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Article originally posted by Marketwatch on 23 Jun2 2017 at http://www.marketwatch.com/story/legendary-technical-analysts-power-index-works-for-long-term-stock-investing-2017-06-22

by Michael Kahn

Technical analysis can be lucrative for investors who look beyond daily market fluctuations.

Even today, technical analysis still gets a bad rap as being, at best, a self-fulfilling prophecy and, at worst, financial voodoo.

And while its practitioners are usually not good ambassadors for the discipline, that does not take away from its usefulness.

It is true that technical analysis — the study of data generated from the market through trading activity and sentiment — is most often associated with day traders and, unfortunately, get-rich-quick marketing. However, it is perfectly suited for use by traders who hold positions for a few days to a few weeks. And, more importantly, it is useful for investors interested in long-term commitments of several years or more.

For those who say they never met a successful technician, let me introduce Robert B. Peirce, a semi-retired portfolio manager with nearly a half century of success. When Bob sold his stake in his investment firm, the Pittsburgh-based Cookson, Peirce & Co., he had almost a half-billion dollars of assets under management and all of it was under the care of long-term technical analysis.

In fact, his methods for employing technical analysis to portfolio management earned him the 2010 award given by the Market Technicians Association. According to the awards committee, the biggest reason for the honor was his “long track record of running technical-analysis-driven portfolios.”

Peirce took his place next to such charting authorities as John Bollinger, Martin Zweig and Charles H. Dow.

 Trends have limited lives

Perhaps nobody seems to know much about professional investors who employ long-term technical analysis because they don’t talk about it much. Indeed, it makes for bad television because they don’t call tops and bottoms in the market. Peirce himself once said that it is virtually impossible to sell long-term market timing. It’s just not as sexy as trying to prophesize the ebbs and flows that dominate the short-term.

Instead, long-term practitioners of technical analysis look for major trends to exploit. And since these trends are long term, by definition they do not change with the news cycle.

The most recent example was the June 9 technology sector selloff, which got pundits scrambling to declare the end of the reign of these leaders and trouble for the market as a whole. To a long-term investor, one day or even one week of volatility is but a blip on a chart.

His approach recognizes that leadership changes in the market over time. There will be periods when growth beats value, or when one market capitalization leads and then lags the others, and the goal is recognize this in order to make money in any environment. This allows him to buy small-cap stocks when they look strong, and by following a disciplined sell methodology, he may end up in large-cap value stocks at a different point in the market cycle.

The whole idea is that trends have limited lives. If you wait too long to get in you should just look for something that is timelier. If you wait too long to get out, you give up too much of your gain. Sometimes sectors stay strong for years, but they are usually strong for 12-18 months.

Peirce’s ‘power index’

Bob uses a combination of indicators based on market cycles, sentiment, breadth, market strength, and monetary indicators. While he tracks more than 70 of them, he trims them down to the 15 with the best recent records, revising the set every January. In this way, his model adapts to an ever-changing market over time.

If the majority of indicators are bullish, then he adopts a more bullish stance in his portfolio and even applies leverage when appropriate. In order to decide how aggressive to be, he created what he calls the “power index,” which is an overbought/oversold indicator based on market breadth.

The theory is that a strong market has strong breadth, which means a larger percentage of stocks are rising than falling. The opposite is true for a weak market.

But as with all overbought/oversold indicators, when it swings too far in one direction, it also tells him to take action. If he thinks it is a bull market, a very low reading tells him it is time to put new cash to work. If he thinks it’s a bear market, a very high reading tells him to use the strength to sell positions, as needed.

In other words, it fine-tunes what he was already doing: participating in a bull market or sitting out a bear market.

In a weak market, breadth should be weak. However, it can become so weak that it indicates huge levels of fear and dislike for stocks. That can signal good buying opportunities.

Over his career, Peirce has shared his thinking freely with colleagues because he was not trying to promote a “black box” style as so many others were trying to do. He also compiled a solid track record of long-term calls. Again, there is very little media coverage when he makes them because we will not know if he is right or wrong for years.

