Market Technician No 87 - September 2019

Market Technician

Issue 87 - September 2019

The Journal of the Society of Technical Analysts

ACI UK COLLABORATION STA AWARDS AND SUMMER PARTY JP MORGAN FUN RUN PG.6

PG.9

10

13

16

24

RESEARCH

RESEARCH

RESEARCH

ANALYST FOCUS

Technical Analysis: the Subjective Analyst

Moose’s Soapbox Thoughts

The Decennial Cycle and the DJIA

Head and Shoulders Above

Tim Parker

Nick Batsford

David McMinn

Gerry Celaya

PG.7

Contents Foreword • IFTA 32nd Annual Conference 2019 • STA Annual Dinner 2019

04 05

News • Building alliances - the ACI UK Collaboration • Summer Party Success • JP Morgan Fun Run 2019

06 07 09

Research • Technical Analysis: the Subjective Analyst - Tim Parker • Moose’s Soapbox Thoughts - Nick Batsford • The Decennial Cycle and the DJIA - David McMinn • Did you know?

10 13 16 23

Analyst Focus • Head and shoulders above - Gerry Celaya • Interview with Mark Tennyson d’Eyncourt - Nicole Elliott

24 28

Book & Software Reviews • The Crypto Trader by Glen Goodman - Simon Gray • Bytes and Pieces - David Watts

29 31

The Society of Technical Analysts • Benefits of STA Membership • STA Calendar 2019/20 • STA Education, STA Library • The STA Executive Committee • Interview with Bronwen Wood prize winner - Akif Din • STA Education: Get qualified in technical analysis • STA Home Study Course© • Congratulations to the latest STA diploma MSTAs • STA Advertising Rates 2019/20

32 33 34 35 36 38 40 41 42

Disclaimer: The Society is not responsible for any material published in The Market Technician and publication of any material or expression of opinions does not necessarily imply that the Society agrees with them. The Society is not authorised to conduct investment business and does not provide investment advice or recommendations. Articles are published without responsibility on the part of the Society, the editor or authors for loss occasioned by any person acting or refraining from action as a result of any view expressed therein.

The Society of Technical Analysts: www.sta-org.uk

3

Editor's Letter

Nicole Elliott FSTA Technical Analyst, Private Investor, E-journalist for the STA

Part 1 and Part 2 Diploma courses and exams have been and gone, most recently on the 1st July 2019; we hope candidates succeed. Towards the back of this issue you can see a list of all those who passed, or distinguished themselves, our new MSTAs whose qualification is accredited by CISI and IFTA. Well done and well deserved!

Wednesday 16th October 2019 sees the start of the next Part 1 course held in the evenings at the London School of Economics, with the subsequent Part 2 stage (for those who want to continue their studies) kicking off Wednesday 15th January 2020 (pg.38).

More exams have been scheduled between now and then. I was surprised to discover that 2,000 people around the world have sat them over the past five years; they obviously think these qualifications well worthwhile.

For those of you who have completed the Diploma, but maybe want to freshen things up by learning new techniques on an ad hoc basis, I suggest the STA Diploma’s reading list as your first port of call. You’ll find this on our web site www.sta-uk.org in the Courses section. A new one on me, and I’ve bought the 2011 first edition of the book, is Christopher Grafton’s Mastering Hurst Cycle Analysis.

Remember, STA members are eligible for discounts on some of the books.

Our annual dinner is on Wednesday 18th September at the National Liberal Club, another fabulous venue where

Since March 2019’s edition of the Market Technician magazine, much has happened at the STA and in technical analysis around the world. Our monthly meetings at One Moorgate Place, London EC2R 6EA, have been well attended, partly because of the calibre of speakers invited, but also helped by the delightful nature of the venue. Remember, members can view videos of the talks on demand. The conference room is cutting edge - so much so that some members have yet to master the use of the seat-embedded microphones - while other meeting rooms are dreamy with chandeliers, domes, frescoes and wood panelling, not to mention portraits of worthies. Do pop in as we usually meet at 18:30 on the second Tuesday of each month.

Annual Dinner, 18 September 2019

family, friends and work colleagues are welcome guests. And here’s an idea: treat them to something they’ll remember. IFTA holds its annual conference (pg.4) on the 5th and 6th October at the Marriott Hotel on the swanky island of Zamalek, bang in the centre of Cairo, on the banks of the Nile. We think the event should be a hit.

Financial markets have been especially tricky since central bankers and politicians have back-pedalled on rate rises and policy as they try to keep up with the new reality of a topsy-turvy economic landscape. Lots of money sloshing around, looking for a reasonable return, has pushed interest rates around the world to record lows - with many sovereign bonds yielding negative rates if held to maturity - and asset prices beyond the reach of mere mortals. Nick Batsford’s article in this issue (pg.13) is timely and comes straight from the horse’s mouth. A trader through and through, he explains how technical

analysis can “help you navigate this uncertainty with a disciplined risk management strategy”. Tim Parker’s research (pg.10) also hones in on this topic stating that “technical analysis is a system of rules that, once learnt, guards the investor from the influence of prejudice and feelings.” This comes from another MSTA with a long and wide-ranging professional markets’ experience under his belt. Or, as stable-mate of mine at the Investors Chronicle reminded me, philosopher David Hume said: ‘’the most lively thought is still inferior to the dullest sensation” and Friedrich Engels echoed: “an ounce of action is worth a ton of theory”.

Timing is certainly something technical analysis is good at, or at least, far better at than many other academic disciplines. However, I also feel that our subject helps us notice small details, surprising outliers and larger themes - not behavioural science as such, but the ability to tune in to the zeitgeist and put together a coherent picture of what is going on and, more importantly, where it might lead to.

With a little luck, we’re in the money!

Do please keep writing in with comments and suggestions, submissions for publication and book reviews.

The Society of Technical Analysts: www.sta-org.uk

FOREWORD

STA Annual Dinner 2019 On Wednesday 18th September 2019, the STA will be holding its annual dinner at the National Liberal Club. This is an excellent opportunity to network with fellow STA members and colleagues in the convivial surroundings of this historic venue.

Guests are able to roam freely between the library, dining room and grand club bar with its huge terrace looking over the Thames and South Bank.

The evening starts with a networking drinks reception, followed by a sit down three-course dinner.

Booking closes on 11th September; so, hurry and call now on 020 7125 0038 or email info@sta-uk.org to reserve a place.

5

6

NEWS

Building alliances - the ACI UK Collaboration We are delighted to announce that the STA has formed a collaboration with ACI UK - the Financial Markets Association. This exciting relationship was cemented at a special signing ceremony at the STA summer party on Tuesday 9th July.

Sue Attwood, President of ACI UK and Tom Hicks MSTA

ACI UK represents the interests of individuals engaged in professional trading, broking, operations, regulatory and compliance activities in the foreign exchange, money and derivatives markets. Its activity is focused around the four key pillars of community, conduct, education and charity. You can visit its website on www.aci-uk.com for more details.

I am delighted that we have the opportunity to combine our respective industry expertise with the Society of Technical Analysts to collaborate on events that will enhance our educational programmes...

There is great deal of synergy between the two organisations with our comprehensive education programme complementing their own educational events. The alliance will involve collaboration on this front, offering STA and ACI UK members alike an even wider range of training and networking opportunities.

Sue Attwood, President of ACI UK, commented: “I am delighted that we have the opportunity to combine our respective industry expertise with the Society of Technical Analysts to collaborate on events that will enhance our educational programmes and provide considerable value to our

respective member communities.

We look forward to working with Eddie Tofpik and his colleagues at the STA and to getting the first co-hosted events off the ground.�

We are very excited to build this new relationship and look forward to sharing more details with you over the coming months.

Tom Hicks MSTA Chairman, Society of Technical Analysts

The Society of Technical Analysts: www.sta-org.uk

NEWS

7

Summer Party Success Not such a grand an event as last year’s 50th birthday bash at the Mayor of London’s City Hall, but July 2019’s summer party was full of surprises. In carefully orchestrated stages, STA chairman Tom Hicks cleverly pulled a series of rabbits from his magician’s hat.

Looking the part in his summery blue suit, he welcomed a nearly full house to the spanking, new conference room at One Moorgate Place, home to the Institute of Chartered Accountants in England and Wales. We’ve been meeting there monthly since January and, though we sometimes miss the cosy premises our STA partner, the Chartered Institute for Securities & Investment, the new venue is grander.

Rather than introducing the speaker, who was eagerly waiting in the wings, Tom invited Sue Attwood to the podium. UK President of ACI, she explained that her organisation was that very day, in front of us all, going to sign a Memorandum of Understanding (or MOU in the jargon) with the STA. Luckily veteran Eddie Tofpik of our committee was sitting next to me as I had no idea what ACI stood for. ‘’Association Cambiste Internationale,’’ he whispered. Founded in Paris in

1955, it’s - in their words - a not-forprofit “leading, global association of wholesale financial market professionals, contributing to market development through education, market practices, technical advice and networking events”. Right up our street!

Sue gave a very brief outline of the organisation, explaining the four pillars of conduct, education, community and charity on which the association is built. Appropriately she had also brought Tina Kane of Marketing & Communications along with her, and Darryl Hooker, Chair of the Partnership & Sponsorship sub-committee.

Successful STA Diploma candidates

Sue and Tom then swapped appropriately logoed pens with which to sign the document. I also noticed that he’d given each of them a T-shirt from July’s JP Morgan Challenge fun run in Battersea Park - green ones.

They gamely held them up after the talk for me to photograph. What sports!

Then, successful STA Diploma candidates were presented with their certificates to the whirring the photographer’s shutter, hired to make the most of this important day for them. Later, at the drinks reception, I managed to interview a handful to see what they thought. Read their responses later in this article.

Following the awards presentation speaker Murray Gunn came on warning that his talk would be shorter than usual, this being a party day.

Between 30 and 45 minutes, he said and true to his word, it lasted exactly 37 minutes; I’m sure he must have rehearsed and timed it beforehand.

This is the level of professionalism one expects of someone from Elliott

8

NEWS

Wave International and previously head of technical analysis at HSBC. Fifty years old, just like the STA, he was surprisingly au courant with current pop music; he’d roped in his 13-yearold daughter for input. I call this clever thinking and team work. Readers, you really must watch the video of this slick, concise and entertaining talk.

