Hello readers, and welcome to another edition of Technically Speaking!
If you have been checking your inbox regularly, then you’ve probably noticed more in-person meetings popping up around you. Months of planning and execution are now bearing fruit as more and more members join the in-person events and get back to the normal that we knew of, pre-COVID.
At this point, I’d like to share my story with you.
I completed my CMT examinations in 2016 and worked with a prop firm in Hyderabad, India. My CMT emails went unopened, moving to older pages in my inbox as I continued to wait for amazing things to happen to me after the completion of the Level III examination. While I was extremely happy and proud of myself for completing the three levels, I assumed that efforts were limited to those landmarks. Aside from a couple of events here and there, I could have done more to interact actively with members of the CMT community.
This was the mistake I was making.
My initiative lost steam once I achieved my big goal of studying and passing the exams. Only in 2019, when I met Joel Pannikot at the Hyderabad CMT Chapter meet, did I take the initiative to be more involved with the association. Credit to Joel’s foresight, identifying the roles we could play as volunteers was the first step of getting our foot in the door. My volunteer journey began with building an India-specific newsletter as an individual entity. This may not seem like the biggest project one could take on. Still, the newsletter led to multiple fruitful conversations with reputed analysts all over India, and suddenly, I had access to them. Eventually, this grew into me taking responsibility for the global newsletter, including numerous opportunities to present at the CMT symposiums, associating with global leaders, and interacting with the best minds in the business. For that matter, my voluntary initiatives with the CMT Association led to an excellent work opportunity with JC Parets and the Allstarcharts team!
So is this an exclusive club, where you benefit only when you’re a more significant part of it? Absolutely not. Getting involved with the association merely translates to global exposure and, subsequently, easy access to folks worldwide!
So, what is the point of this story?
Don’t wait for things to happen for you. If you are interested, take the first step and participate in a local chapter meeting. If the chapter meeting is yet to occur in your region, reach out to someone nearest to you. I cannot stress enough how important it is to put in the time to build relationships. And if you thought there were only a couple of ways to interact with the CMT Association, think again. This link could lead to innumerable outcomes, but you must drive it.
If you’re looking for an example, here’s yours truly!
Until next time, think technical!
President's Letterby Robert Palladino, CMT
The third quarter ended on a busy note for the CMT Association. Here are a few highlights: Many CMT charter-holders descended on Las Vegas for the third annual FX Evolution conference (hat tip...
Congratulations Charterholdersby Alvin Kressler
Congratulations to the CMT charterholders who were named in the 2023 Institutional Investor All-American Ranking for Technical Analysis. Three of the top four spots went to CMT...
S&P 500 Buy Signal Triggeredby Louis Spector
The Bull or Bear debate rages on. And with September 2023’s monthly close punctuating the end of the 3rd quarter, the S&P 500’s momentum is signaling a historically reliable buy signal which...
US Rates and Equities: Long Term Trend Reversals and Price Targetsby Anthony F. Esposito, CMT
Over the past month the 10-year US Treasury yield has rallied to a high of more than 4.8%. These are the highest levels seen since 2007 and are creating what looks like a potential long...
A Transcontinental Odyssey: Unveiling Financial Landscapes from India to the UAEby Joel Pannikot
A few months ago, Tyler, Kaizad and I talked about the importance of engaging in person with the financial services industry across the Asia Pacific region. The Asia Roadshow I embarked on this July...
Congratulations to the CMT charterholders who were named in the 2023 Institutional Investor All-American Ranking for Technical Analysis. Three of the top four spots went to CMT chartherholders
|1||Rich Ross, CMT||Evercore ISI|
|2||Christopher Verrone, CMT||Strategas Research|
|4||Craig Johnson, CMT, CFA||Piper Sandler|
They have achieved notable recognition within the industry for their exceptional contributions and achievements. The recognition is a testament to their dedication to excellence in the use of Technical Analysis to add value for their clients.
We are immensely proud of them for their remarkable achievements. Their dedication to pushing the boundaries in our industry and their commitment to delivering outstanding results have not only earned them this prestigious recognition but have also contributed significantly to the application of Technical Analysis in security selection and portfolio management.
