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Technically Speaking, September 2015

LETTER FROM THE EDITOR

This month’s issue of the magazine is the sixth month in a row we are featuring content from the Annual Symposium. That meeting lasts just a few days but it truly does provide months worth of ideas for attendees. Planning is underway for the 2016 Symposium and each year is always better than the previous year. It’s not too early to start making plans to attend.  This month’s magazine also includes examples of the latest research into technical analysis and historical perspectives of the field. As always, we hope you find actionable ideas in each issue.  Remember, submissions for the 2016 Charles H. Dow Award are now being accepted. More details are available by clicking here. Submissions for other awards, including the MTA Annual Award and the Memorial Award, will also be accepted soon. If you know of someone who should be recognized with one of the MTA’s awards, now is the time to plan their nomination.  You can always provide feedback on Technically Speaking by emailing us at editor@mta.org. Sincerely, Michael Carr

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What's Inside...

QUALITY TRENDS: BET ON QUALITY AND MONITOR CONSISTENCY

by Eoin Treacy & Michael Carr, CMT

Editor’s note: Eoin Treacy is s a global strategist at Fullermoney.com. He provided details on a strategy that could help investors beat their benchmark at the MTA Annual Symposium in March. The...

DOW JONES’S 22,000 POINT MISTAKE

by Dr. Bryan Taylor

Editor’s note: In the previous article, Eion Treacy highlighted the importance of the index weighting scheme to performance.  In this article Dr. Bryan Taylor demonstrates that decisions made...

SAM HALE, CMT - IN HIS OWN WORDS

Sam Hale, CMT, passed away on August 4, 2015 at the age of 78. Sam spent many years as the Senior Technical Analyst – Futures and Options Divisions at A. G. Edwards before retiring in 2002....

WYCKOFF LAWS AND TESTS

by Henry Pruden, Ph.D. & Bernard Belletante, PH.D.

Editor’s note: Richard Wyckoff was an early influence on Same Hale, CMT, as noted elsewhere in this issue. This article was originally published at www.HankPruden.com as an example of the...

DISCIPLINARY ACTION

On August 11, 2015, the Board of Directors of the Market Technicians Association (MTA) suspended the MTA membership of Vishal B. Malkan, including the right to use the Chartered Market Technician...

INTERVIEW WITH TYLER YELL

by Amber Hestla-Barnhart

How would you describe your job? My role at DailyFX is as a currency analyst and trading instructor. As an analyst, I take monetary policy and look for relative edges to present to our clients. As an...

BLOOMBERG BRIEF HIGHLIGHTS: CHART-BASED TRADING STRATEGIES

Editor’s note: This article was originally published in the August 27 issue of Bloomberg Brief: Technical Strategies. Below is an extract of that article. Charts have been the basis of technical...

THE SANDPIPER AND TRADING: HOW YOU CAN USE VOLATILITY MEASUREMENT TO GAIN AN ADVANTAGE IN YOUR TRADING

by Kirk Northington, CMT

Editor’s note: This article was originally published at The Educated Analyst, an education blog maintained by Market Analyst. As a trader do you find yourself sometimes looking at a price chart and...

PREDICTIVE MEDIA CONTENT ANALYTICS; 24/7 INFORMATION HAS FOREVER CHANGED FINANCIAL MARKET STRATEGIES

by Richard Spitzer & Bill Lattyak & Peter Hafez

Editor’s note: sentiment analysis has long been a part of technical analysis. In the past, sentiment was often measured in surveys and a significant lag existed between the time questions were...

THERE ARE NO LONG-TERM STOCK MARKET TRENDS

by Jim Rohrbach

In mid-July I was interviewed Business Talk Radio.net and something very interesting happened. I was asked how long the longest signal I have ever received using my RIX Index lasted. I then proceeded...

RESEARCH UPDATE: HIGH FREQUENCY TRADING: A TOOL OF PANACEA OR FIASCO FOR MARKET LIQUIDITY AND ROBUSTNESS?

Abstract: The report discusses the merits of the entitling High Frequency Trading and its rapid growth as the future of computerized trading. A lack of evidence and analysis in the recent literature...