Thank you, Katie Abberton (looking lovely as always) for coordinating such a successful event. In the gorgeous, domed, chandeliered and frescoed main reception room, the usual drinks were served, staff happily topping up glasses. Canapés were passed round: smoked chicken, pine nut and radish tart; slow cooked duck fois gras with pickled blackberry; crab, avocado and smoked tomato tart; parmesan and truffle potato doughnut (served in mini chip fryer baskets); sorrel, pea and fresh herb cone. And finally, there was a fine raspberry tart - or so I’m told as I didn’t get to sample any of this because I was scribbling notes for you.

Katie says: ‘’I love the STA summer party. It’s a fantastic opportunity for seasoned technical analysts and new members to get together - with the added bonus of including some of our new MSTAs who are in attendance for the Awards ceremony. The STA community is very inclusive - and we hope that our new ACI UK collaboration will give us the opportunity to host more events in the future and reach a wider audience.’’

Then I picked out my first victim, Bronwen Wood memorial prize-winner Akif Din. Personable, presentable, confident and happy, he is just the sort of offspring any parent would be proud of. He’d stumbled across financial markets via a spread betting site while at sixth form. Deciding this was for him, he skipped university and went to learn how to trade at Paddy Osborne’s London Academy of Trading.

Paddy, in turn, pointed Akif to the STA’s Diploma Course at the London School of Economics and, as they say, the rest is history.

My second interviewee was at the other end of the spectrum, architect John Weir of the DDL70 practice. In his

words a ‘’young older man’’ - with a 60+ Oyster card to prove it! He too had signed up for the STA course in London and found the lecturers ‘’engaging and intelligent’’ - which I’m sure they’ll be pleased to hear. He especially liked the way the course ‘’sent you off into different directions of enquiry, something you couldn’t have done on your own’’. His reason for studying technical analysis properly is because he wants to take greater control, and gain a deeper understanding, of how to manage his pension plan. Sounds like a very sound move to me.

My third victim was a young lady I’d bumped into briefly the previous week at the Battersea Park fun-run.

Albanian national Xhensila Brahaxhija - (I took a photo of her runner’s details on the STA T-shirt to remember how to spell it) - her name is pronounced

‘Jensila Brahajiya’. Having studied for an international IB Diploma at UWC Atlantic College’s residential sixth form in the Vale of Glamorgan, South Wales, she’s now studying on the STA’s Diploma course. Work commitments meant she couldn’t make many of the LSE classes so the videos of these are her main learning tool. She’s not nervous about the upcoming exam.

Go girl!

Finally, it was so good to see a strong turnout of STA Committee members.

I know they give their time freely but I keep a tally of who rocks up to events; they have been warned.

By Nicole Elliott FSTA

The Society of Technical Analysts: www.sta-org.uk

NEWS

9

JP Morgan Fun Run 2019 A team of 17 STA members joined the JP Morgan 5.6k run this year for another day in the blistering sun. This was my fourth year attending the event and this time I had the good sense to wait in the beer garden with Mark Tennyson d’Eyncourt and Nicole Elliott as the rest of the gang braved the conditions.

As the runners turned up it was clear to see the atmosphere was one of great spirit and excitement. This year the STA raised money for Cancer UK, which means a lot to me and others of us from the society as so many people and their families are affected by the illness.

Joining in with the STA events is great as there are always members I would not normally get the chance to speak to during the lectures or at the monthly events. It gives an opportunity for members to have conversations with like-minded people they would not normally see on a regular basis. STA chairman Tom Hicks and the rest of the group headed out for the run at

roughly 6pm and, as I waited drink in hand in the fine Prince Albert pub beer garden, one by one the brave runners made it back to the meeting point with a T-shirt souvenir. Tom thought it would be an amusing idea for the STA sprinters to hold candlesticks while running and exchange them for a refreshing beverage upon completion.

Thankfully none of the candles melted and I am happy to report that most of them (and the runners) came back in good condition.

On a personal note, it was great to speak to more senior members of the community about the recent tough market conditions in today’s low vol FX markets. I was reassured that this is not the first or last time that this will happen and given some great past examples of similar issues. That's the great thing about technical analysis and the study of past price patterns; it is experience that gives us the edge, and speaking to senior members of the society and learning from their experiences really helps and cannot be underestimated.

The event always has a great atmosphere and it is amazing to support such a great cause.

Throughout the year the STA will be holding more events and, regardless of whether you are new to the industry or a charting veteran, it’s always beneficial to network with fellow technical analysts. I look forward to seeing you all at these as the year progresses.

Our thanks go to the following runners for their support: Xhensila Brazhazhija, Adrian Choi, Patricia Elbaz, Lewis Harland, Tom Hicks, David Kerly, Ee Lyn Lim, Rajesh Mathrani, Leona Mondsee, Diarmuid O'Hare, Martin Sewell, Michael Stanley, Ben Tyler, Francis Usanga, Ross Van Poortvliet, Marcus Webster and Dan Wynne.

By Rajan Dhall MSTA

10

RESEARCH

Technical Analysis: the Subjective Analyst Introduction No investment analyst has a monopoly on the best way to make money in the financial markets, but some make better use of analytical toolkits than others.

In this article I look at one of those toolkits, technical analysis, and discuss the importance of subjectivity as a source of differentiation.

Tim Parker MSTA Tim Parker, MSTA, is the CEO and founding partner of Messels Ltd, an independent technical analysis research firm based in the UK. Prior to Messels, Tim was also co-founder of Stockcube plc (the first independent research firm to be listed on the London Stock Exchange) for 14 years, following time spent with both Credit Suisse and L. Messel & Co, where he started his stockbroking career. Tim graduated from Cambridge University, where he won an award to read English Literature, after which he attended the Royal Military Academy Sandhurst, before serving as a Captain in the Coldstream Guards. He is an Executive Director of the European Association of Independent Research Providers (Euro IRP).

Trading involves discipline and patience. Discipline means obeying rules and following the process of a controlled behaviour - mastering emotions while trading price movements. TA is exactly that: a system of rules that, once learnt, guards the investor from the influences of prejudice and feelings. In behavioural terms, discipline rectifies cognitive biases. Indeed, the discipline of TA explicitly involves a degree of punishment if you disobey the rules: you’ll lose money if you allow emotion to dominate your trading strategy.

Objectivity would appear to trump subjectivity.

Apophenia is the term applied to the psychological phenomenon of identifying patterns in random information (such as seeing faces in random objects, or pareidolia).

‘Patternicity’, which Michael Shermer (2008) defined as the “tendency to find meaningful patterns in meaningless noise”, is another psychological term that emphasises the randomness of data and the unreliability of pattern recognition by the brain - leading to outcomes such as the ‘Monte Carlo fallacy’ and other well-known gambling errors. These psychological theories cast doubt on the notion that recognising a pattern is meaningful.

However, the dictionary defines TA as “a method of evaluating securities by analysing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security’s intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity.”

However, some academic literature on TA leads to a different conclusion.

Andy Lo of MIT co-authored a paper entitled Foundations of Technical Analysis: Computational Algorithms, Statistical Inference and Empirical Implementation in which he proposed “a systematic and automatic approach to technical pattern recognition using nonparametric kernel regression... We apply this method to a large number of US stocks from 1962 to 1996 to evaluate the effectiveness of technical analysis...and...we find that over the 31year sample period, several technical indicators do provide incremental information and may have some practical value.”

The key word in this definition is ‘suggest’. It immediately challenges the notion that TA is a rules-based discipline and purely objective. The ‘suggestion’ of future price activity is what shifts the philosophy of TA away from the realm of science and closer to the realm of intuition; from the objective to the subjective.

Recognition TA starts with the recognition of a pattern on a chart of price data. This is done by eyeballing and using the brain’s extensive processing power.

But do patterns mean anything?

Lo argues that TA, a form of human pattern recognition, is another application of behavioural finance and is statistically significant. I would argue that the statistical reason for this is that market price data is not random or ‘meaningless noise’. A price trend in

The Society of Technical Analysts: www.sta-org.uk

RESEARCH

11

place shows that successive values in a time series are correlated with one another. Or as David Stephenson said in a lecture on 2nd September 2000: “Serial correlation and trends can severely reduce the effective number of degrees of freedom in a time series.”

For the purposes of alpha discovery, a trading strategy can use trend analysis because it possesses what quantitative analysts call ‘information value’.

Trend analysis, often called momentum analysis, represents one of the two pillars of TA. The other is mean reversion, or regression to the mean, another statistical phenomenon defined as “the greater the deviation of a random variate from its mean, the greater the probability that the next measured variate will deviate less far – in other words an extreme event is likely to be followed by a less extreme event” (Wolfram Research, 2013).

Again, we can infer that information value is obtainable.

A meaning or forecast can emerge quite powerfully from these two approaches, but it doesn’t necessarily follow that it will always emerge, and ambiguity will often exist. Information derived from the statistical study of market action can have forecasting value, but judgement may be needed to extract the best of this value (in the real world) and may make the difference between winning and losing.

In this sense, the judgement of dataderived information is as important as the information itself.

Intuition An analyst’s judgement is by definition subjective and depends on their skill and intuition, reading and interpreting the patterns as they sees fit. Being human, their judgement is always evolving, which is appropriate for the inherently dynamic environment of the markets themselves.

If we take one of the most respected 20th century TA methods, the trendfollowing approach of Dow Theory, we know that it is not flawless. When mechanised in trading systems, which may involve automated trend-line drawing and automated trend-break and break-out signals, the results are often disappointing. The subjective analyst might know that, from an intuitive standpoint, resistance lines don’t work well in bull markets, and in bear markets support lines are also less effective. Moreover, trend followers are often late. A trend may end suddenly as soon as identified and be followed by a sideways market of unknown duration and unknown future direction. Indicators may simply fail and volume die away. In these circumstances, the subjective analyst needs to identify the current market context, and then employ the suitable technical method identifying, early on, any empirical regularities that may exist. If markets are displaying momentum characteristics, then they can use Dow trend theory. If markets are ranging, however, the analyst can make use of a suitable combination of momentum oscillators.

