popular media can be a contrary indicator of the markets. Covers have also been the subject of academic research that supported their use as an indicator. A 2007 paper by three University of Richmond professors, Are Cover Stories Effective Contrarian Indicators, “study found a statistically significant correlation between appearance on the cover of one of the magazines and the subsequent performance of the company's stock.” This month, Tom Vician provides a survey of the magazine indicator with a number of charts. Technical analysis is built on charts and Tom’s work is helpful for technicians who want to understand this indicator in historical context. We conclude this issue with a classical interpretation of charts prepared by Susan Berger, who learned to analyze charts while working for John Edwards. Her work shows how durable the basic principles of technical analysis are and how ideas contained in books written nearly seventy years

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What's Inside...

MAGAZINE COVERS AT MARKET TURNS?

by Thomas Vician, CMT

Skewed sentiment is an important coincident indicator at market turns. By definition, financial markets are most bullishly optimistic at major tops and most bearishly pessimistic at major bottoms....

TRADE LIKE A STOCK MARKET WIZARD - HOW TO ACHIEVE SUPERPERFORMANCE IN STOCKS IN ANY MARKET BY MARK MINERVINI

by Lance McDonald, CMT

Mark Minervini’s new book Trade Like A Stock Market Wizard – How To Achieve Superperformance In Stock In Any Market (McGraw Hill, 2013) is a look into the mind and strategy of a top stock...

WHY IS MY STOCK GOING DOWN? THE SUPREME FUNDAMENTAL

by Mark Minervini

Editor’s note: This was originally published at Mark Minervini’s Official Blog and is republished here with permission. “What’s making the market go up?” “Why is my stock going...

GEORGE LINDSAY TRAINING COURSE: 1921- 1942 LONG CYCLE BY ED CARLSON, CMT

by Michael Carr, CMT

George Lindsay’s work was largely lost to time until several years ago when Ed Carlson located old newsletters and pieced together the methods that Lindsay used. The reason Lindsay’s work was...

EQUITIES, BONDS, AND THE DOLLAR: A STRATEGIC ANALYSIS

by Rafael Diamond, CFA

Editor’s note: This report was prepared by Archaea Capital Research for release in October 2013 and is reprinted here with permission. It begins with comments made by leading figures in investment...

CHART OF THE MONTH: INDICATOR SUMMARY

by Susan Berger

Editor’s note: This was originally published in the beginning of October and is republished here to demonstrate how effective chart analysis can be. The NASDAQ is a classic Major Base Breakout and...

MAGAZINE COVERS AT MARKET TURNS?

MAGAZINE COVERS AT MARKET TURNS?

Skewed sentiment is an important coincident indicator at market turns. By definition, financial markets are most bullishly optimistic at major tops and most bearishly pessimistic at major bottoms. Magazine covers can act as a sentiment thermometer at market turns of different time constants. Covers are one tool hanging in the trader’s workshop that can help spot a heavily bunched herd. With this white paper, I intend to place a general, stylized framework around the use of magazine covers as contrarian market indicators to better define their usefulness. Topics include: magazine types, magazine cover content, and the noise problem.

Magazine Types

The most coincident covers tend to come from broad, national news/commentary magazines because they rarely touch upon economics and mirror hot trending topics to draw the widest viewership. Time and Newsweek fit this category. Both appeal to a vast common audience and channel the current public zeitgeist in their cover

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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)

Thomas Vician

Thomas Vician, CMT

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TRADE LIKE A STOCK MARKET WIZARD - HOW TO ACHIEVE SUPERPERFORMANCE IN STOCKS IN ANY MARKET BY MARK MINERVINI

TRADE LIKE A STOCK MARKET WIZARD - HOW TO ACHIEVE SUPERPERFORMANCE IN STOCKS IN ANY MARKET BY MARK MINERVINI

Mark Minervini’s new book Trade Like A Stock Market Wizard – How To Achieve Superperformance In Stock In Any Market (McGraw Hill, 2013) is a look into the mind and strategy of a top stock trader. Minervini will be a recognizable name to many whether they know him as a 1997 U.S. Investing Champion, a regular guest on financial television or being in the elite group of
traders to be featured in Jack Schwager’s Stock Market Wizard series of books.

