Education Archive

By Emily E.A. Meyer

Generally speaking, there are two types of technology companies: those that sell or market directly to consumers, and those that market and sell to businesses.

For the last several months, consumer-focused technology companies have dominated the stock market, whether they’re consumer internet (Alphabet (GOOGL​), Facebook (FB), Netflix (NFLX​)); consumer retail (Amazon.com (AMZN​)); or consumer hardware (Apple (AAPL​)).

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Revisiting a Q&A with Dawn Bolton-Smith

Posted September 21, 2017 By APTA.org.au

This article was originally published by the Educated Analyst.

In this edition of Q&A we talk to trader and market legend Dawn Bolton-Smith.  With a career spanning over 50 years Dawn has successfully navigated her clients through stellar bull runs, major crashes and everything in between…

Q.  How did you get into trading/investing?

A.  As a complete novice in 1960 and having accumulated funds to invest, the family Doctor sent me along to his broker who said the market was high (but I didn’t know what it meant); he went ahead and bought me all the good leaders.  The Holt Credit Squeeze in 1961, also known as the “Holt Jolt”, brought the shares tumbling down, and I knew I had to find out what it was all about.  I enrolled at the Stocks & Shares Class at the Mosman Evening College which set me on a career path for the next fifty years.

The Mosman Group under the late Ian Notley were the real pioneers of Technical Analysis in Australia.  To draw up the price charts, we went to the Mitchell Library and copied the prices out of the Newspaper and then exchanged them by tracing with lunch wraps and a tracing light which I still use to this day.

Q.  How long have you been trading the markets?

A.  All told now for five decades – stock market, commodities and foreign exchange.

Q.  Were there any authors, market teachers that influenced your style of trading as you started?

A.   The main textbook at that time was ‘TECHNICAL ANALYSIS OF STOCK TRENDS’ by Edwards & Magee.

Ian Notley was one chapter ahead of the class and for some years he dictated the text, and I think I must have written most of this classic book by hand.  It continues to be the most well thumbed book on my shelf.

Progress was slow, but thorough.  I later acquired a copy of ‘BEAR MARKETS: How to survive and make money in them’ by Dr. Harry D. Schultz, where the lessons learnt from this book were applied for my later prediction of the 1974 Share Crash.

Q.  Which exchanges do you prefer to trade, and if so, why?

A.  The Sydney Futures Exchange is adequate for local markets.  For offshore, the CME and NSYE for their liquidity.

Q.  What time frames do you aim for your trades (short term, mid-term, long term, combination of all 3)?

A.  The time frames using Gann’s Seasonal times provide the best pivot points.

Q.  Do you utilize any fundamental analysis in your trading, or do you use Technical Analysis exclusively?

A.  It is hard to divorce yourself from hearing the fundamentals, but I believe if you can do it – best to board up the windows and use the technicals.

Q.  What is the most important lesson you’ve learnt as a trader?

A.  Not to overtrade and only take the number of contracts you are comfortable with.

Q.  You were the first Technical Analyst to be employed in the Australian Stock Market.
Was there a lot of resistance to your methods by your peers?

A.  I was fortunate to be starting out with the right charts and the advent of the oil and mining booms. I acquired a following with the quality of the analysis I was able to produce.  I was the Chartist in the Bulletin for many years and made some good calls.  I was able to pinpoint the Bass Strait Oil discoveries at the start of the run because of my charts.  Likewise with the Nickel boom and WMC. From the mid 1960’s the mining and oil market exploded and I had acquired five full time assistants, and we had every mining and oil stock on the board charted.  Sadly, following Poseidon, the boom came to an abrupt end as booms always do.  The point I would make here is that the investors decided they couldn’t sell because of the tax, but later there were no profits to tax.  A lot of defunct share scrip is probably still in bottom drawers.

Q.  You successfully predicted the crash of 1974 to within 4 points of the market low.
Would you class this as a major turning point into how your peers viewed Technical Analysis? Did this cause the company to employ more analysts using TA?

A.   I do believe there were more analysts coming into the industry.  The highlight for me was the address I was asked to deliver by the National Times in late 1974 to a group of Economists, Brokers and Fund Managers on HOW I PICKED THE THIRTIES STYLE CRASH! I had done considerable technical work on the long term trend of the Stock Market with a magnificent chart, along with some of the key economic indicators.  It was a case of putting it all together and indeed knowing where the major uptrend line of the All Ordinary Index would bring in support, which it did.   The chart had become rather tattered and Russell Lander said to pass the hat around to buy me some more chart paper!  The chart showed how simple and effective some of the basic principles of TA helped with the predictions.  The major top formations made by the individual stocks also greatly assisted in determining just how far the market could fall.  The extent was greater than the 1929 crash and devastating for non believers.  The inevitable retrenchments occurred in Stock Broker’s offices as the boom subsided and turnovers dried up.  A lot of good people left the industry and said they would never return.

