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Technically Speaking, September 2008

Letter from the Editor

This newsletter offers an opportunity for the best technical analysts in the world to showcase their work. While we usually feature the work of experienced technicians, Technically Speaking would appreciate the opportunity to review the writings of novice analysts for possible publication. Our newsletter is distributed to about 3,000 market professionals around the world, providing a great deal of exposure for your ideas. However, lately we have had to reject several excellent articles because they provided short-term analysis. Due to the production time required for print publications, it is not possible for us to publish these types of articles. Those seeking an outlet to showcase their tradable insights should consider blogging which allows for immediate publication. Several well-known analysts have used this approach and developed large audiences. Novice analysts, as well as experts, can blog on sites like Market Education (http://www.marketedu.com/) which already has developed a community of readers. Those with the best ideas will get the most hits, and can develop their business model from there. MarketEDU even allows video blogging,

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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.

What's Inside...

Pivot Points

by Jean Paul van Straalen, CMT, FRM

To view the charts from this article in full color, please visit Newsletter Archives on mta.org. What are pivot points? A pivot point is a tool used by traders to help determine the best trading...

2009 Charles H. Dow Award Competition

by George A. Schade, Jr., CMT

The competition for the 2009 Charles H. Dow Award is open. The Award for excellence and creativity in technical analysis has been presented since 1994, and today is the most significant writing...

R. N. Elliott - The Years Before the Discovery

by George A. Schade, Jr., CMT

The Elliott Wave Principle, the legacy of Ralph Nelson Elliott, is practiced globally – now 62 years after his last work was published. Within its sophistication, as Paul Tudor Jones pointed...

Market Will Be Rational When People Are – Dr. Samuel Tibbs

by Ajay G. Jani, CMT

Ajay Jani spoke with Dr. Tibbs in mid-June. Tibbs is co-author of the paper “Using Index Momentum to Generate Alpha,” which was recently recognized with the 2008 MTA Dow Award. The paper uses a...

Updating “Using Index Momentum to Generate Alpha”

This paper was recently recognized with the 2008 MTA Dow Award. It presented test results from January 1972 – December 2005. Ajay Jani recently updated the research to see how this research had...

Support the MTAEF/MTA Library at Baruch College

The MTA Educational Foundation’s commitment to introduce technical analysis to colleges and universities extends to the library. Baruch College alum, Baruch College Fund Trustee and MTA Educational...

Georgia Tech’s Class on Technical Analysis for Stocks 2001-2008: Special topics MATH and ISYE 4801

by F.P. Powell, CMT

Georgia Tech began exploring a Technical Analysis (TA) class in 2001 with Dr. Robert Kertz spearheading the effort. Dr. Kertz was head of the Quantitative Computational & Finance (QCF) program in...

“What’s Hot” The MTA Library Announces...

The MTA would like to announce that the following books have been added to the MTA Library. “Beyond Greed and Fear” by Hersh Shefrin “Preferreds: Wall Street’s Best-Kept Income Secret” by...

MTA Updates

The following are some important updates and reminders from the MTA Office. • 2009 Mid-Winter Retreat – Save the Date! The MTA is pleased to announce that the 2009 Mid-Winter Retreat will be...

Pivot Points

Pivot Points

To view the charts from this article in full color, please visit Newsletter Archives on mta.org.

What are pivot points?

A pivot point is a tool used by traders to help determine the best trading strategy for the coming day. More specifically, a pivot point is the average of the previous trading day’s high, low and closing price of an underlying asset. Traders will calculate the pivot point at the beginning of each day, before the start of their trading, in order to establish resistance and support levels based on the extremes and close of the previous day.

Developed by professional floor traders—also known as “locals”—to analyse the short-term supply and demand in the market, a pivot point provides locals with an inflection point and an estimated trading range for the day. These pivot points, resistance and support levels are often tested by traders.

Calculating pivot points

The input needed to calculate the pivot point

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)

Jean Paul van Straalen, CMT, FRM

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2009 Charles H. Dow Award Competition

2009 Charles H. Dow Award Competition

The competition for the 2009 Charles H. Dow Award is open. The Award for excellence and creativity in technical analysis has been presented since 1994, and today is the most significant writing competition in the field. The recipients of the Award are among the most notable market technicians. The success of the Award has resulted in an enhanced cash prize.

The winning author will receive a cash prize of $4,000.00 and will be invited to present their paper at an MTA seminar or chapter meeting. The paper or a summary may be published in the MTA’s Journal of Technical Analysis, Technically Speaking newsletter, and posted to mta.org. At the discretion of the judging panel, the authors of runner-up papers will receive certificates. The last day to submit papers is February 6, 2009, and the winner will be selected on or before May 8, 2009. The 2009 guidelines (below) and copies of

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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R. N. Elliott - The Years Before the Discovery

R. N. Elliott - The Years Before the Discovery

The Elliott Wave Principle, the legacy of Ralph Nelson Elliott, is practiced globally – now 62 years after his last work was published. Within its sophistication, as Paul Tudor Jones pointed out, “Elliott Wave theory allows one to create incredibly favorable risk/reward opportunities.”1 We focus on a pioneer’s work and when  impressed by a theory, we wish we knew more about the person. Essayist Ralph Waldo Emerson put it best: “There is properly no history, only biography.”