Dow call in 2010

But in May 2010, when the Dow Jones Industrial Average was hovering near 10,500, he said: “I believe we are in an ongoing bull market that could have a long way to go.” He also recognized the potential for short-term weakness (May and June were down months) but the overriding goal was not to be shaken out of his long positions in a bull market.

Bob lamented that the biggest disappointment of his career has been that the individual investor has not embraced long-term market timing. Again, that is because he operates in the long-term where patience is a virtue and media soundbites are rare.

And what does he think about the stock market now? He is still bullish heading into the summer months and encouraged by what he sees. However, since he is not in the prediction business, he’ll let the indicators guide him each month.

Michael Kahn, a chartered market technician (CMT), is a columnist for MarketWatch as well as Barrons.com, where he writes the “Getting Technical” column. He is the author of three books on charting and comments on technical analysis on his Twitter feed.

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http://www.cnbc.com/2017/06/13/death-of-the-human-investor-just-10-percent-of-trading-is-regular-stock-picking-jpmorgan-estimates.html

  • “Fundamental discretionary traders” account for only about 10 percent of trading volume in stocks today, JPMorgan estimates.
  • “The majority of equity investors today don’t buy or sell stocks based on stock specific fundamentals,” said JPMorgan’s Marko Kolanovic.
  • JPMorgan believes the recent sell-off in technology stocks may have been related to quantitative and computer trading and not traditional fundamental investors.

by Evelyn Cheng | @chengevelyn
Tuesday, 13 Jun 2017 | 4:49 PM ET

Quantitative investing based on computer formulas and trading by machines directly are leaving the traditional stock picker in the dust and now dominating the equity markets, according to a new report from JPMorgan.

“While fundamental narratives explaining the price action abound, the majority of equity investors today don’t buy or sell stocks based on stock specific fundamentals,” Marko Kolanovic, global head of quantitative and derivatives research at JPMorgan, said in a Tuesday note to clients.

Kolanovic estimates “fundamental discretionary traders” account for only about 10 percent of trading volume in stocks. Passive and quantitative investing accounts for about 60 percent, more than double the share a decade ago, he said.

In fact, Kolanovic’s analysis attributes the sudden drop in big technology stocks between Friday and Monday to changing strategies by the quants, or the traders using computer algorithms.

In the weeks heading into May 17, Kolanovic said funds bought bonds and bond proxies, sending low volatility stocks and large growth stocks higher. Value, high beta and smaller stocks began falling in a rotation labeled “an unwind of the ‘Trump reflation’ trade,” Kolanovic said.

“Upward pressure on Low Vol and Growth, and downward pressure on Value and High Vol peaked in the first days of June (monthly rebalances), and then quickly snapped back, pulling down FANG stocks” — Facebook, Amazon.com, Netflix and Google parent Alphabet, the report said.

Along with Apple, the big tech-related names fell more than 3 percent each last Friday and dropped again Monday, sending the Nasdaq composite lower in its worst two-day decline since December.

However, “the contribution coming from quant rebalances to this snapback is now likely over,” Kolanovic said, noting that S&P derivatives have supported market gains at the beginning of this week.

“$1.3T of S&P 500 options expire on Friday, and this will change dealers’ positioning,” he said. “This can result in a modest increase of market volatility starting on Friday and into next week.”

Tech recovered Tuesday, helping U.S. stocks close higher with the Dow Jones industrial average at a record.

Derivatives, quant fund flows, central bank policy and political developments have contributed to low market volatility, Kolanovic said. Moreover, he said, “big data strategies are increasingly challenging traditional fundamental investing and will be a catalyst for changes in the years to come.”

Figures from market structure research firm Tabb Group point to similar gains in machine-driven trade volume, while the overall number of shares traded has declined.

A subset of quantitative trading known as high-frequency trading accounted for 52 percent of May’s average daily trading volume of about 6.73 billion shares, Tabb said. During the peak levels of high-frequency trading in 2009, about 61 percent of 9.8 billion of average daily shares traded were executed by high-frequency traders.

To be sure, not everyone on Wall Street is giving ground to the machines so easily.