Minervini goes beyond strategy and throughout the book sprinkles wisdom gained through decades of experience, along with motivation. It is like having a coach giving you “atta boys” as you learn a new skill. This is a very quotable book, so have a fresh highlighter when you read it.

The core of Minervini’s investment success is what he calls the SEPA Strategy, which is

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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)

Lance McDonald

Lance McDonald, CMT

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WHY IS MY STOCK GOING DOWN? THE SUPREME FUNDAMENTAL

WHY IS MY STOCK GOING DOWN? THE SUPREME FUNDAMENTAL

Editor’s note: This was originally published at Mark Minervini’s Official Blog and is republished here with permission.

“What’s making the market go up?” “Why is my stock going down when the company has a great product and they just reported good earnings?” I’m asked questions like these all the time. Making money and controlling risk depends far more on discerning a stock’s probable price direction than knowing the “why” behind that movement. Indeed, often you will learn the “why” well after the opportunity to avoid loss or reap gain has passed. The only true answer for why your stock is moving up or down is that more dollars are bidding than offering and vice versa.

Armed with an appreciation of the law of supply/demand, you can learn how to position your portfolio in stocks that have a good chance of attracting willing buyers who will bid your shares up—even though you may

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)

Mark Minervini

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GEORGE LINDSAY TRAINING COURSE: 1921- 1942 LONG CYCLE BY ED CARLSON, CMT

GEORGE LINDSAY TRAINING COURSE: 1921- 1942 LONG CYCLE BY ED CARLSON, CMT

George Lindsay’s work was largely lost to time until several years ago when Ed Carlson located old newsletters and pieced together the methods that Lindsay used. The reason Lindsay’s work was lost was simply that he had never published a comprehensive description of how he forecast price moves. Instead, Lindsay wrote newsletters that offered real-time examples of his work. His forecasts were accurate and his work was important but like many analysts from that time, his work was not fully explained.

Ed searched for copies of those newsletters and confirmed that Lindsay’s work was useful. He also discovered that Lindsay’s work was difficult to understand. Lindsay was a great market forecaster but he was not great at writing about what he did so that others could apply his techniques. In the past several years, Ed Carlson has done his best to correct 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)

Michael Carr, CMT

Michael Carr, CMT

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EQUITIES, BONDS, AND THE DOLLAR: A STRATEGIC ANALYSIS

EQUITIES, BONDS, AND THE DOLLAR: A STRATEGIC ANALYSIS

Editor’s note: This report was prepared by Archaea Capital Research for release in October 2013 and is reprinted here with permission. It begins with comments made by leading figures in investment analysis and builds on those ideas to develop unique insights into the economy and the markets. It is reprinted here as an example of how charts and intermarket analysis can be applied to economic analysis.

Reflecting on Bill Gross’ recent investor letter re: Ray Dalio’s “Beautiful Deleveraging”

“The last time the U.S. economy was this highly levered (early 1940s) it took over 25 years of 10-year Treasury rates averaging 3% less than nominal GDP to accomplish a ‘beautiful deleveraging.’” – Bill Gross

Starting with the big picture.

We constructed this chart of the S&P, U.S. Nominal GDP Growth, and U.S. 10-Year Treasury Yields:

  1. Since the 2000 peak in Stocks, the U.S. has experienced two major deleveraging / deflationary

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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)

Private: Rafael Diamond, CFA

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CHART OF THE MONTH: INDICATOR SUMMARY

CHART OF THE MONTH: INDICATOR SUMMARY

Editor’s note: This was originally published in the beginning of October and is republished here to demonstrate how effective chart analysis can be.

The NASDAQ is a classic Major Base Breakout and you would expect to see the uptrend continue.

On the weekly chart, you can see that the trend is accelerating. The huge percentage blast out of tight trading ranges propelled a lot of large cap stocks recently. It looks like the acceleration will continue.

The S&P 500 also broke out of a Major Base and should continue to go higher.

The uptrend continues to be intact on

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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)

Susan Berger

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New Educational Content This Month

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