The point is that a more flexible and intuitive response by the technical analyst as market interpreter is needed to identify the existence of bull and bear trends and the inflection points

between them.

I call this the ‘recognitive process’ which relies on the instinct, experience and intuition of the analyst. They have an interpretative skill which they brings to bear and their judgement overlays calculation, therefore acting both subjectively and objectively. In such cases the rules of the analysis the toolkit - are more than matched by the subjective and recognitive talents of the analyst. These skillsets complement one another.

Thinking about subjectivity biologically, an analyst’s inbuilt and hard-wired responses are ‘innate’, while learned responses are ‘intuitive’.

The brain reacts in both of these ways at the same time. As an illustration, consider this: on the ‘innate’ side, is normal eye perception. The human eye moves, on average, three times a second and forgets every move. However, by a process called confabulation the brain does in fact recognise patterns in what it sees and creates a narrative that extracts meaning from the chaos. In the same way good technical analysts see and recognise patterns in price and volume data which they will understand as a narrative with a forecastable outcome.

A price chart plotting data three times a second would appear meaningless second by second but, at some point,

12

RESEARCH

the analyst’s brain will make sense of it ‘intuitively’ and discover narrative value. The better analyst, of course, would have a better story to tell. To labour the point, I maintain that the brain is constantly seeking a story by inference and by pattern recognition.

The market is a narrative.

During a typical trading day, the simple psychological setup of the market is that the investor/analyst is always trying to anticipate the response of every other investor/analyst by reading and interpreting the common narrative. Cognitive scientists call this the ‘mirror’ system in the brain: a neuronal system that operates by allowing us to understand others by what is going on in our own brain; in other words, to ‘get inside other people’s heads’. This is a subjective process.

In the real world - and practical experience backs this up - patterns change as the market evolves, absorbs, understands and arbitrages away the full predicted outcome of those patterns.

Evolution Market patterns are dynamic in an evolutionary sense and technical patterns are too - evolving according to a slowly but constantly adapting set of rules. Tom DeMark’s invented patterns and indicators are a case in point.

One of the arguments against the notion that new patterns are constantly forming in price data is that human psychology doesn’t really change over time, and that the investor and the investment crowd react, time and again, in the same semi-feral way.

I quote from John Murphy’s Technical Analysis of Futures Markets: “Patterns, or ‘pictures’, reveal the bullish or bearish psychology of the market... they are based on the study of human psychology, which tends not to change.”

It is true that human psychology doesn’t change very quickly, indeed the evolution of the human brain is somewhat slower than the evolution

of technology, but the study of investor behaviour in markets is always adapting and evolves quite quickly. The process of ‘study’ is the competitive effort to try to find meaning or insight and thereby discover alpha.

They find facts in the world which are objectively ‘out there’, that is, outside the realms of people’s emotions.

Scientists are therefore explicitly not trying to influence other people in the same way. They are being objective.

Constant sensitivity to the results of study means that the market tends to stay one step ahead. As conventions are studied, understood and arbitraged, so they change because the brain has recognised new things, such as new patterns. Conventions change just as patterns change.

I maintain that technical analysts rely on both internal and external factors in the market narrative and therefore need to be both subjective (like an artist) and objective (like a scientist), using TA to bridge the gap.

It is likely, however, that some parts of our psychological make-up change at a glacial pace. There are hardwired functions in the brain which are not learned but are in our DNA... fear and flight, appetite and greed, for instance, are necessarily derived from our anthropological history, reflecting the imperatives of survival and reproduction. These responses are innate and emotional, and don’t originate from, or allow, the luxury of rational thought and considered action. The finer emotional expressions of, say, love, melancholia or humour exist in the subjective realm of high art rather than in what is thought of as the objective realm of high finance.

A most striking example of this is demonstrated by the Fibonacci series, often used in TA techniques.

The Fibonacci summation series is mathematical, but irrational - the series develops when, beginning with 1, 1, the next number is formed from the sum of the two previous numbers.

It tends (approaching slower and slower) towards a constant ratio... but the ratio has a never-ending and, crucially, unpredictable sequence of decimal values: 1.61803398875... sometimes higher, sometimes lower. It can never be known to the last digit.

An amazing demonstration of the coexistence of art and science!

TA tries to excise emotion from our assessment of price action, by reducing it to the objective analysis of price and volume data as recorded by the market. But I question the objectivity of the process: it is, in fact, very subjective.

Adherents of the Fibonacci series argue that it is present in nature and thus may also be present in the functioning of the human brain (and in price charts). There is a natural fit, or sense of comfort, when these proportions are sensed or recognised.

Aesthetic and mathematical considerations are rolled into one technique.

Inspiration

Conclusion

In the wider world, it is often said that artists are subjective and scientists are objective. Artists inspire people to discover the truth of beauty (or the beauty of truth) by means of emotional responses; that is, they influence people. They recognise and re-order the emotions in others, which is a subjective process to which their own identity and personality are central.

By contrast, scientists come up with a hypothesis and try to find truths about the world objectively, and independent of the person doing the investigating.

The subjective response of a technical analyst to the developing narrative of the market strengthens that narrative and is as important as the objective use of the data itself. Ultimately the buy-side investor should be very careful about their choice of technical analyst and, if at all possible, seek audited performance data. The subjective input counts.

The Society of Technical Analysts: www.sta-org.uk

RESEARCH

13

Moose’s Soapbox Thoughts Technical analysis is such a unique way of interpreting financial markets that it occasionally attracts derision from other fields. Charts are for sailors, astrologers and pop pickers, apparently. I disagree and therefore I pay no heed to attention-seeking critiques.

Technical analysis works in both bull and bear markets, which distinguishes it from almost all other techniques.

Granted, it is not great in sidewaystrading markets, but “trade the range” is often cited to deal with this weakness.

Nick Batsford MSTA CEO at Core London With 25 years of experience in the City across trading, brokerage and hedge fund management, Nick (or Moose) is the founder and CEO of Core London.

In a bull market, participants will typically be super bullish at the market highs yet, as always, we only know the top has occurred after the event. It’s only when you apply technical analysis and study the charts that you realise that everything may not be as rosy as it appears in the headlines. Technical analysis allows us to deconstruct the headlines and look at the micro trends driving the top line. This is where the fundamentals and technicals tend to diverge the most.

We could use Forbes magazine and its exuberant headlines as a classic example of not scrutinising the hype: Current thinking suggests that we are in the ninth innings of a bull market run, with the current one having lasted an impressive 120 months.

That makes it the longest since the great bull market of 1975-87. However, there does not appear to be any sign in today’s markets of the kind of major bull market peaks that come at the end of a proper melt up, just before the meltdown.

Everybody is unsure when the end is coming, and some economists are starting to use the R word recession - when a rapid increase in the unemployment rate is key to economic downturn. We are not there yet, and with the effects of Brexit, trade wars, tariffs, quantitative easing

and quantitative tightening distorting the conventional business cycle, it is harder than ever for fundamental analysts to make accurate, evidencebased calls on how global markets will perform.

Brexit was expected to cause an instant recession, as was President Trump’s election and his tax cuts and tariff strategy on China. Yet here we are with the UK leading major EU nations in economic growth, the US economy surging, and both sat with record low unemployment. Fundamental interpretations of market performance have been turned on their heads.

As Michael Mackenzie noted in the FT recently: “Imagine having to try and navigate the long-term impact of climate change, shift towards alternative energy sources, the rise of artificial intelligence, the increasing use of robots and the sharing economy. A hardening of the geopolitical battle over technology means even more deep thinking about their portfolio is required.”

When policy is delivered via Twitter and seemingly designed to keep everybody guessing, technical analysis can help you navigate this uncertainty with a disciplined risk management strategy. While Keynes famously said successful investing is anticipating the anticipations of others, I am less than convinced that his proclamation was made with President Trump’s social media strategy in mind.

We headed into this year expecting further US rate hikes and more

14

RESEARCH

quantitative tightening, but after strong criticism from the President responding to policy decisions taken elsewhere in the world, the Federal Reserve appears to be backtracking.

Now global stock markets are on track for their best first half to the year in 20 years. If fundamental analysis is supposed to be the stable, methodical method of analysing markets, then I have a beach front property in Birmingham for sale.

I’m not wishing to sound controversial, but name me a macro strategist who has called market tops consistently over time? That is the problem with fundamental analysis - it struggles with market timing. Similarly, at market bottoms a bit of classic divergence on momentum often gives the technician a clue that the selling is drying up and it’s time to go on the bid.

"In football, if a team can prevent the opposition from scoring, or ‘keep a clean sheet’, then statistically you are 60% more likely to get three points, and 100% likely to get one.

Even scoring two goals in a game does not guarantee you victory, and only scoring one gives you just a 35% chance of winning."

Now, as technical analysts, it is our job to evaluate a range of indicators and deduce the expected market reaction, so it would be remiss of me to not put some focus on the main criticism of technical analysis.

That criticism comes when people tell technicians that technical analysis can tell us the past but cannot predict the future. Our rebuke is that we are working with probabilities.

Our approach is about developing a disciplined plan, with entry, exit and stop loss points.

In football, if a team can prevent the opposition from scoring, or ‘keep a clean sheet’, then statistically you are 60% more likely to get three points, and 100% likely to get one.

Even scoring two goals in a game does not guarantee you victory, and only scoring one gives you just a 35% chance of winning.

Last year in the Premier League, Manchester City won the league with Liverpool finishing second by one point, and both clubs a country mile ahead of the rest. It is no coincidence that both clubs had 20 clean sheets and have spent heavily in defence roles in recent years. Probabilities matter and Billy Bean’s depiction in the movie

Moneyball is another perfect example of the value of technical analysis.

The technical analyst views the world through probabilities. Yes, we look at past performance, but we use it to calculate probabilities for the future, against which we execute a disciplined trading strategy. I’ve sat in trading rooms for 30 years and it is the clearest roadmap for trying to navigate the future. If you manage your bottom line, then you have control over your top line. As with running a business, you need a clear disciplined strategy to raise investment and grow. The alternative is getting extremely lucky or failing, without understanding why.