AllianceBernstein analysts made the case in an April 28 note that artificial intelligence is unable to generate significantly different results — by the mere fact that analyzing more and more data results in increasingly similar strategies.

Evelyn Cheng CNBC

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Exceptional Education, Meaningful Mission

Posted March 27, 2017 By APTA.org.au
Market Technicians Association - MTA

Have you ever wanted to be a part of an organization with clarity of purpose? With international reach and growing global membership? With integrity and core values you agree with? Do you desire to give back to the industry and take part in a mission driven body of professionals managing market risk?

Through your participation in various events, we know you recognize the educational benefits of membership. As an investment professional, we encourage you to take the next step as an advocate of professional ethics, accountability and competency. The next 45 years of the MTA will depend on even greater engagement from the investment industry and professionals like you.

The Australian Professional Technical Analysts (APTA), in association with the MTA, drives value through three main areas: the CMT curriculum, educational programming, and our growing professional network:

 

APTA and MTA FAQs

Posted March 24, 2017 By APTA.org.au

APTA and MTA FAQs

What is the MTA and what do they have to do with APTA? 
MTA information Click here.
APTA and the MTA have a strategic partnership in Australia, offering honorary membership to MTA members.

How can I learn more about the MTA ?
Watch the following short video

What are the benefits of an APTA or MTA Membership ?
The three main benefits of an APTA or MTA membership are:
1. Qualifications – CMT Examination (MTA) or AMT – An APTA qualification.
2. Education
3. Networking

MTA Benefits Click here

BENEFIT 1: QUALIFICATIONS / CMT EXAMINATION

What qualification does APTA offer?
APTA qualifications

What is the value of the CMT examination ?
Click here

What is the structure of the CMT examination ?
Click here

How can I get detailed information about the CMT examination ?
Click here

BENEFIT 2: EDUCATION

The educational resources of the MTA are available to APTA members by registering at the APTA website.

Click on the 8 sources of education for an APTA or MTA member:

1.  Student Newsletter

2. Knowledge Base

3. Educational Webcasts

4. Podcasts

5. Journal of Technical Analysis

6. CMT Newsletter

7. MTA Library

8. Technically Speaking Newsletter

BENEFIT 3: NETWORKING

Who presents to the APTA Meetings ?
Institutional Traders & Analysts (banks, hedge funds, brokers) and APTA members present their trading and analysis techniques.

APTA Meetings are free for APTA and MTA members to attend.

What are some of the benefits of attending APTA Meetings ?

Educational content (learn new market strategies)
Networking opportunities (meet people in the industry and exchange business details)

Rookie Currency Traders Are Causing Trouble

Posted March 23, 2017 By APTA.org.au

It’s been something of a common lament among Wall Street veterans for a while now. And it goes, more or less, like this: All these darn twenty-something-year-olds around here have no idea what they’re doing.

Perhaps it’s just the typical grousing of community elders, but last week, the Bank for International Settlements said there may be something to the notion.

Tucked deep into a report on foreign-exchange market liquidity was a brief paragraph on how rookie traders could be partly to blame — along with falling volumes and the growing prevalence of electronic trading — for the flash crashes that have roiled the $5.1-trillion-a-day currency market over the past two years.

One case the BIS found particularly worrisome was the time last October that the pound plunged 9 percent in a matter of minutes during early trading hours in Asia. The organization concluded that “less experienced” traders handicapped by a limited knowledge of which algorithms to use at that moment “amplified” the rout.

For Keith Underwood, the report just confirmed what he’s known for a long time.

“If there’s a shortage of senior people, there’s a shortage of knowledge,” said Underwood, who runs his own foreign-exchange consulting firm after a 25-year trading career that included stints at Lloyds Banking Group Plc and Standard Chartered Plc. In his trading days, he said he was leery of handing off positions to junior staff in other regions overnight. “I’ve certainly adjusted my orders, and I’ve also adjusted my sleep.”

Younger, lower-paid employees make up a greater percentage of trading desks today than they have in years.

