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Technically Speaking, November 2014

Letter From The Editor 

Many readers already know that Fred Dickson, CMT, passed away at the end of October.  In this issue, we look at an example of his work. It is an amazing example of clarity and focus and provides an example of how to turn ideas into actions.  Fred dedicated much of his life to helping others turn ideas into actions. As with most great individuals, outstanding professional accomplishments are just one small part of their life.  Gail Dudack, CMT, notes, "Fred was probably the smartest and most gentile person i have known.  And while he had a great reputation on Wall Street and CNBC, his true passion was counseling people who needed help and he did this for decades as deacon of his church.  He was always there if you needed him.  But his greatest passion was his harem: wife Linda, daughters Kathy and Barbara." Fred also played a significant role in turning the ideas of technical analysis into a respected profession.  It is impossible to overstate the impact Fred had on the MTA.  He became a member in September

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What's Inside...

THE WARNING SIGNS OF MAJOR MARKET TOPS (UPDATED TO AUGUST 15, 2014)

by LOWRY RESEARCH CORPORATION

Editor’s note: This paper was prepared and originally published by Lowry Research Corporation and is published here with permission. Paul Desmond is President of Lowry Research. Paul also wrote the...

DOW AWARD HIGHTLIGHT: PAUL DESMOND

The winner of the 2002 Charles H. Dow Award, Paul Desmond, is President of Lowry Research. He joined the firm in 1964 as Director of Research and advanced to the Presidency in 1972. Over the past 45+...

IN MEMORY OF FRED DICKSON, CMT

Fred Dickson, CMT, Senior Vice President, Chief Investment Strategist, passed away on October 31, 2014, after a brief illness. Fred worked as an investment analyst for more than 40 years. In his...

A TECHNICIAN'S PERSPECTIVE ON INSIDER TRADING

by Michael Carr, CMT

When we think about insider trading, we usually picture company executives buying out of the money calls on their company stock right before a takeover announcement. That is just one way to define...

BLOOMBERG BRIEF: S&P 500 SEASONALITY AND CYCLES HISTORICALLY BULLISH

by Paul Ciana, CMT

Editor’s note: This was originally published in the October 30, 2014 issue of Bloomberg Brief: Technical Analysis and is excerpted below. U.S. equity markets have performed best from October to May...

CALL FOR NOMINATIONS

Members, Affiliates and Friends… The MTA Awards Committee is pleased to announce that as of November 1st we will be officially accepting nominations for the 2015 Honorees. We welcome you to submit...

SEATTLE MTA CHAPTER SUMMARY

by Leslie Jouflas

The Puget Sound Chapter had the pleasure of hosting Heather Greshan and John Antal at a meeting on October 9, 2014.  They gave a captivating presentation on the Investor Business Daily’s...

DISCIPLINARY ACTION

On September 2, 2014, the Board of Directors of the Market Technicians Association suspended the MTA membership of Juan Carlos Parets, including the right to use the Chartered Market Technician...

BLOOMBERG BRIEF: TECHNICAL ANALYSIS MAKES EQUITY ANALYSIS “CRYSTAL CLEAR”

by Cynthia A. Kase, CMT, MFTA

Editor’s note: This was originally published in the October 16, 2014 issue of Bloomberg Brief: Technical Analysis and is excerpted below. GT Advanced Technology recently filed for bankruptcy....

INTERVIEW WITH MATT BAILEY, CFA

by Matt Bailey, CFA & Amber Hestla-Barnhart

How would you describe your job?   I’m a portfolio manager and investment analyst at a boutique wealth management firm here in Atlanta. I manage or co­manage around a dozen asset...

BREAKOUT SIGNALS ON THE DOW AND S&P 500 PART ONE: WILL THEY HOLD, AND SIGNAL THE NEXT MAJOR BULL MARKET, OR THE EXACT OPPOSITE?

by Scott Hathaway, CFTe

Overview This two-part article will provide evidence of the stock market attempting to successfully break above resistance in a fashion that has only occurred three times previously in the Dow’s...

CHART OF THE MONTH

Crude oil futures have recently broken to multi-year lows as the weekly chart below shows. The monthly chart provides a longer-term perspective and shows that oil is testing support levels that have...

THE WARNING SIGNS OF MAJOR MARKET TOPS (UPDATED TO AUGUST 15, 2014)

THE WARNING SIGNS OF MAJOR MARKET TOPS (UPDATED TO AUGUST 15, 2014)

Editor’s note: This paper was prepared and originally published by Lowry Research Corporation and is published here with permission. Paul Desmond is President of Lowry Research. Paul also wrote the 2002 Charles H. Dow Award winning paper, Identifying Bear Market Bottoms and New Bull Markets.