Ralph N. Elliott’s Wall Street career is well known. During the last 13 years of his life, he advanced a unique theory of stock market action. The Elliott Wave Principle was first revealed privately, in December, 1934, to Charles J. Collins, an investment counselor. In August, 1938, a monograph written with Collins’ assistance – The Wave Principle – was published.

A year later, Elliott wrote the now-famous twelve articles for the magazine Financial World, where

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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Market Will Be Rational When People Are – Dr. Samuel Tibbs

Market Will Be Rational When People Are – Dr. Samuel Tibbs

Ajay Jani spoke with Dr. Tibbs in mid-June. Tibbs is co-author of the paper “Using Index Momentum to Generate Alpha,” which was recently recognized with the 2008 MTA Dow Award.

The paper uses a combination of proprietary and Russell index data to test the proposition of relative strength investing based on index style. The paper expands upon the growing evidence of the efficacy of momentum investing, while breaking new ground in terms of the asset classes used to generate the momentum signals. Until now, most of the momentum work has been done on individual stocks or sectors, rather than styles such as “growth” and “value.”

The desire to find a low cost alternative to implement a momentum investment strategy led Tibbs to this research. Previous work on relative strength required access to specialized databases or involved high turnover, fees, and expenses. While primarily a fundamentalist, he has kept an open mind to

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)

Ajay G. Jani, CMT

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Updating “Using Index Momentum to Generate Alpha”

Updating “Using Index Momentum to Generate Alpha”

This paper was recently recognized with the 2008 MTA Dow Award. It presented test results from January 1972 – December 2005. Ajay Jani recently updated the research to see how this research had fared since that time.

Between January 2006 and June 2008, the top ranked style had a total return (including dividends) of -0.88%. In comparison, the bottom ranked style had a total return of -5.14%. The S&P 500 had a total return of 7.60% during this time frame.

Thus Jani finds that the returns have been a bit less during the past 2.5 years, but there is still a spread between top and bottom ranked styles using the paper’s ranking methodology. These figures all exclude transactions costs, similar to the data in the paper.

To Jani, the most striking change is the rank-based returns of the strategy. From 1972 – 2005, there is a monotonic relationship between the rank and compounded

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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Support the MTAEF/MTA Library at Baruch College

The MTA Educational Foundation’s commitment to introduce technical analysis to colleges and universities extends to the library. Baruch College alum, Baruch College Fund Trustee and MTA Educational Foundation Advisory Panel member, David Krell, CMT, has established a matching program for donations to the Baruch College Fund to benefit the MTAEF/MTA Library at Baruch College. The goal is $50,000.

David will match donations up to $1,000, dollar-for-dollar, with a maximum of $25,000. The matching plan is for one year and ends June 30, 2009.

The establishment of the collection at the Baruch College Newman Library and the MTAEF/MTA Library Fund are the first steps in what is hoped will become a long and productive collaboration.

As the thermometer shows, we have a long way to go to reach our goal – your contribution is very important to

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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Georgia Tech’s Class on Technical Analysis for Stocks 2001-2008: Special topics MATH and ISYE 4801

Georgia Tech’s Class on Technical Analysis for Stocks 2001-2008: Special topics MATH and ISYE 4801

Georgia Tech began exploring a Technical Analysis (TA) class in 2001 with Dr. Robert Kertz spearheading the effort. Dr. Kertz was head of the Quantitative Computational & Finance (QCF) program in the School of Mathematics at Ga. Tech. Dr. Kertz had some knowledge of TA through various sources including general media, other Business Schools, academic articles (e.g. Lo at MIT) and from some of the students in the program. Professor Kertz stated “the main idea was to have some ‘extra value’ courses that would fill in some possible gaps within the education of the students in the Masters of Science (MS) QCF program, and which would be useful to them in one way or another in their broad range of QCF-related careers after their graduation. These would not be courses that would count towards their curriculum requirements, but they would be taken as extra Georgia Tech courses”.

Dr. Kertz noted 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)

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“What’s Hot” The MTA Library Announces...

“What’s Hot” The MTA Library Announces...

The MTA would like to announce that the following books have been added to the MTA Library.

  • “Beyond Greed and Fear” by Hersh Shefrin
  • “Preferreds: Wall Street’s Best-Kept Income Secret” by Kenneth G. Winans, CMT

The MTA would also like to thank David Aronson, Kenneth G. Winans, CMT and Lane Mendelsohn for their recent donations to the MTA Library.

As we continue to add to the library, if you have any recommendations for us, please email Cassandra Townes at cassandra@mta.org

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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MTA Updates

MTA Updates

The following are some important updates and reminders from the MTA Office.

  • 2009 Mid-Winter Retreat – Save the Date! The MTA is pleased to announce that the 2009 Mid-Winter Retreat will be held in Las Vegas, NV from January 22nd – 24th. Event registration and more details will be posted shortly.
  • Charles H. Dow Award – Let the Competition Begin! This year, the MTA Board of Directors have increased the cash prize for the winning paper 100% to $4,000. The recipients of the Dow Award in the past are among the most notable technicians in the market today. The deadline for submissions is February 6, 2009. Submit inquiries to DowAward@mta.org.
  • CMT Level 1 and 2 Format Change – After consultation with our test administrator, Prometric, we have decided that for the Fall and future CMT examinations we will embed a small number of randomly inserted questions which will not be

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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New Educational Content This Month

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