Now, back to the analysis. The data shows that there is around a 49% chance the stock market will drop in price tomorrow. Over 10 years, there’s

more than a 99% chance it will be up in price, according to Barron’s. Those are pretty good odds.

Looking at the S&P 500, you could expect average annual returns of returns around 8% and that is what the S&P 500 has returned since 1957.

In fact, stock market returns, in the US at least, have been so consistent that William Bengen created the 4% rule back in 1994.

In case you are curious, the 4% rule, states that so long as you only withdraw 4% of your invested capital per year, you will never run out of money in retirement. Or at least not for the next 33 years. So, according to the 4% rule, if you had an investment portfolio of $1 million, you could withdraw $40,000 per year in every year of your retirement.

The Society of Technical Analysts: www.sta-org.uk

RESEARCH

Now, in the spirit of full disclosure, while this rule worked and has been applied as an industry benchmark for decades, it has received criticism in recent years.

That criticism is not related to the rule itself, but because of factors external to the market like low wage growth and asset inflation, the assumptions that underpinned the 4% rule are no longer in sync with Main Street.

The 25x rule is now something being adopted by millennials who have not been beneficiaries of a decade of quantitative easing.

It’s also worth noting that the FTSE 100 has not returned quite as much as its US counterparts. According to IG, the FTSE 100 has averaged 6.4% gains per year over the last 25 years and 8.3% over the last decade. Compare that to the S&P 500’s 9.8% average gains over the last 25 years and 9.5% over the last 10 years. (Both scenarios include reinvested dividends).

However, even if the 4% rule holds true in theory, the inevitable down years are still going to hurt. Even if you know you’re likely to ride out the recessions that doesn’t mean that ride will be a fun one.

This is exactly why people hammer on and on about portfolio diversification, and it presents a perfect example of why technical analysis is so important.

Charts can be used to work out relative strength of stocks versus sectors. A rule to live by is always go with the strong stocks and strong sectors.

Let’s talk about my latest business venture, financial video production, where it feels as though I have interviewed every type of analyst in the market.

The worst technical call of all was the application of the “funnel method” of technical analysis. This saw the selling of Deutsche Bank at record lows, just prior to the stock rallying like a homesick angel, almost doubling in price.

The best technical call I ever saw was

15

My advice is simple; stick to what you know. Niches are niches because they take time to understand and master.

Every seasoned analyst knows their niche, and junior analysts are trying to develop theirs.

Once you feel the beat, don’t get off the dance floor was always my old adage. the breakout on Bitcoin, watching it soar from $3,000 to an eventual high of $20,000. Additionally, harking back to my previous comments on the state of disarray in fundamental analysis in today’s world, keen crypto watchers cite the absence of fundamental norms in the crypto world as a reason for technical analysis being so efficient.

The conclusion for me is clear. I watched a seasoned technical analyst with a good reputation in a couple of markets try and dip his hand into equities. He spent a summer getting it wrong and eventually gave up.

Before you think I am getting on my high horse, I followed him based on his track record and also lost heavily during that summer.

It almost feels like Neil Woodford and his change of strategy in recent years.

If we remember back to his tenure at Invesco, his portfolios would allocate the majority of funds to large and mega cap securities. Fast forward six years and only a small proportion of the Woodford Equity Income Fund is in the same large cap space.

Mr Woodford had a clear and successful investment approach, but for whatever reason, decided to switch to something new, for him at least.

And the current headlines are selfexplanatory.

My advice is simple; stick to what you know. Niches are niches because they take time to understand and master.

Every seasoned analyst knows their niche, and junior analysts are trying to develop theirs. Once you feel the beat, don’t get off the dance floor was always my old adage.

Finally, now I’m out of the trading room, I produce financial video content for third parties. If you ever fancy getting on a soapbox to air your thoughts, feel free to get in touch. We distribute our video across over 100 global financial websites and our own data shows that technical analysis videos are the most watched and engaged with of all. Video is the next industrial revolution in the making.

Cisco Systems forecast that by 2021 there will be 1.9 billion online video users watching 3 trillion minutes of video per month, and 80% of all internet traffic will be video.

Additionally, Forrester Market Research finds that a one-minute video is equivalent in impact to 1.8 million written words. Video is also the most engaged with media asset now on social media and including a video in your email is shown by marketers to boost your engagement by between 200-300%.

The revolution has already been recorded, uploaded, liked and shared.

16

RESEARCH

The Decennial Cycle and the DJIA Introduction The Decennial Cycle in US stock prices was first proposed by Edgar Lawrence Smith in 1939. He researched historic trends going back to 1880 and established a 10-year pattern in trading activity on the New York stock exchange. His approach was vindicated in the ensuing decades, despite radical changes in technology, market regulations, income levels, trading sophistication and so forth. Years ended in certain digits usually experienced similar market outcomes, a trend that has persisted throughout the past 130 years:

David McMinn David McMinn completed a Bachelor of Science degree from the University of Melbourne in 1971 (geology major) and subsequently became a Minerals Economist in ANZ Banking Group Ltd. Since leaving this position in 1982, he has conducted private research on cycles arising in seismic and financial trends, publishing numerous papers on cycle theory, especially in relation to the 9/56year cycle.

•

•

•

•

•

•

1- and 2-ended years typically see DJIA bear market lows and 1911, 1921, 1932, 1942, 1962, 1982 and 2002 witnessed some of the most notable lows in the 20th century.

3- and 4- ended years are usually good for the DJIA with escalating prices, although some years bucked the pattern; there were major lows in 1893, 1903, 1914, 1934 and 1974.

5-ended years have been called ‘the year of ascension’. Virtually all years ended in five have experienced a rising market.

6- and 7-ended years tend to see a peak in the DJIA and the beginning of a bear market (1886, 1897, 1906, 1916, 1937, 1946, 1956, 1966, 1976, 1987, 1997 and 2007). Crises often happened in the autumn of a 7-ended year (1907, 1917, 1937, 1957, 1987, 1997 and 2007).

8-ended years are usually good for equities, with a few exceptions such as in 1948, 2008 and 2018.

9- and 0-ended years see a DJIA peak and bear market, (1890, 1899, 1909, 1919, 1929, 1939, 1969, 1990 and 2000). These years often also fall victim to financial upheavals.

The Decennial Cycle can be used effectively for stock market investing over the long term. According to Richard W. Miller (2004): “If one were out of the market at the beginning of the ‘0’ year, entered the S&P 500 on June 30 of the ‘2’ year, then were out from August through October of the ‘7’ year, and finally re-entered until the end of the ‘9’ year, the value of $1 invested in 1900 would be worth $6,660.86 in 2002 versus just $148.41 were you instead fully invested over the entire period of time. An awareness of the 10-year cycle would have produced 44.9 times the return.”

Since the study was published, the US stock market rose to a record high in October 2007 and ensuing collapse to a low of March 2009. This was atypical as 8-ended years were usually favourable for US stocks. The

corrections in 2010 and 2100 were again atypical because two bear markets are usually experienced in the early years of a new decade. There was no bear market commencing in a 6- or 7-ended year in the 2010s, with corrections in early 2018 and late 2018.

Moon Sun data was timed at 12 noon New York time, with daylight saving ignored. The ecliptic positions of the Moon and Sun have been given as Eo while the angle between the two luminaries (lunar phase) has been denoted as Ao. This is to avoid confusion between two different concepts. The annual one-day (AOD) rise or fall are the biggest percentage one day movements in the DJIA during the year commencing 1st March. They represent the biggest one-day shifts in investor sentiment during a given year.

The Society of Technical Analysts: www.sta-org.uk

RESEARCH

17

Years ending in 0 Major DJIA bear markets beginning in 9 and 0 ended years have been presented in Table 1. It has been one of the more reliable trends in US financial history with nine bear markets and four corrections.

TABLE 1: DJIA bear markets commencing in 9- and 0-ended years

Year

DJIA High

DJIA Low

% Decline

Market

1890

17 May 1890

8 Dec 1890

-22.6

BM

1900

5 Sep 1899

24 Sep 1900

-31.8

BM

1910

19 Nov 1909

25 Sep 1911

-27.4

BM

1920

3 Nov 1919

24 Aug 1921

-46.6

BM

1930

3 Sep 1929

8 July 1932

-89.1

BM

1940

7 Nov 1940

28 Apr 1942

-32.5

BM

1950

12 Jun 1950

17 Jul 1950

-13.5

C

1960

5 Jan 1960

25 Oct 1960

-17.1

C

1970

3 Dec 1968

26 May 1970

-35.9

BM

1980

13 Feb 1980

21 Apr 1980

-16.0

C

1990

16 Jul 1990

11 Oct 1990

-21.2

BM

2000

14 Jan 2000

21 Sep 2001

-19.9

BM

NB: 1890 data based on the 12 Stock Average index.

Abbreviations: C = correction. BM = bear market.

For years ended in 0, DJIA AOD falls (≼ -2.50%) nearly always occurred in the five months beginning 15 March (see Table 2), with one discrepancy in 1960.

TABLE 2: DJIA AOD falls in 0-ended years*

AOD fall

% fall

US crisis

16 Apr 1900

-4.45

AOD fall

3 Jun 1910

-2.99

26 Jul 1910

-2.97

19 May 1920

-4.22

After inflation crisis

16 Jun 1930

-5.81

US Govt imposed import duties

14 May 1940

-6.76

21 May 1940

-6.78

26 Jun 1950

-5.65

Outbreak of Korean War

19 Sep 1960

-2.56

US recession

25 May 1970

-3.14

US recession

Antitrust crisis

Germany invaded France

17 Mar 1980

-2.84

After silver mania

6 Aug 1990

-3.32

Iraq invaded Kuwait

14 Apr 2000

-5.64

After Greenspan bubble

20 May 2010

-3.60

Euro sovereign debt crisis

* Year beginning 1st March NB: Two days of almost equal percentage AOD declines happened in 1910 and 1940. Thus, two AOD falls have been presented for each of these years.

18

RESEARCH

TABLE 3: a 20-year cycle commencing in 1910 always had djia aod falls in the 3.3 Months to 10 August

1910

+20

3 Jun

1930

+20

16 Jun

1950

+20

1970

26 Jun

+20

25 May

1990

+20

6 Aug

2010 20 May

26 Jul NB: Two almost equal percentage AOD falls occurred in 1910.

TABLE 4: In the 20-year cycle beginning 1900, AOD falls occurred in the 2.5 months to 25 May, with an anomaly on 19 Sep, 1960.