Q.  Can you give details of one of your best trades (setup, entry, exit etc.)?

A.  My best trades came as a result of taking positions early in the trend and locking in the profits as the trend had run its course. There were so many during the halcyon days of the mining and oil markets.  I did have a small suitcase full of oil scrip which in those days was issued in 100 lots but acquired at very low prices.  By the time of the 1968 top – I had emptied the suitcase (a great lesson for buying low and selling high).  In more recent times, I sold Gold Futures at $840 when everyone was looking for $1000, futures opened down $220 the next day.  The optimists were faced with huge margin calls and there was no real recovery as the bear market got underway.    Capturing the bottom of the $AUD after Mr. Keating’s  “Banana Republic” statement was achieved by using Gann Square and Point and Figure chart.  There were many sore heads in the Forex Dealing rooms on that day!  My worst experience was holding too many gold contracts.  Sydney had a big premium on the Friday, but it was wiped out in Hong Kong on the Saturday morning.  The only consolation was that Dr. Harry Schulz had the same position.  It took me a month to get over it.  Lesson learned.

Q.  If you had to pick 3 things no trader should be without, what would they be and why?

A.  An hourly chart on the market I was trading (in the case of ASX 200, a half hourly works best) a hand drawn point & figure chart and access to a good piece of online software (Market Analyst 6 of course!).

Q.  You use Point & Figure charts extensively when analyzing the markets.  Can you explain some of the benefits you find this charting style has over a standard bar or candlestick chart?

A.  My preference for P&F charts has grown considerably over the years and more so since I have been able to draw really long term charts in major indices, commodities and stocks with the aid of an excellent piece of software – Bull’s Eye Broker and using CSI data.  I just print out the chart and copy it onto a piece of chart paper which is then easily updated by hand.  The use of Gann Square overlays produces some amazing geometry and with the use of angles and arcs you can produce great analysis.  P&F charts are considered the oldest form of charting, and simply reflect the supply and demand of any trend where the use O’s and X’s can provide clear answers where the other charts merely stutter. David Fuller of Fullermoney, when asked for his preference – candle or P&F – his answer, “P&F” which he uses extensively with a huge data base.

Some years ago, I did a presentation in Brisbane on P&F with a good set of explanatory notes.  I would be able to email this to any reader of this Newsletter to further their interest.  You learn by doing.  There is a wonderful textbook: ‘The Definitive Guide To Point and Figure’ by Jeremy du Plessis.  Published by Harriman House, you would do well to put it in your library.

As a further point of interest for using P&F charts – they are wonderful for mining stocks.  They give great trend lines and patterns and are simple to maintain.  Coming out of bases provide the least risk and most reward.

Q.  You also utilize W.D. Gann’s theories into your analysis.  Do you find his material, most of which was written in the early 20th century, is still applicable to today’s markets?

A.  I believe Gann’s theories in some ways are more applicable to today’s market.
Basically, all markets are the mathematics of emotion, fear and greed always present.
I have a much treasured GANN SQUARE – W.D. Gann Price and Trend Calculator, 1952 which I obtained from Bill McLaren at one of his seminars some years ago.  Mr. Gann was reputed to have charged $5000 US in 1954 in his personal seminars.  If you learn to understand the real meaning of the Triangle, the Square and the Circle you will then understand markets.

Q.  We’ve seen a lot of volatility in the markets since the GFC, and for the unprepared trader it can cause many problems. Do you have any tips on how to overcome the issues volatility can bring?

A.  There has always been volatility in markets not necessarily due to a GFC.  It is very important to have up-to-date charts always, and be prepared for the unexpected. Pre-market preparation is necessary.  Most traders tend to rely on too many indicators – they have their place but I believe the emphasis should be on the price chart.  Moving averages are great, especially 3/5 period crossovers after a long run up (or down).  Getting in too late in a trend brings risk.  I recommend traders and investors use Welles Wilder’s Directional Movement System as a back up to all others.  I believe if you live by the rules of this system you will never be “wiped out”.

A great example was into the 1987 highs – you had three week’s warning to get out of the market.  The Parabolic Stop can keep you trading with the trend.  It works on all time frames. The indicators most used today – RSI, Stochastic, DM, etc were actually borne out of the 1970’s commodity boom, and were introduced to Australia by Mr. Wilder at the Sydney Opera House in 1980.  I always felt I was indeed privileged to have been tutored by him.  Computers were just coming in then but for some years I calculated the indicators by hand calculator – it was a way of really getting to understand how they work in the markets.