Part of banks’ broader effort to cut staff, boost electronic trading and lower costs following the global crisis, the “juniorization of Wall Street,” as some call it, has been especially acute in the foreign-exchange market. The world’s 12 largest global banks cut front-office staff by about 25 percent in Group-of-10 currency markets over the past four years, according to Coalition Development Ltd.

That’s coincided with a shift to automation, which slashed staffing needs and spawned a new, and small, generation of quantitative traders whose decisions are driven by mathematical models. For every managing director with about 10 years or more on the job, there are as many as seven less-experienced staffers on currency desks, Coalition said. The ratio was one-to-four just five years ago.

“The old hands who have seen crazy things happen, they’re gone,” said Michael Melvin, a professor at the Rady School of Management at the University of California San Diego and a former managing director at BlackRock Inc.

‘World Is Ending’

BIS’s write-up on the effects of juniorization, which stemmed from discussions with market participants, echoed conclusions put forth in an earlier study that BIS staffers did in tandem with the Bank of England.

Franz Gutwenger, a recruiter in New York, estimates that about 75 percent of recent job openings at banks’ currency desks were for candidates with three to five years of experience. The advertised roles are mainly for assistant vice presidents with base salaries of up to $150,000 a year, or vice presidents who earn about $200,000 a year. That kind of pay is a fraction of the salaries that top traders can make.

Having so many inexperienced people manning a trading desk is risky, Gutwenger said, and senior staff should be on hand in critical situations. Melvin said that many young traders can panic and think “the world is ending” when suddenly exposed to a market crisis.

Read Next: Currency Traders Race to Reform ‘Last Look’ After Bank Scandals

“For many of the jobs, day-to-day, it’s all good, there’s no issue,” he said. “But when extraordinary events happen, it really is useful to have some seasoned old hands around.”

By Emily E.A. Meyer

The Puget Sound Chapter of the MTA invites you to our next chapter meeting on Thursday, December 15, 2016. We are pleased to have Jesse Felder as our guest speaker for the August meeting.

Register Here

We encourage you to bring clients or colleagues interested in technical analysis to this presentation.

Complete event details are listed below. We hope to see you there!

Leslie Jouflas, CMT
Brant Greene, CMT
Tom McClellan
Puget Sound Chapter Chairs


Date: Thursday, December 15, 2016

Time: 7:00 PM – 8:30 PM

Topic:
Jesse Felder began his journey on Wall Street in the mid-1990’s as a boring old Ben Graham-style value investor just as the stock …read more

Source:: MTA News

      

By Emily E.A. Meyer

The New York Chapter of the MTA invites you to our next chapter meeting on Monday, December 5, 2016 hosted by Baruch College, Zicklin School of Business. We are pleased to have Wesley R. Gray, Ph.D. and Jack Vogel, Ph.D. as our guest speakers.

Register Here

Registration for this event is free for Members and Non-Members. We encourage you to bring clients or colleagues interested in technical analysis to this presentation.

Complete event details are listed below.

Alan Lax, CMT
Dan Russo, CMT
Mike Sroga, CMT
New York Chapter Co-Chairs


Date: Monday, December 5, 2016

Time: 5:30 PM – 7:30 PM

Topic: Creating a Momentum-Based Stock Selection Strategy

Jack and …read more

Source:: MTA News

      

By Emily E.A. Meyer

The MTA Chapter of Richmond and the CFA Society of Virginia invite you to join us at our next joint meeting on Friday, November 18, 2016. We are pleased to have Meb Faber, CMT as our guest presenter.

We encourage you to bring clients or colleagues interested in technical analysis to this presentation.

Complete event details are listed below.

Sam Turner, CMT
Richmond Chapter Chair


Date: Friday, November 18, 2016

Time: 12:00 PM – 1:30 PM

Topic: The 4 Biggest Investor Mistakes, and How to Fix Them

Presenter: Meb Faber, CMT, CAIA, Co-founder & Chief Investment Officer, Cambria Investment Management

Location:
The Omni Hotel Richmond
100 South 12th Street
Richmond, VA …read more

Source:: MTA News

      

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