1900

+20

16 Apr

1920

+20

19 May

1940

+20

1960

14 May

19 Sep

+20

1980 17 Mar

+20

2000 14 Apr

21 May NB: Two almost equal percentage AOD falls happened in May 1940.

Years early in the decade commonly experienced two bear markets (see Table 5), a finding that has held up well since 1890 with notable exceptions in the early 1950s and early 2010s.

TABLE 5: DJIA bear markets early in a new decade.

1st bear market

2nd bear market

High

Low

Fall

High

Low

Fall

17 May 1890

8 Dec 1890

-23%

4 Mar 1892

26 Jul 1893

-35%

5 Sep 1899

24 Sep 1900

-32%

12 Jun 1901

9 Nov 1903

-29%

19 Nov 1909

25 Sep 1911

-27%

30 Sep 1912

30 Jul 1914

-25%

3 Nov 1919

24 Aug 1921

-47%

10 Mar 1923

27 Oct 1923

-19%

3 Sep 1929*

8 Jul 1932*

-89%

5 Feb 1934

26 Jul 1934

-23%

12 Sep 1939

10 Jun 1940

-28%

9 Nov 1940

28 Apr 1942

-33%

12 Jun 1950

17 Jul 1950

-13%

5 Jan 1953

16 Jun 1953

-12%

5 Jan 1960

25 Oct 1960

-17%

13 Dec 1961

26 Jun 1962

-27%

3 Dec 1968

26 May 1970

-36%

11 Jan 1973

6 Dec1974

-45%

13 Feb 1980

21 Apr 1980

-16%

27 Apr 1981

12 Aug 1982

-24%

16 Jul 1990

11 Oct 1990

-21%

21 Jan 1994

4 Apr 1994

-10%

14 Jan 2000

21 Sep 2001

-30%

19 Mar 2002

9 Oct 2002

-32%

2 Apr 2010

2 Jul 2010

-14%

1 Apr 2011

23 Sep 2011

-16%

Most sources time the early 1930s bear market from 3 September 1929 to 8 July 1932. However, some sources (eg: Bespoke Investment Group) broke this down into several bear markets because of the extreme DJIA gyrations during 1930-33. The 2nd bear market was taken as occurring from 5 February 1934 to 26 July 1934.

Data for the early 1890s was based on the 12 Stock Average index.

NB: Only corrections were experienced in the early 1950s and early 2010s with prior bear market lows in June 1949 and March 2009 respectively.

The Society of Technical Analysts: www.sta-org.uk

RESEARCH

19

TABLE 6: The early 1950s were anomalous, with weak corrections in 1950 and 1953.

High

Low

Decline

High

Low

Decline

12 Jun, 1950

17 Jul, 1950

-13%

5 Jan, 1953

16 Jun, 1953

-12%

TABLE 7: The early 2010s were anomalous with weak corrections in 2010 and 2011.

High

Low

Decline

High

Low

Decline

26 Apr, 2010

2 Jul, 2010

-14%

29 Apr, 2011

23 Sep, 2011

-16%

US recessions in 0-ended years The US usually experiences a recession or depression around a 0-ended year, an enduring trend since at least 1860 (see Table 8).

The US failed to go into recession at the beginning of the decade on just five occasions, in 1880, 1940, 1950, 2000 and 2010. In 1940, a downturn was avoided due to increased war spending following the outbreak of WW II. For 1880, 1950 and 2010, the recessions occurred earlier than usual and finished in a 9-ended year - March 1879, October 1949 and June 2009 respectively.

For 2000, a brief shallow recession commenced slightly later than could have been expected in March 2001. Interestingly, crises/ crashes also tended to take place late in 9-and 0-ended years.

TABLE 8: 0-ended years & us recessions 1860–2018.

10YC

US Recession

US Crisis

1860

10/60-6/61

1860-61

Beginning of Civil War

1870

6/69-12/70

Sep 1869

Black Friday. Gold panic

1880

10/73-03/79 ended 10 months early

No crisis

-

1890

7/90-5/91

Nov 1890

Banking panic

1900

6/99-12/00

Dec 1899

Stock market panic

1910

1/10-1/11

1910-11

Antitrust crisis

1920

1/20-7/21

1920-21

After inflation crisis

1930

8/29-3/33

Oct 1929

Black Monday

1940

No recession

May 1940

Germany invaded France

1950

11/48-10/49 ended three months early

Jun 1950

Beginning of Korean War

1960

4/60-2/61

Autumn 1959

Credit crunch

1970

2/69-11/70

Jun 1970

Penn Central railway failure

1980

1/80-7/80

Mar 1980

US crises. After silver mania

1990

7/90-3/91

Aug 1990

Iraq invaded Kuwait

2000

3/01-11/01 began three months late

Apr 2000

After Greenspan Bubble

2010

12/07-6/09 ended seven months early

May 2010

Euro sovereign debt crisis

Source of Recession Data: Wikipedia.

Source: McMinn (2006).

7-ended years The DJIA has often peaked in a 6- or 7-ended year and then collapsed. This has been another enduring trend with 11 bear markets and three weak corrections (see Table 9). The record peak on 26 January 2018 was a little late, marking the beginning of a -13% correction with a 23 March low. Years ending in 8 have been historically favourable for US equities, with these stocks experiencing major rallies. Exceptions were 1948, 2008 and 2018, when the DJIA suffered reversals.

20

RESEARCH

TABLE 9: DJIA bear markets beginning in 6- and 7-ended years.

6- and 7- ended years

DJIA high

DJIA low

% fall

Market

1887

3 Dec 1886

2 Apr 1888

-20.1

BM

1897

10 Sep 1897

25 Mar 1898

-24.6

BM

1907

19 Jan 1906

15 Nov 1907

-48.5

BM

1917

21 Nov 1916

19 Dec 1917

-40.1

BM

1927

3 Oct 1927

22 Oct 1927

-10.2

C

1937

10 Mar 1937

31 Mar 1938

-49.1

BM

1947

29 May 1946

13 June 1949

-24.0

BM

1957

6 Apr 1956

22 Oct 1957

-19.4

BM

1967

9 Feb 1966

7 Oct 1966

-25.2

BM

1977

21 Sep 1976

28 Feb 1978

-26.9

BM

1987

25 Aug 1987

4 Dec 1987

-35.1

BM

1997

6 Aug 1997

12 Nov 1997

-13.2

C

2007

9 Oct 2007

9 Mar 2009

-54.1

BM

2017 (a)

26 Jan 2018

23 Mar 2018

-12.6

C

(a) A correction commenced later than usual on 26th January 2018.

Abbreviations: BM = bear market, C = correction.

The DJIA lows that can be seen in Table 9 occurred most frequently in the 5.5 months beginning 20 October of those years ending in 7. There were three anomalies - June 1949, October 1966 and March 2009 - where the lows took place either much earlier or much later than usual.

The Society of Technical Analysts: www.sta-org.uk

RESEARCH

21

Seven-year autumn jinx Of the 12 AOD falls (≥ -2.20%) in 7-ended years, eight occurred in the two months ending 15 November (see Table 10). (NB: The double autumn AOD falls in 1887, 1897 and 1917 were each treated as one event.) The four exceptions were in 1907 (a major banking panic happened on 22 October 1907), 1947, 2007 and 2017. The AOD rises also occurred most often in October.

TABLE 10: DJIA AOD rises & aod falls in 7-ended years*

Year

AOD Fall ≥ -2.20%

AOD Rise ≥ +2.20%

1887

19 Sep 12 Oct

-2.24% -2.29%

20 Oct

+2.32%

1897

21 Sep 12 Oct 12

-3.95% -3.90%

31 Aug

+2.97%

1907

14 Mar

-8.29%

15 Mar

+6.69%

1917

1 Nov 01 8 Nov

-4.16% -4.21%

31 Jan 1918

+3.66%

1927

8 Oct

-3.65%

6 Sep

+2.95%

1937

18 Oct

-7.75%

20 Oct

+6.07%

1947

14 Apr

-2.95%

(a)

-

1957

21 Oct

-2.48%

23 Oct

+4.12%

1967

(a)

-

(a)

-

1977

(a)

-

(a)

-

1987

19 Oct

-22.61%

21 Oct

+10.17%

1997

27 Oct

-7.18%

28 Oct

+4.71%

2007

21 Jan 2008

(b)

24 Jan 2008

+4.75%

2017

5 Feb 2018

-4.61%

(a)

-

*Year beginning 1 March (a) No one-day rises and/or falls ≥ 2.20% were recorded during the year. (b) Worldwide stock market panics occurred on 21 January 2008. This has been taken as the DJIA AOD fall for 2007, even though the US market was closed due to the Martin Luther King Jr holiday.

NB: Two days of almost equal percentage AOD declines happened in 1887, 1897 and 1917. Thus, two AOD falls have been presented for each of these years.

In 7-ended years, DJIA AOD October falls happened with the lunar phase always at a few days prior to a new moon (300 - 340 Ao) or around a full moon (150 - 205 Ao). This finding was also applicable to a larger sample of October panics and AOD falls (McMinn, 2010). The north node - apogee angles aligned closely near 0, 120 and 240 degrees indicating a possible 3rd harmonic.

However, this may be an artefact of lunisolar cycles (McMinn, 2015).

Oct AOD Falls > -2.20%

Sun Eo

Moon Eo

Phase Ao

Sun Eo

Apo Eo

NNAp Ao

12 Oct 1887

199

140

301

136

017

241

12 Oct 1897

200

042

202

302

064

122

8 Oct 1927

194

344

150

082

204

122

18 Oct 1937

205

009

164

248

252

004

21 Oct 1957

208

187

339

221

347

126

19 Oct 1987

206

170

324

001

127

126

27 Oct 1997

214

174

320

167

175

008

There was also a notable propensity for historic US October panics and DJIA AOD falls to happen in 7-ended years and repeat in intervals of 60 years (McMinn, 2010).