ETHICS CORNER: SPONSORSHIP

What is my ethical obligation when sponsoring a candidate for MTA membership? One of the requirements of membership in the MTA is sponsorship. Under this process, the candidate obtains the...

CHART OF THE MONTH: THE WORST BEAR MARKET IN HISTORY

Editor’s note: This article was originally published at the Global Financial Data blog and is reprinted here with permission. Which country has the dubious distinction of suffering the worst bear...

QUALITY TRENDS: BET ON QUALITY AND MONITOR CONSISTENCY

QUALITY TRENDS: BET ON QUALITY AND MONITOR CONSISTENCY

Editor’s note: Eoin Treacy is s a global strategist at Fullermoney.com. He provided details on a strategy that could help investors beat their benchmark at the MTA Annual Symposium in March. The complete presentation is available at the MTA’s Knowledge Base, the web’s free repository for everything related to technical analysis.

Many investment managers and individual investors set a relatively simple goal for themselves. They want to beat the benchmark. Eoin Treacy explained the problem with the goal and then explained how it can be done at the beginning of his presentation.

  • To begin with, beating the benchmark is hard.
  • It can be done, but the only way it can be done is to try something different.

Once again, this goal sounds deceptively simple. There are many ways for an investment manager to do something different. The biggest problem here, as many investment managers have learned, is that doing something different can get you

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Contributor(s)

Eoin Treacy

Michael Carr, CMT

Michael Carr, CMT

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DOW JONES’S 22,000 POINT MISTAKE

DOW JONES’S 22,000 POINT MISTAKE

Editor’s note: In the previous article, Eion Treacy highlighted the importance of the index weighting scheme to performance.  In this article Dr. Bryan Taylor demonstrates that decisions made by index committees can have large impacts on an index’s performance. This article was originally published at the Global Financial Data blog and is reprinted here with permission.

One of the long-term components of the Dow Jones Industrial Average has been IBM. The company was originally added to the Dow Jones Industrials on March 26, 1932 in a reshuffle involving eight stocks including Coca-Cola, Nash Motors (later American Motors) and Proctor & Gamble. On March 13, 1939, however, both IBM and Nash Motors were removed from the average and replaced by American Telephone & Telegraph and United Aircraft Corp. (now United Technologies).

AT&T was in the Dow Jones Utilities Average until June 1, 1938. Until then, the Dow committee had interpreted utilities in a

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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)

Dr. Bryan Taylor

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SAM HALE, CMT - IN HIS OWN WORDS

SAM HALE, CMT - IN HIS OWN WORDS

Sam Hale, CMT, passed away on August 4, 2015 at the age of 78. Sam spent many years as the Senior Technical Analyst – Futures and Options Divisions at A. G. Edwards before retiring in 2002. Prior to that, Sam enjoyed a successful, although brief, career in broadcasting in Atlanta, Chicago and New York, Sam shifted from the markets’ being his avocation into his full time career in 1966.

His Wall Street career included seven years at Dean Witter before forming his own NASD research boutique. After three years as president of this firm, he became a member of the CBOE and a registered Market Maker in IBM, EK, and GM. While on the floor he
remained a market timing consultant to other market makers, as well as to a member firm. He was recruited by A. G. Edwards & Sons, Inc. in

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WYCKOFF LAWS AND TESTS

WYCKOFF LAWS AND TESTS

Editor’s note: Richard Wyckoff was an early influence on Same Hale, CMT, as noted elsewhere in this issue. This article was originally published at www.HankPruden.com as an example of the application of Wyckoff’s principles.

Wyckoff is a name gaining celebrity status in the world of Technical Analysis and Trading. Richard D. Wyckoff, the man, worked in New York City during a “golden age” for technical analysis that existed during the early decades of the 20th Century. Wyckoff was a contemporary of Edwin Lefevré who wrote The Reminiscences of a Stock Operator. Like Lefevré, Wyckoff was a keen observer and reporter who codified the best practices of the celebrated stock and commodity operators of that era. The results of Richard Wyckoff’s effort became known as the Wyckoff Method of Technical Analysis and Stock Speculation.