You learn by doing and this applies to keeping some key charts by hand and not leaving everything to the computer.  What I have observed over the last two years is the importance of the 30 period moving average.   Keep this one on your charts.

4 Top-Performing Alternatives to Bitcoin

Posted September 21, 2017 By

By Emily E.A. Meyer

While Bitcoin dominates the headlines, its underlying blockchain technology has spawned a new ecosystem of alternative cryptocurrencies, known as “altcoins.” Following Bitcoin’s staggering 1,000% moonshot of the past 12 months, a fresh wave of capital has flooded the space searching for the next 10-bagger.

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By Emily E.A. Meyer

After months of a slow grind lower, shares of Alphabet Inc. (GOOGL​) are setting up for a major breakdown. The stock for Google’s parent company significantly unperformed the broader market over the summer and is down around eight percent from its June peak, compared with all-time highs set by the Nasdaq and other major indices.

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By Emily E.A. Meyer

October 2017 CMT Level III Registration Deadline Extended
Registration Deadline: Sunday, October 1st
The registration deadline for the October 2017 CMT Level III exam has been extended. The deadline to register for CMT Level III is Sunday, October 1st at 12:00am ET.
Exam Dates:
CMT Level III: October 19, 2017
Final Registration Deadline:
CMT Level III: October 1, 2017 at 12:00am ET

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Source:: MTA News

      

The S&P 500 has had quite a run since the early 2016 lows, not experiencing even a slight pullback of 5% or more, leading many to believe that the market would wobble during the seasonally weak period of August and September. Over the last twenty years, the market has rallied only 55% of the time during August and only 50% of the time during September, losing on average 1.0% and 0.80%, respectively, in those two months before strengthening into the final three months of the year.

seasonality chart
Source: Stockcharts.com

This year’s current path has remained strong, bucking the normal seasonal trend as the S&P 500 hits new all-time highs. This is shown below with the year-to-date performance of the S&P 500 shown by the solid line relative to the 30-year seasonal average.

spx index avg
Source: Bloomberg

With August now behind us, bears are still holding out for a major pullback the last few weeks of September. Unfortunately, the message from the credit markets is not giving them much to stand on.

High yield (junk) bonds often serve as a canary in the coal mine and a good example of this was in 2015 when the BofA Merrill Lynch High Yield Index began to weaken several months before the August 2015 summer correction. Then, as the S&P 500 staged a strong recovery, junk bonds continued to sell off through the remainder of the year, eventually pulling the S&P 500 down a second time.

sp500 boa merrill lynch yield
Source: Bloomberg

Just as the junk bond market led on the way down it also led on the way up, confirming the bottom in February 2016 and then hitting a new high in June, one month before the S&P 500 did the same. So, given the high yield bond market can serve as a useful tool to gauge market risk, what is its current message?

“Don’t Worry Be Happy Now”

The junk bond market is echoing the words of Bobby McFerrin’s famous song as it experienced only mild weakness in the last few weeks and hit a new high last Wednesday, ahead of the S&P 500’s new highs seen on Monday.

sp500 boa merrill lynch yield 2
Source: Bloomberg

The message from junk bond indices is being confirmed by investors′ fears of corporate bond defaults as measured by credit default swaps (CDS) on investment grade (IG) and high yield (HY) bonds. While the S&P 500 didn’t peak until the summer of 2015 before it went through a rough 6-month span, bond investors were getting uneasy a year earlier. The CDS indices on IG and HY indices bottomed in the summer of 2014 and default insurance began to rise heading into 2015 and really picked up steam just before the summer 2015 correction, giving an early warning to anyone listening of coming market turbulence.

sp500 markit cdx
Source: Bloomberg

Major bond investors are signing McFerrin’s song as the cost of CDS protection has fallen since early 2016 and is closing in on the lows seen in 2014 with no early warnings present.

sp500 markit cdx 2
Source: Bloomberg

From a stock market breadth perspective, we are also seeing some encouraging signs of improvement. My last article highlighted that market bottom conditions had not been confirmed (link) but we are now seeing technical evidence to the contrary. For a solid bottom in the markets, you want to see oversold conditions materialize that create enough buying enthusiasm to suggest prices got low enough to bring the bulls back into the markets. Oversold markets that lead to little buying interest tend to be “dead cat” bounces in which even lower prices are needed to entice bulls to enter the markets once more and a bottom to form.