22

RESEARCH

Discussion and conclusions The evidence supports the Decennial Cycle as a valid influence in US stock market activity over the past 130 years. Bear markets were most likely to occur in the early years of a new decade, as well as in 6- and 7-ended years. Then there is the seven-year jinx, when DJIA AOD rises and AOD falls frequently happened in the autumn, especially October. US recessions were also likely to occur around years ended in 0. Only the year 1940 was associated with no recession, although some US recessions ended early (1879, 1949 and 2009) and one commenced a little later (2001). We are now approaching 2020 and it will be very curious to see if the US again enters the recession suggested by history.

Financial markets cannot be random, given the role played by the Decennial Cycle in US financial history. The obvious question arises, then, as to what causes such patterns. According to the Moon Sun Hypothesis, financial activity is viewed as being mathematically structured in time, changing in tune with Moon Sun tidal harmonics (McMinn, 2004). This could also be applicable to the 10-year cycle. How such an effect could actually function remained well outside prevailing paradigms in economics.

The 9/56-year cycle consists of a grid with intervals of 56 years on the vertical and multiples of nine years on the horizontal.

Events like financial upheavals will cluster with significance in these patterns, which in turn can be intimately linked to lunisolar cycles (McMinn, 2018). Artefact 10-year sub cycles appeared in the timing of financial crises and can be derived from the 9/56year grid. This may offer a theoretical basis for the Decennial Cycle (McMinn, 2006). Alas no proof can be offered to verify such speculations.

The Decennial Cycle has limited predictability as it is based on averages over a long period. At certain times the realised outcome will deviate considerably from the trend. A good example is the current decade in which there were no bear markets at the beginning of the decade or in years ending in a 6 or 7. The year 2018 should have been favourable for stocks, but it experienced two corrections thereby contrasting with history again. Despite such glitches, it is still worth while being well aware of this cycle and how it relates to prevailing market sentiment.

McMinn, D., 1993. Financial Crises & The Number 56. The Australian Technical Analysts Association Newsletter. p 21-25. September.

McMinn, D., 2004. Market Timing By The Moon & The Sun. Twin Palms Publishing. 163p.

McMinn, D., 2006. Market Timing By The Number 56. Twin Palms Publishing. 121p.

McMinn, D., 2010. 60 Year Intervals & October Panics. Market Technician. Journal of the Society of Technical Analysts. Issue 67. p 13-15. June.

Miller, R W., 2004. The Decennial Cycle: Dow at 40,000 by 2009. December. http://www.triplescreenmethod.com/MonthlyArticles/MonthlyArticle1204.asp Smith, E L., 1939. Tides in the Affairs of Men. The Macmillan Co. 178p.

The Society of Technical Analysts: www.sta-org.uk

23

Did you know?

Our members come from over 40 different countries worldwide?

With more than 1,400 members, we are one of the largest TA networks in the world.

www.sta-org.uk

24

ANALYST FOCUS

Head and Shoulders above: Gerry Celaya I stumbled into a career of using technical analysis as a trading and investment tool at a relatively young age, when I took a part-time job at an obscure firm whilst pursuing my master’s degree in Economics at San Francisco State University, but the road since then has been a lot of fun. My initial exposure to chart analysis was seeing my girlfriend’s father trade commodity futures using paper point and figure charts; I was intrigued! Imagine my surprise when a few weeks later I spotted a 3”x5” card pinned to the jobs board at the SFSU Economics Department that said: “Money Market Services is looking for an intern to start at 5am to update charts, hours will vary.”

Gerry Celaya MSTA Gerry Celaya, MSTA is a former board member of the STA and a director of Redtower Asset Management. He has previously worked at various US banks in London, providing research and proprietary trading, services and ran the European technical analysis team for one of the largest providers of real time research to professional dealers. Gerry holds economics degrees from UCSD (BA) and CSUSF (MA).

"In 1989 I was moved to London to cover for a group of analysts who had left to set up IDEA, and the rest is history; my brief visit turned into a permanent (so far) move to the UK."

The job, and hours, were indeed varied. I had to watch currency market deals go through a Telerate screen in order to jot down hourly blotters and update hand drawn point and figure charts. I needed to calculate bond yields by hand (using a Monroe calculator!) to create blotters and update all of these charts on the Telerate machines line by line. Then there was the time spent going over the computer code that calculated technical indicators for our clients as well, not to mention basis spreads and implied volatility numbers for options on futures. I was lucky that my position became better paid and then full time - yippee!

I was also fortunate that my bosses, Heidi Schmidt, Mary Maier and Cindy Keel, were willing to allow me to explore ‘hard’ research themes on converting bond futures prices to cash yields in order to generate better ‘basis’ trades and yield curve ideas, along with ‘market research’ reports buy or sell and at what level? I worked closely with the economics team - it turns out that starting at 5am in the morning in a small office leads to pretty good team building. And when the firm (later named MMS and part of S&P, eventually being sold a few times to become part of Informa) sent me to Tokyo in 1987 to help cover for analysts on holiday, I was a pig in clover! I worked on BoJ policy research, FX and bond market reports and managed to rewrite some of their FX vol code that was coming up with obscure answers.

Cindy even had me join the TSAA in San Francisco then in order to give a talk on JGB’s, the Nikkei and candlestick charts, and I made every mistake in public speaking that you can imagine!

In 1989 I was moved to London to cover for a group of analysts who had left to set up IDEA, and the rest is history; my brief visit turned into a permanent (so far) move to the UK. Kalpana Patel was my first boss in London and she had me work more and more on FX markets whilst also developing a European bond market analysis product along with our economists. This green shoot eventually led to the entire bond team receiving a prize from McGraw-Hill (then our parent company).

She also introduced me to the STA and had me join in order to support the Society; they were nice enough to ‘grandfather’ me in, which means that I have never had to sit for the Diploma!

It was with fond memories that I read Trevor’s account of attending a Compu-Trac seminar as Cindy roped me into speaking at their TAG seminar in New Orleans (she had been invited to speak but couldn’t make it) in the early 1990s. It was here that George Lane himself told me that my slides (acetates and an overhead projector!) on how to use his stochastic indicator provided one of the best explanations that he had ever seen, a really nice thing to say to someone struggling at the podium!

The Society of Technical Analysts: www.sta-org.uk

ANALYST FOCUS

25

move as I really didn’t like being a people manager and that was the direction that my BoA position was moving in. The client base at AEB was made up of relatively big risk takers, many of whom took on board chart analysis as part and parcel of their investment process. They had a view, would get input from economists as needed, and would structure or gear their view up strategically by using chart levels for pyramiding or risk management as required.

MMS was a great learning experience for me and the company sent me all over Europe and the Middle East to give seminars on technical analysis, as well as supporting Bloomberg and Reuters (which sold our research pages on their systems) through seminars in Europe. I became the Head of Technical Analysis Research in Europe at MMS as we grew our market coverage and readership over the next few years. However, as more and more of my time was spent on managing people instead of market research (there were around 10 of us in TA research in Europe by the time that I left) I moved to Bank of America in 1994, leaving the technical analysis research provision at MMS in the excellent hands of Patricia Elbaz, Tom Pelc, George MacLean, Elizabeth Miller, Steve Kwan. Along with the other analysts in the London, Frankfurt and Paris offices, they were doing a great job of flying the TA flag. The company continued to prove a great training ground for the leading technical analysts who followed.

Geoff Wilkinson my boss at BoA, taught me a huge amount on how technical and chart analysis can be used as a risk management tool. My first job at BoA was odd - Geoff was running an FX model trading desk with two quantitative traders that traded more than $200m in spot, forwards and options. He wanted me to use my TA skills to help hedge some of the risk now and then and to provide market updates to the bank’s dealers,

sales desks and clients. This entailed showing up between five and six in the morning and starting to type up the research to be faxed and photocopied (!) for distribution within our London and BoA dealing rooms and clients around the world by seven. I also had to update our TA commentary page on Reuters and participate in our global ‘shout down’ system at the same time when called upon - and try to lean against the models now and then to generate my own P&L on the side through futures, spot and options trades.

As we moved our research up the rankings (up to 4th from 12th on the FX chart analysis research rankings) servicing corporates, hedge fund, central bank and other client research requests became more and more of the job. I had my own trading desk then and we managed a larger pot of ‘management money’ with an FX basket approach which was effectively looking for ‘carry’ opportunities within a large set of currency pairs, with some directional kickers. We worked with our economics team and a really good econometrician in order to manage the timing and risk of the trades. We also supported our global trading and sales team through our daily research notes and by holding seminars and meetings with key clients in the UK and Europe.

However, I saw an ad on Reuters looking for a technical analyst/trader to set up a new desk at American Express Bank and couldn’t resist the

My final boss there was Amanda Nicol who taught me to dig down into the details of the trade - the only boss who ever made me read the nitty gritty of a bond prospectus before we thought of trading it. She also encouraged my membership of the STA, which added value to our relationship with other parts of the bank and our clients and meant that I travelled all over the world to promote our bank’s capability to clients (corporates, high net worth individuals, family offices and other banks). This was great fun.

I also worked with our economists and we managed to get many top 10 FX forecasting placings in various corporate and data vendor surveys.

AEB was nice enough to cater for my frustration at not being able to spend enough time on my farm in Scotland to outsource my research input to my own company at the turn of the century, which kept the relationship going for well over a decade.

I was lucky to be able to work with Murray Gunn (at Standard Life Investments at the time) and Barry Tarr (with Bank of Scotland then) to help the STA promote the Society and technical analysis in Scotland with a few seminars in Edinburgh.

We listened to great speakers and saw a pretty good attendance from regional corporate treasury managers as well as fund managers. Interest was helped by sponsorship and support from Murray and Barry’s companies and Bloomberg, Reuters and other data vendors and chart systems (and if memory serves, Katie who came up to help). Murray also set up a talk in Glasgow with a local stock broking

26

ANALYST FOCUS

firm and spoke at a seminar with us in Aberdeen at Robert Gordon University as we promoted our field of market analysis to MBA students.

I also had the pleasure of joining the Board of the Society and helped to get some authors for the online course lined up and assisted Anne, Deborah and the rest of the Board (and Katie who did a lot of the behind the scenes hard graft) when we hosted the IFTA Conference in London in 2002. This marked a real turn in the fortunes in the STA for me.