Wyckoff is a practical, straight forward bar chart and point-and-figure chart pattern recognition method that, since the
founding of

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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)

Henry Pruden, Ph.D.

Bernard Belletante, PH.D.

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DISCIPLINARY ACTION

DISCIPLINARY ACTION

On August 11, 2015, the Board of Directors of the Market Technicians Association (MTA) suspended the MTA membership of Vishal B. Malkan, including the right to use the Chartered Market Technician (CMT) designation, for a period of 36 months. The suspension results from a determination that Mr. Malkan 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. Malkan failed to disclose in his Personal Conduct Statement (PCS) that he had been the subject of a customer complaint. The MTA suspension was imposed for failing to disclose this action for several years.

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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INTERVIEW WITH TYLER YELL

INTERVIEW WITH TYLER YELL

How would you describe your job?

My role at DailyFX is as a currency analyst and trading instructor. As an analyst, I take monetary policy and look for relative edges to present to our clients. As an instructor, I teach traders new to the FX or currency market how individual account management can be optimized through understanding risk in this particular market as well as using technical analysis in order to recognize when a trade idea has been invalidated.

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

My prior role was focused on equities however, an increasing number of my high net worth clients began asking about large moves in the currency market. This was back in 2006 and I knew very little about currencies’ effects on other markets much as described by John Murphy in Trading with Intermarket Analysis: A Visual Approach to Beating the Financial Markets Using

To view this content you must be an active member of the CMT Association.
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Contributor(s)

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BLOOMBERG BRIEF HIGHLIGHTS: CHART-BASED TRADING STRATEGIES

BLOOMBERG BRIEF HIGHLIGHTS: CHART-BASED TRADING STRATEGIES

Editor’s note: This article was originally published in the August 27 issue of Bloomberg Brief: Technical Strategies. Below is an extract of that article.

Charts have been the basis of technical analysis since Charles Dow learned how to draw point and figure charts from other
traders on the floor of the New York Stock Exchange. Despite the proliferation of indicators, charts are still the basis of
technical analysis. In a recent Bloomberg Brief: Technical Strategies, Dean Rogers, Senior Analyst at Kase & Co., presented
a complete trading strategy for natural gas.

Blue trend lines highlight a bearish flag pattern. This indicates traders should consider short positions. However, a move above $2.75, based on a confluence of several important retracement and extension levels, would indicate potential upside in natural gas. Indicating a reversal level

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THE SANDPIPER AND TRADING: HOW YOU CAN USE VOLATILITY MEASUREMENT TO GAIN AN ADVANTAGE IN YOUR TRADING

THE SANDPIPER AND TRADING: HOW YOU CAN USE VOLATILITY MEASUREMENT TO GAIN AN ADVANTAGE IN YOUR TRADING

Editor’s note: This article was originally published at The Educated Analyst, an education blog maintained by Market Analyst.

As a trader do you find yourself sometimes looking at a price chart and wondering why a stock reversed at a specific level?  Or possibly more often you may want to know where it will stop falling so you can buy it. If so, you are thinking about what the extreme is…“what is the farthest?”

You are thinking about volatility.

You are not alone. Every person and institution involved in traded markets thinks about volatility. The difference is you are not likely thinking about volatility the same way most of your competitors are.

The real point of this series of articles is to show how you can use volatility measurement to gain an advantage in your trading.

When I use the term ‘competitors’ I’m referring to participants in markets that determine price direction. The big money is

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)

Kirk Northington, CMT

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PREDICTIVE MEDIA CONTENT ANALYTICS; 24/7 INFORMATION HAS FOREVER CHANGED FINANCIAL MARKET STRATEGIES

PREDICTIVE MEDIA CONTENT ANALYTICS; 24/7 INFORMATION HAS FOREVER CHANGED FINANCIAL MARKET STRATEGIES

Editor’s note: sentiment analysis has long been a part of technical analysis. In the past, sentiment was often measured in surveys and a significant lag existed between the time questions were answered and results were distributed. Real-time communications lessen that time lag and create new opportunities for measuring sentiment. Rather than measuring just attitudes towards the market, it’s now possible to quantify the tone of headlines related to economic news. That application is the topic of this paper which was originally published by TrendPointers and is reprinted here with permission.