The Law of Supply and Demand is universally recognized in both academia and the business world as the foundation, the starting point of all economic analysis. The Law of Supply and Demand states that when demand for a freely traded commodity exceeds the supply of that commodity, its price will rise. And, if the supply of that commodity exceeds the demand for it, the commodity’s price will fall. Notice the lack of equivocation. No mights or coulds or shoulds, just will. It’s the Law. And, since common stocks are a freely traded commodity, their price movements are dictated by the Law of Supply and Demand –

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DOW AWARD HIGHTLIGHT: PAUL DESMOND

DOW AWARD HIGHTLIGHT: PAUL DESMOND

The winner of the 2002 Charles H. Dow Award, Paul Desmond, is President of Lowry Research. He
joined the firm in 1964 as Director of Research and advanced to the Presidency in 1972. Over the
past 45+ years he has earned the distinction of being regarded as the Dean of Supply/Demand analysis. Paul has been a distinguished member of the Market Technicians Association, serving as its President from 1997-1999. He was honored as the winner of the very prestigious Charles H. Dow Award in 2002, based on his long recognized expertise on the study of 90% market moves, which is only one of the unique elements to the analysis at Lowry’s. Paul was honored in 2009 as the Technical Analyst of the Year by the Technical Analyst Magazine of London. Paul is also a cofounder of the American Association of Professional Technical Analysts (AAPTA).

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IN MEMORY OF FRED DICKSON, CMT

IN MEMORY OF FRED DICKSON, CMT

Fred Dickson, CMT, Senior Vice President, Chief Investment Strategist, passed away on October 31, 2014, after a brief illness.

Fred worked as an investment analyst for more than 40 years. In his most recent position, he was named Chief Investment Strategist for the various Davidson Companies in October 2009. Prior to that appointment, Fred served as D.A. Davidson’s Director of Private Client Research and Chief Market Strategist between August 2001 and September 2009. Fred served earlier as D.A. Davidson’s Director of Research between 1993 and 1997.

In his capacity as the firm’s Chief Investment Strategist, Fred provided daily, weekly and monthly commentary on the various financial markets and was a frequent speaker at client events, community public service clubs, and trade association meetings throughout the west. Fred served on the D.A. Davidson Board

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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A TECHNICIAN'S PERSPECTIVE ON INSIDER TRADING

A TECHNICIAN'S PERSPECTIVE ON INSIDER TRADING

When we think about insider trading, we usually picture company executives buying out of the money calls on their company stock right before a takeover announcement. That is just one way to define insider trading according to the Securities and Exchange Commission (SEC) and the courts. Legally, this is known as the “classical theory” of insider trading and only company insiders can be guilty of this action.

Technical analysts don’t usually work in offices specializing in mergers and acquisitions. Many technicians prepare reports without referring to fundamental data or talking to a company’s executives. In this way, technical analysts might feel that they couldn’t be involved with insider trading.

However, there is a more expansive definition of insider trading called the “misappropriation theory” that applies to investors and traders who are not company insiders. According to a paper in the American Criminal Law Review[1], this theory was affirmed through a Supreme Court

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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)

Michael Carr, CMT

Michael Carr, CMT

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BLOOMBERG BRIEF: S&P 500 SEASONALITY AND CYCLES HISTORICALLY BULLISH

BLOOMBERG BRIEF: S&P 500 SEASONALITY AND CYCLES HISTORICALLY BULLISH

Editor’s note: This was originally published in the October 30, 2014 issue of Bloomberg Brief: Technical Analysis and is excerpted below.

U.S. equity markets have performed best from October to May over the past 30 years, an S&P 500 seasonality chart shows.

The chart above was created with Bloomberg’s SEAG function. It shows the average percent return of the S&P 500 beginning in October for the last 30 years. On average, the index rises about 8.5 percent.

Adding to the bullish outlook is the fact that the best six months coincide a favorable election cycle. Chad Gassaway, CMT has calculated the return of the S&P 500 during the last 16 midterm

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)

Paul Ciana, CMT

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CALL FOR NOMINATIONS

CALL FOR NOMINATIONS

Members, Affiliates and Friends…

The MTA Awards Committee is pleased to announce that as of November 1st we will be officially accepting nominations for the 2015 Honorees. We welcome you to submit your recommendations for recipients in all four award categories.

Each year the MTA Awards Committee has the honor of presenting several awards to dedicated professionals who make lasting contributions to technical analysis through the Annual Awards Program. Recipients of the awards are celebrated at the Annual MTA Gala Dinner where they are honored by long-time colleagues and friends in front of hundreds of their peers. It is our unique opportunity to celebrate the growth and innovation of technical analysis within the broader financial community.

The Annual Award recognizes a career that that expands the realm of technical analysis and makes a lasting impact on the larger technical analysis community.

The Service Award recognizes volunteers and staff that drive

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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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SEATTLE MTA CHAPTER SUMMARY

SEATTLE MTA CHAPTER SUMMARY

The Puget Sound Chapter had the pleasure of hosting Heather Greshan and John Antal at a meeting on October 9, 2014.  They gave a captivating presentation on the Investor Business Daily’s stock selection approach utilizing the CANSLIM approach and illustrated how fundamental and technical analysis combined can be effectively used to time entry and exit points for individual stock selection.