"A big ‘thank you’ from me is given for the long service that Anne, Mark and David Watts have given, the current board that is pushing the Society forward and the service that Adam, Deborah, Malcolm, Simon, John Breame and John Cameron, Michael, Karen, Axel, Robin, Kevan and Luise, and of course Bronwen, Fran, David Fuller and Elli gave to the STA during my time in the UK." Redtower Asset Management

While our Society is enjoying a decent membership and bank balance now, things were not always this way. A big ‘thank you’ from me is given for the long service that Anne, Mark and David Watts have given, the current board that is pushing the Society forward and the service that Adam, Deborah, Malcolm, Simon, John Breame and John Cameron, Michael, Karen, Axel, Robin, Kevan and Luise, and of course Bronwen, Fran, David Fuller and Elli gave to the STA during my time in the UK. That’s not forgetting all the committee members, fellows, speakers and teachers that have worked and continue to work on the education courses.

At Redtower, we have worked with structured product companies, banks, FX service providers, ETF providers, equity, futures and CFD brokers and investment advisory firms around the world in providing investment research and risk advice for clients. We garnered a few top 10 FX forecasting rankings and were No.1 in the JPY on a Bloomberg survey when we participated, which was good. I have been lucky enough to be able to apply my technical analysis expertise and charting skills to trading money for others and myself, investment and risk management in many asset classes and for different time frames and risk tolerances.

I think that the future of technical

analysis is pretty good as so many market participants use different aspects of TA and chart analysis in their investment and risk decisions now and most dealing room and online retail systems incorporate charts and technical analysis tools. The Society does need to continue to advocate the benefits of taking the time to study for the Diploma and read the Journal in order to try and ensure that the basic understanding of chart analysis and technical indicators is sound though. In a world where a quick look at a YouTube video can make you an excellent cake maker, chainsaw operator, plumber or brain surgeon (it seems...) the dedication that is needed to really learn the craft of studying charts and interpreting indicators is important.

I would say that being able to use technical analysis in a competent manner is a skill set that every trader, broker, sales or relationship manager, investor and risk manager should have or else they are really missing a trick when it comes to their decision making, and the STA helps with that.

Despite all of the advancements in computing power and data analysis the underlying aspects of chart and technical analysis remain the same study prices for trend and risk analysis and stay humble. We use our tools to try and find out what the market is trying to tell us through price and chart action, not what we are trying to tell the market.

The Society of Technical Analysts: www.sta-org.uk

ANALYST FOCUS

27

Interview with STA Fellow, Mark Tennyson d’Eyncourt - by Nicole Elliott For the third year running, Mark Tennyson d’Eyncourt FSTA and I have manned the fort at the Prince Albert pub for the JP Morgan fun-run in Battersea Park. Last year’s race on 5th of July 2018 was the hottest day (so far) in Britain. Nonetheless, team STA were out in force, in Cancer Research UK T-shirts and plenty of sun cream. Bagging our tables in the garden, we kept their kit bags and valuables safe, while taking ‘before’ and ‘after’ photos.

Over a white wine spritzer, I laid out my cunning plan and hoped Mark would agree. Part of the STA marketing team’s Analyst Focus programme, I had copied out the nine standard questions to ask eminent technical analysts. I showed him the list but he struggled with my appalling handwriting (I blame the keyboard) so I read them out.

Mark Tennyson d’Eyncourt FSTA

He agreed, and off we went!

Question 1: Who/what introduced you to technical analysis?

Quick as a flash he answers: Brian Marber’s weekly newsletters covering UK stocks through the 1973-74 stock market crash. Then Richard Lake FSTA, founder member of ACTA and former chairman of the STA, its successor. I too was introduced to Brian Marber’s views; in the early 1980s he was considered probably the best FX strategist with a massive subscriber base and the Reuters page GURU. 2: Where and how did you study technical analysis?

Through absorption and reading, mainly broker offerings and well-known technical analysis books. Starting his career at leading stock jobbers Durlacher Oldham Mordaunt Godson in 1963, it was not until 1984 that he joined ACTA, blaming the delay on its poor marketing. “I’ve not been as disciplined as I should have been,” he says about his approach to learning. More helpful was writing the monthly market reports when he was running the Qatar Investment Office because they had to be short, clear, and simple. A combination of deadlines, headlines and the rigour of brevity proved to be “an iron discipline, but useful.”

3: Who is your hero? What are your essential methods?

Short and to the point in his third answer: “I have heroes, plural, and it would be invidious to quote one only.” His methods are traditional, Dow Theory, trends, patterns and so on.

4: What are the best/worst aspects of this work?

“The delay; patience is key.” One mustn’t anticipate a break of a trend line, or the

Marber on Markets, Brian Marber

28

ANALYST FOCUS

move outside a chart pattern. “Don’t beat the break”. He adds that its opposite, when one can see a clear picture forming quickly, is so much fun.

5: Do you regret your career choice? Did you have a Plan B? There clearly was no back-up strategy, he says of his career, but interestingly: “Things evolved and things went wrong at various times. One of the best lessons I learnt was not to let other people and/or events dictate and affect one’s options.”

6: What’s the best piece of advice you were given and what advice would you give to someone starting on a career in technical analysis today?

“Much wisdom was imparted to me by partners and staff at DOMG’s pitch on the London Stock Exchange; there was time to ask questions and listen to explanations.” Interestingly he also advises: “You’ve got to be prepared to learn; there are no short cuts; you must paper trade.”

7: What areas of further research are you interested in, or might you suggest?

“Cycles, definitely,” says Mark with enthusiasm! He feels they have a terrific allure and can get major market calls spot on. He has the photocopied papers of the English translation of Kondratieff’s original work. Talk about doing his homework!

I’m really impressed.

8: His two favourite books are “Edwards and Magee”, as in Technical Analysis of Stock Trends by Robert D. Edwards and John Magee, a book many consider the Bible of technical analysis. It is incidentally also the first I ever read on the subject.

Looking through my notes I realise he’s given me only one. Then I remembered he’d mentioned Beginners Please, the 1975 edition of extracts from the Investors Chronicle “where the TA chapter also acts as a primer and where the charts show the major tops in 1972 and the declines through to 1974. A real bear market! This should be required reading for younger analysts.”

9: Please comment about things we have missed so far, and general feelings about the subject.

This was a question designed to allow him space and time to ramble, re-think, and deviate from the format. Mark says he is sad that so few technical analyst job opportunities currently exist, by how rarely the word ‘chart/ist’ appears in the appointments pages. He is understandably infuriated by “misinformed commentators with axes to grind” denigrating chart analysis.

“I like going short” comes out of left field, explaining the natural contrarian tendencies of his strong right-handed brain, coupled with a left master eye.

Interesting, Jesse Livermore also liked going short - because as a broker he knew only too well that the clients were always buying. This one chimes loud and clear with me, being a wholesale dealer specialising in derivatives - where it’s as easy to go short as it is to go long, but with a very different risk profile.

Technical Analysis of Stock Trends

Beginner's Please

I’d like to add that I really enjoyed this chat with Mark and wish to thank him for his time.

By Nicole Elliott MSTA

Things evolved and things went wrong at various times.

One of the best lessons I learnt was not to let other people and/or events dictate and affect one’s options.

Mark Tennyson d’Eyncourt FSTA

The Society of Technical Analysts: www.sta-org.uk

BOOK & SOFTWARE REVIEWS

29

The Crypto Trader

By Glen Goodman (2019). Harriman House, Hampshire, UK Book review by Simon Gray BA MPhil MBA MSTA CFTe Glen Goodman is a former business correspondent for BBC and ITV News whose trading became sufficiently successful to allow him to dispense with the day job.

Successes such as turning £3k to £100k by shorting banks and oil through the 2008/9 financial crisis - his little short1 rather than The Big Short - and publicly calling the top of Bitcoin’s rise at the end of 2017 (and profiting from its collapse) have brought him a significant following on social media and a wider interest in his views on crypto currencies, hence this book.

The Crypto Trader

1My Little Short. How I risked it all to turn £3000 into £100,000 The Times, Monday 8th February 2016

The first part of the book - What’s it all about? - is a brief run through of the key characteristics of cryptocurrencies: their origin and digital-only existence, how they are traded and, with hundreds of new cryptocoins being offered, how to spot warning signs of potential scams and Ponzi schemes.

Such warnings are important as, encouraged by Bitcoin’s meteoric price rise from mid 2017, many traders were leaping on board, fearful of missing out - FOMO - and wondering when they could order their first Lamborghini When Lambo? Many were still holding on for dear life - HODLing - as Bitcoin’s price more than halved in January 2018. Inexperienced traders, including one who contacted Goodman seeking a ‘genuine Ponzi scheme’, clearly need as much assistance and education as possible and are, perhaps, the key target audience for this book. This part concludes with Goodman detailing some of the lessons learned from his early trading days and introducing his initial rules for trading: grow profits, cut losses and trade the trend.

The bulk of the book is taken up by its second part - Let’s Make Money.

The initial chapter deals with buying cryptocurrencies via exchanges and the complications of what you need to do with them once you own them: virtual wallets, wallet addresses, private keys, hot wallets, cold storage etc. Goodman suggests buying

Bitcoins and then transferring these into a trading exchange on which you can then trade a vast array of other cryptocurrencies. It might seem simpler to use a spread betting platform, which Goodman points out would have significant tax and regulatory advantages for UK based traders. Still, this route also has its own drawbacks, such as costly spreads, a restricted range of cryptocurrencies and, unlike holding the underlying asset, the ever-present risk of being stopped out.

In Chapter 5, Goodman outlines his trading strategy, which is to avoid day trading as it is “a losing game because costs add up fast” and, as a longerterm trader, to concentrate on trend trading. Trends tend to persist, and the knack is to buy when the trend is underway and sell when the trend ‘bends’ (ie reverses). He points out that market moves are fractal but does not develop this concept in an Elliott direction.