We also extend our congratulations to the following CMT charterholders who also received II votes and recognition in Technical Analysis:
|Jeff DeGraaf, CMT, CFA||Renaissance Macro Research|
|Stephen Suttmeier, CMT, CFA||BofA Securities|
|Jonathan Krinsky, CMT||BTIG|
|Mark Newton, CMT||Fundstrat Global Advisors|
|Ari Wald, CMT, CFA||Oppenheimer & Co.|
|Kevin Dempter, CMT||Renaissance Macro Research|
|Paul Ciana, CMT||BofA Securities|
|JC O’Hara, CMT||Roth MKM|
|George Davis, CMT||RBC|
|Dan Wantrobski, CMT||Janney Montgomery Scott|
|Russ Visch, CMT||BMO Capital Markets|
|Sid Mokhtari, CMT||CIBC World Markets|
|John Kolovos, CMT||Macro Risk Advisors|
|Pat Tschosik, CMT, CFA||Ned Davis Research|
|Tim Hayes, CMT||Ned Davis Research|
|David Nicoski, CMT||Vermilion Technical Research|
|Javed Mirza, CMT, CFA||Canaccord Genuity|
Their contributions extend beyond their individual accomplishments; they embody the collaborative spirit and commitment to excellence that defines CMT Association and the CMT charter.
CEO, CMT Association
Over the past month the 10-year US Treasury yield has rallied to a high of more than 4.8%.
These are the highest levels seen since 2007 and are creating what looks like a potential long term
headwind for the S&P 500 and US equity returns. Simply put, bond yields have a major impact on the cost of capital in valuing equities.
As bond yields push higher, the future cash flows for equities will continue to get discounted at higher rates.
In addition, US Treasuries yielding 5% provide an enticing risk free alternative to equities.
Overtime, in the current “higher for longer” environment, equity valuations will compress and prices will fall.
For a visual on the current relationship between the 10-year yield and the S&P 500 I have pulled the chart below (Chart A).
As you can see, in September of 1981 yields were peaking at close to 16% and equity markets were flat.
As yields began to fade and enter a Secular Bear Market, the S&P 500 (acting inversely) entered a multi-decade Secular Bull Market.
In December of 2021 the S&P 500 peaked with the 10-year at ~1.50%.
The absolute spread at that point between the S&P500 and the 10-year yield hit a high of 4766.
This spread is currently ~4250 representing a level that is still over 3 standard deviations from the mean for the time period 1962 through today.
Clearly, even with the recent massive surge in yield, there is a need for additional reversion to bring this spread back inline.
The question is how does that happen? What does that look like?
In a real effort to simplify that answer I have pulled the two charts below.
Ignore all the rhetoric. Just for a moment forget Mr. Powell, Spreads, Economic Releases, Forward P/E Ratios, Dot Plots, Geopolitics, etc.
Chart B below shows the 10-Year Yield from 1970 through today.
This includes a massive Secular Bear Market which extended from 1981 through 2020.
That downtrend line has been broken, yields have hit their lows and a new Bull Market has begun.
I am marking the upside target for yields at 6.4% based on a Fibonacci Retracement for the entire peak-to-trough move highlighted below.
Chart C below shows the S&P 500 from 1970 through today.
This includes a massive Secular Bull Market which extended from 1980 through 2021.
That uptrend line has yet to be tested or broken, leaving real room for a significant move to the downside.
I am marking the downside target for the S&P 500 at 3000 based on a Fibonacci Retracement for the entire trough-to-peak move highlighted below.
In conclusion, markets in general are volatile and misaligned. We function in a continuous state of information overload.
Simple, objective Technical Analysis eliminates the noise which is more often than not just that, noise.
There is ~35% upside in US 10-Year Yields (target 6.40%) which I believe will coincide with a ~30% move to the downside in the S&P 500 (target 3000).
New Educational Content This Month
December 6, 2023
Marrying Fundamental and Technical Analysis for Independent RIAs
Presenter(s): David Rath
November 22, 2023
Utilizing Trend & Mean Reversion in Breadth Studies to Gauge Market Conditions
Presenter(s): Victor Riesco
November 18, 2023
Beating the Bench
Presenter(s): Scott Brown, CMT