Their approach uses fundamentals to search for the strongest stocks in the strongest groups through the IBD’s relative strength ranking. The relative strength ranking is usually at the 90 level. In addition, the stocks must meet earnings and revenues criteria, such as EPS above 90. This technique aims to enhance a traders probability.

Particularly interesting was the use of classic chart patterns combined with volume analysis. This simple but effective approach favors the investor while allowing for assessment of risk/reward. A position is entered once a stock has proven itself and made

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)

Leslie Jouflas

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DISCIPLINARY ACTION

DISCIPLINARY ACTION

On September 2, 2014, the Board of Directors of the Market Technicians Association suspended the MTA membership of Juan Carlos Parets, including the right to use the Chartered Market Technician designation, for a period of 18 months.  The suspension results from a determination that Mr. Parets violated Ethical Standard 1 of the MTA’s Code of Ethics, which requires all members to maintain at all times the highest standards of professional integrity. Mr. Parets’ failed to disclose in his Personal Conduct Statement that he had been barred by FINRA from association with any FINRA member in any capacity for 18 months and had been ordered to pay $30,000 in restitution to customers. The MTA suspension was imposed for failing to disclose this action and two previous customer complaints in 2011 and 2012. 

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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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BLOOMBERG BRIEF: TECHNICAL ANALYSIS MAKES EQUITY ANALYSIS “CRYSTAL CLEAR”

BLOOMBERG BRIEF: TECHNICAL ANALYSIS MAKES EQUITY ANALYSIS “CRYSTAL CLEAR”

Editor’s note: This was originally published in the October 16, 2014 issue of Bloomberg Brief: Technical Analysis and is excerpted below.

GT Advanced Technology recently filed for bankruptcy. Pundits claimed that the filing came as a total surprise to just about everyone. Could one, using technical analysis, have known that GTAT was going bankrupt, or at least have been prepared for a precipitous drop? To the former, no; to the latter, yes.

Technical analysis can help predict future price behavior, but doesn’t generate reasons for this behavior.

Nevertheless, GTAT was in a clear bearish trend with targets below $6.00 confluent.

The daily chart alone shows multiple bearish factors. The gap marked “1” is an exhaustion gap, indicating that the uptrend may be ending. The gap wasn’t filled on a closing basis before $18.90, marked “2” with a horizontal dashed line, representing the 76.4% retracement for the move down from $20.54 high, a standard level

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)

Cynthia A. Kase, CMT, MFTA

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INTERVIEW WITH MATT BAILEY, CFA

INTERVIEW WITH MATT BAILEY, CFA

How would you describe your job?  

I’m a portfolio manager and investment analyst at a boutique wealth management firm here in Atlanta. I manage or co­manage around a dozen asset allocation models for both retail and institutional clients. My job is to form opinions on all areas of the market and choose the best investment vehicles or managers to allocate to. I use both ETFs and actively managed mutual funds and utilize technical and fundamental analysis. I also work directly with our clients to keep them abreast of what we’re doing though meetings and markeUportfolio commentaries.  

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

My grandfather introduced me to the capital markets when I was young, and I knew that I would work in them some day. But it was while studying for the CFA designation that I knew I wanted a position that allowed me to work

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)

Matt Bailey, CFA

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BREAKOUT SIGNALS ON THE DOW AND S&P 500 PART ONE: WILL THEY HOLD, AND SIGNAL THE NEXT MAJOR BULL MARKET, OR THE EXACT OPPOSITE?

BREAKOUT SIGNALS ON THE DOW AND S&P 500 PART ONE: WILL THEY HOLD, AND SIGNAL THE NEXT MAJOR BULL MARKET, OR THE EXACT OPPOSITE?

Overview

This two-part article will provide evidence of the stock market attempting to successfully break above resistance in a fashion that has only occurred three times previously in the Dow’s history. In addition, the S&P 500 is simultaneously breaking major resistance from a large expanding parabolic channel stemming from 1982.

In Part One, a yearly log chart of the Dow demonstrates 2014’s attempt at a potential breakout indicating a continued massive bull market. In addition, I offer evidence that unless November signals a false breakout by closing below monthly geometric resistance, the markets will embark on the continued large rally, and offer two some price/time targets in the short-term for the Dow.

Part Two (next month) will offer long-term targets for the Dow, and both short and long-term targets for the S&P. In the case of the Dow, I will offer sequential analysis that indicates every successive major top from each respective breakout,

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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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CHART OF THE MONTH

CHART OF THE MONTH

Crude oil futures have recently broken to multi-year lows as the weekly chart below shows.

The monthly chart provides a longer-term perspective and shows that oil is testing support levels that have held for nearly five years.

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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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