One measure I use to gauge an oversold market is by tracking the underlying behavior of the 3000 stocks in the Russell 3000 Index, which represents 98% of the entire US market capitalization. In the middle panel blow, we measure negative momentum with the percentage of members with their MACD line in positive territory. Readings of 30% and below tend to mark oversold markets and, in late August, we reached the most oversold levels seen since the November 2016 elections.

To answer the question if prices moved low enough to entice bulls into the market and signify a low, I look for buying enthusiasm as evidenced by a surge in positive momentum measured by the percentage of stocks that experience a MACD buy signal. On that front, the recent rally has led to the strongest surge in momentum since the February 2016 lows as nearly 40% of the 3000 members in the Russell 3000 experienced a MACD buy signal (third panel below).

russell 3000 index
Source: Bloomberg

Bottom line: Given little signs of anxiety coming from the credit markets and a resurgence in market internal momentum, it appears as though the path of least resistance is higher and bearish hopes of a market decline in the seasonally weak part of the year are unlikely to come to fruition.

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Harvest, the world’s fastest-growing investor network, today announced a ground-breaking partnership to make the best thinking and most innovative strategies of the world’s leading technical analysts available to investors – all in one place.

The new partnership between Harvest and the CMT Association provides proprietary access to videos featuring presentations of leading market analysts such as Ralph Acampora, Chris Verrone, Barry Ritholtz, Robin Griffiths, Hank Pruden, Dan Wantrobski and many others from the Association’s 44th Annual Symposium.

This development builds on the success of the collaboration between Harvest and the CMT Association to bring the educational content from live events, seminars, and workshops to a global audience through an industry leading digital platform.

“The CMT Association is excited to expand our relationship with Harvest. Our mission is to advance the discipline of technical analysis. Harvest is essential to bringing the latest developments, applications, and market analysis to a global network of investment professionals.,” said Tyler Wood, Managing Director of Global Business Development for the CMT Association. “The exchange of ideas used to happen exclusively at live meetings, but the world is flat now and our members are using technology to connect 24 hours a day anywhere in the world. Content has to be accessible anytime from anywhere, that’s what Harvest provides.”

The new Harvest-CMT Association Symposium Network features topics including:

  • “Cross-Asset Strategy: Technical Tools for Global Macro Investing”
  • “TechoQuant; The Merger of Technical Market Insights and Systematic Trading”
  • “A Tandem Walk Down Wall Street: Two New Statistical Tools”
  • “New Ideas in Technical Analysis”
  • “Implied Volatility as a Market Indicator”

“Harvest is always seeking to partner with top investors and their credentialing, professional associations,” said Peter Hans, CEO of Harvest. “The CMT Association has long been a supporter of our platform and we are looking forward to welcoming more of its members into our network.”

Full-access subscriptions to the Harvest-CMT Association Symposium Network are $199 per user annually and include archives from the 2017 and 2016 annual events. Symposium registrants receive free access after registration. Access includes video, slides, asynchronous conversation and networking of all presentations, panel discussions, workshop sessions, and bonus interviews,

About the CMT Association

CMT Association is a global credentialing body with nearly 50 years of service to the financial industry. We believe technical analysis provides the tools to successfully navigate the gap between intrinsic value and market price across all asset classes through a disciplined, systematic approach to market behavior and the law of supply and demand. The Chartered Market Technician® (CMT) designation marks the highest level of training within the discipline and is the preeminent designation for practitioners worldwide. Earning the CMT demonstrates mastery of a core body of knowledge of investment risk in portfolio management; including quantitative approaches to market research and rules based trading system design and testing. We strive to further the profession with diverse opportunities in continuing education, advocacy, ethics awareness, and networking.

About Harvest

Harvest is a digital distribution and behavioral data platform that enables financial firms to compliantly reach connect a targeted, investment-focused audience, in scale. Harvest’s machine learning technology offers financial firms the ability to optimize data-driven sales & marketing ROI. By sharing and distributing insights on Harvest, firms can engage with a reader base of more than 500,000 institutional investors, RIAs, financial planners and High Net Worth investors.

By Emily E.A. Meyer

Jim Puplava of the popular Financial Sense website welcomes back John Kosar CMT, Chief Investment Strategist at Asbury Research LLC.

In his latest interview by Financial Sense, which took place on Friday September 8th, John discussed Asbury Research’s outlook for the US financial landscape, as well as specific areas of the economy including:

  • the US stock market, market sectors, and industry groups,
  • US interest rates,
  • key commodities like silver, gold. and crude oil, and
  • the US Dollar.

Listen Now

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Source:: MTA News

      

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