Executive Summary: The new methodology of MacroSentiment Analytics© (MSA) provides an application of causal or anticipatory MacroSentiment Analytics that are shown to significantly outperform the benchmark S&P 500 over a recent nearly five-year period. The complex-text analytics process, applied to the 24/7 flow of an adaptive lexicon of financialrelevant information, is a new design to extract the net meaning of content

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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)

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THERE ARE NO LONG-TERM STOCK MARKET TRENDS

THERE ARE NO LONG-TERM STOCK MARKET TRENDS

In mid-July I was interviewed Business Talk Radio.net and something very interesting happened. I was asked how long the longest signal I have ever received using my RIX Index lasted. I then proceeded to explain that over the past 40 years I have had an average of 3 round trips a year. That’s 3 buys and 3 sells on average per year.

Using my RIX Index, there really were no long-term trends. The average trend lasted less than four months.

After this discussion I realized there really aren’t any long-term trends in the stock market. There are a series of intermediate-term trends that can be traded.

Many individuals might say:

“That’s okay. I will just ride out a series of intermediate-term moves for a few years as long as the overall market is moving up or down.”

Ah, but that is where that long-term trend theory will fail. We never know when a

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Contributor(s)

Jim Rohrbach

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RESEARCH UPDATE: HIGH FREQUENCY TRADING: A TOOL OF PANACEA OR FIASCO FOR MARKET LIQUIDITY AND ROBUSTNESS?

RESEARCH UPDATE: HIGH FREQUENCY TRADING: A TOOL OF PANACEA OR FIASCO FOR MARKET LIQUIDITY AND ROBUSTNESS?

Abstract: The report discusses the merits of the entitling High Frequency Trading and its rapid growth as the future of computerized trading. A lack of evidence and analysis in the recent literature endows most of the contemporary discussion as only that of an interim typology and in turn grants an element of caution and vigilance in the use of HFT, in the light of the May 6th 2010 flash crash. The effort to introduce controls has been gradually surging in the recent years, through the likes of MiFID I and MiFID II by the European Union. Then, the aim of this paper is to provide an overview of recent research on the effects of HFT on market quality and its robustness. The objective is to evaluate recent literature and assess main theoretical frameworks and empirical findings. Understanding the implications of HFT on market quality could potentially offer a better understanding

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ETHICS CORNER: SPONSORSHIP

ETHICS CORNER: SPONSORSHIP

What is my ethical obligation when sponsoring a candidate for MTA membership?

One of the requirements of membership in the MTA is sponsorship. Under this process, the candidate obtains the endorsement of three members to join. Sponsors are confirming to the Admissions Committee that they are familiar with the candidate’s work and character. There’s never been a formal requirement of what a sponsor is required to know about a prospective member but the Code of Ethics offers some guidelines.

Under the Code of Ethics, members must:

  • Act with integrity, competence, diligence, respect, and in an ethical manner with the public clients, prospective clients, employers, employees, colleagues in the investment profession, and other participants in the global capital markets.
  • Use reasonable care and exercise independent professional judgment when conducting investment analysis, making investment recommendations, taking investment actions, and engaging in other professional activities.

Each of these requirements affects sponsorship.

The requirement to act with diligence indicates sponsors

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CHART OF THE MONTH: THE WORST BEAR MARKET IN HISTORY

CHART OF THE MONTH: THE WORST BEAR MARKET IN HISTORY

Editor’s note: This article was originally published at the Global Financial Data blog and is reprinted here with permission.

Which country has the dubious distinction of suffering the worst bear market in history?

To answer this question, we ignore countries where the government closed down the stock exchange, leaving investors with nothing, as occurred in Russia in 1917 or Eastern European countries after World War II. We focus on stock markets that continued to operate during their equity-destroying disaster.

There is a lot of competition in this category. Almost every major country has had a bear market in which share prices have dropped over 80%, and some countries have had drops of over 90%. The Dow Jones Industrial Average dropped 89% between 1929 and 1932, the Greek Stock market fell 92.5% between 1999 and

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New Educational Content This Month

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