Chapter 6 - How to Choose a Target recommends choosing a market that is trending upwards and introduces moving averages as a method of determining trend direction. The content then pivots to the different approaches of fundamental analysis and technical analysis and introduces Richard W Schabacker’s 1930s work Technical Analysis and Stock Market

30

BOOK & SOFTWARE REVIEWS

Profits as the first definitive book on technical analysis. Goodman comments: “Thousands of technical analysis books have been written since then but most of the new analysis has been superfluous or misleading, so a lot of analysts choose to stick with Schabacker.”

This statement surprised me and will probably surprise a lot of analysts who, sadly, won’t ever have heard of Schabacker whose course, published in 1932 and 1937, was out of print until republished in 1997. It’s true that many technical analysts use his analysis of patterns but only because it formed the basis of Part One of Edwards and Magee’s 1948 book Technical Analysis of Stock Trends which has, in turn, informed most subsequent discussion of classical chart patterns and their interpretation. More eyebrow raising is Goodman’s opinion that most technical analysis from the last 80 years is ‘superfluous or misleading’.

Goodman goes on in Chapter 7 to introduce candlesticks (as opposed to line charts), support and resistance levels and then focuses on chart patterns. Triangles, wedges, flags, head and shoulder patterns are described but without any mention of associated volume movements or of determining price targets from measured moves which are analysed in great detail by Schabacker. Volume is only introduced as an important indicator later in the chapter as a signal of major price reversals and as providing confirmation of breakouts.

Chapter 9 - My Best Buys - explains how to select buying or entry points based on breakouts from wedges and triangles on eleven charts illustrating some of Goodman’s trades. These are all daily candlestick charts that show only price. I would have expected some reference to volume and momentum here, even if Goodman’s focus is on longer term trends. A look at shorter- and longer-term timeframes (eg weekly/hourly) for context and detail would also not go amiss when choosing the optimal entry point.

Chapter 10 - When to sell - outlines the

general principle that “you wait for the trend to bend and then find a good point to sell”. Goodman suggests that most traders use sell signals generated by break of a moving average or a double moving average crossover before discussing stops. With the chandelier stop, he introduces the Average True Range (ATR), almost the first technical concept (and certainly the first indicator) to appear in this book which did not originate with Schabacker. Goodman himself no longer uses such “blunt mathematical tools” as MA and ATR trailing stops and chooses exit points based on his “natural feel for the ebb and flow of the markets”.

Chapter 11 is titled How much to buy? This should be straightforward: entry less stop equals risk; 1-2% of the account divided by risk gives the maximum position size. Goodman’s explanation is less straightforward.

In his example, the stop is a prior support line, but he also introduces a 1.75 ATR multiple as an alternative means of calculating the same stop level; “pretty standard distance for a trend trader’s stop-loss” he explains.

Both methods of setting the stop in this particular example give the same risk and same position size. He then states that doubling the position size would also double the ATR. This confuses risk with volatility and, having discussed stops earlier on, there is no need to muddle position sizing with stop method selection. Curiously, there is no reference here to targets.

This precludes the calculation of risk: reward ratios for trade evaluation.

There is also no discussion about risk limits for the overall trading account. Any trader interested in risk control should look at the 2% and 6% rules for position sizing and account

management outlined in Dr. Alexander Elder’s 2014 book The New Trading for a Living.

I have concentrated here on Goodman’s approach to technical analysis and to focus less on his insights into the world of cryptocurrencies and the psychology of trading. The sub-title of this book is “How anyone can make money trading Bitcoin & other cryptocurrencies”, and I suspect that people buying a copy will do so aiming to improve their trading skills as well as to learn more about cryptoworld. It’s therefore unfortunate that the range of technical analysis covered here is essentially limited to the classical patterns and trends of the 1930s. While this is valuable knowledge, there are many concepts developed over the last few decades which help a trader’s understanding and interpretation of price movements. For example, confirming a breakout is helped by measuring momentum with an indicator such as the Relative Strength Index (RSI), developed by J. Welles Wilder and published in 1978 alongside the ATR, the sole indicator used in this book. With assets as volatile as Bitcoin, the RSI’s overbought and oversold areas could help with timing entries and exits. Its ID ranges, first described

by Andrew Cardwell in the early 1980s and subsequently developed by Constance Brown, can help identify trend changes. The RSI has much else to offer, and this is all just from one indicator.

Technical analysis has not stood still for the last seventy years, and it’s a pity that at least some of its advances and insights are not incorporated in this book.

The Society of Technical Analysts: www.sta-org.uk

BOOK & SOFTWARE REVIEWS

Bytes and Pieces David Watts MSTA BSc (Hons) CEng MICE MIWEM MSTA Systems and Website Specialist

Weis wave Supply and demand analysis is a standard Wyckoff approach. For those of you who interpret volume, I am particularly impressed by the float analysis methods of Steve Woods and recently the volume analysis of David Weis. The accumulated volume of price swings is compared and, by that comparison, divergences and peaks can be found. From my analysis of a few charts, the method is straight forwards and Impressive. David has also published book on the topic, Trades About To Happen: A Modern Adaptation of the Wyckoff Method.

Volume divergence is a technique added to my arsenal of stock analysis techniques. A book for the library.

Steve Woods also analyses the changes in supply and demand, in his case by looking at how this changes in relation to the “float” or the total number of shares available to trade.

Accumulation and distribution can be seen as changes in the available float numbers.

His own book, entitled Float Analysis: Powerful Technical Indicators Using Price and Volume, is also a classic.

Somehow, I can imagine there is a further synergy to be obtained by combining both methods. www.weisonwyckoff.com

Wavebasis The map provided by computer Elliot Wave analysis continues to evolve and now, with AI and machine learning, will continue to be refined. Wavebasis is the latest in a long line of charting applications that can define and label Elliot Waves. Wavebasis features a sophisticated pattern recognition engine for determining high-probability, Elliott Wave counts. Wavebasis offers a 14-day free trial and various types of subscription. www.wavebasis.com/#about

Label your own waves Advanced GET by Trading Technologies was the first programme to label waves automatically and has now been incorporated into the Esignal Package. But should you want to add Elliot Waves to your home charting package, NinjaTrader, Tradestation, Multicharts or ThinkorSwim then Wave5Trade.com offers an Elliot Wave package to number the waves.

The Wave5Trade.com has been developed by Paul Bratbry who also offers a methodology for trading Elliot’s 5th Waves. www.wave5trade.com

Build Your Own Systems - no manual coding required If you want a trading system, but without the hard work of coding numerous variations to find a profitable system, the computer can help. As it can design, test and then deploy a computergenerated system designed with Algo Design Lab. You can further learn and share your code with other users and gain further tips and tricks. www.tradingtechnologies.com/trading/algo-trading/adl

31

32

THE SOCIETY OF TECHNICAL ANALYSTS

Benefits of STA membership

The STA holds 11 monthly meetings in the City of London, including a summer and Christmas party where canapés and refreshments are served.

As a service to our members, many of whom are unable to attend all our monthly meetings, we have been making videos of meeting presentations for several years.

Key benefits • Chance to hear talks by leading practitioners • Networking • CPD (Continuous Professional Development)

Key benefits • Never miss the latest meeting.

• Browse our extensive video archive of previous meetings.

The STA has been running educational courses on technical analysis for 25 years.

Student members have access to an education forum which is available in the member’s area of the website.

Key benefits • Courses are taught by leading authorities in their field such as authors, highly regarded professionals and Fellows.

• The STA also offers a Home Study Course for self-study.

The STA ”Market Technician” journal is published online twice a year.

Key benefits Members receive the latest issue of the “Market Technician” via e-mail.

They are also able to access an archive of past editions in the member’s area of the website. Technical analysts from all over the world contribute to the STA journal.

Key benefits Members can ask questions on technical analysis in the Technical Analysis Forum which a course lecturer, author or Fellow will answer.

The STA has an extensive library of classic technical analysis texts. There are over 1000 books in the collection. It is held at the Barbican Library with a smaller selection available at the City Library, a reference library in London. As a member you can now browse which titles are available on-line.

Key benefits Members are encouraged to suggest new titles for the STA book collection and, where possible, these are acquired for the library. The complete listing of books held can be downloaded in Excel format from within the member’s area.

The Society of Technical Analysts and the Chartered Institute for Securities & Investment (CISI) have formed a partnership to work together on areas of mutual interest for our respective memberships.

Key benefits CISI examination exemptions for STA Diploma Part 1 and 2 holders. MSTAs with three+ years’ experience can become full members (MCSI).

Endorsed by the Chartered Institute for Securities & Investment (CISI), members of the STA are entitled to receive continuing professional development points (CPD for their attendance on the taught course lectures.

Key benefits • Remain compliant.

• Be informed of all new industry developments.

STA members benefit from significant discounts on technical analysis books, magazines and software.

Key benefits STA members currently enjoy discounts from: • Your Trading Edge • The Technical Analyst Magazine • MT Predictor • CQG • Tradermade and the Global Investor bookshop.

The Society of Technical Analysts: www.sta-org.uk

SOCIETY OF TECHNICAL ANALYSTS

33

STA Calendar 2019/20

More information about the STA events can be found here.

IFTA Conference pg.4

Tuesday 10 September 6.30pm One Moorgate Place Tim Parker MSTA, Messels Ltd

Wednesday 18 September

Sat/Sun 5/6 October 2019

7.00pm Annual Dinner National Liberal Club

6:30pm IFTA’s 32nd Annual Conference Marriott Zamalek Hotel, Cairo

See pg.38 for more info

Tuesday 8 October 6.30pm One Moorgate Place Speaker to be confirmed

Tuesday 12 November 6.30pm One Moorgate Place Andy Dodd MSTA, Louis Capital

Wednesday 16 October

Thursday 17 October

6.15pm London School of Economics STA Diploma Part 1 Course commences

Monday 2 December

1.30pm Central London STA Diploma Part 2 exam

Tuesday 10 December

10.00am Stay Ahead Training Centre

6:30pm Christmas Party One Moorgate Place

See pg.39 for more info

Tuesday 14 January 6.30pm One Moorgate Place Market Outlook Panel

Monday 2 March 6:30pm Stay Ahead Training Centre STA Diploma Part 1 Exam

Wednesday 15 January London School of Economics STA Diploma Part 2 Course

Tuesday 10 March 6.30pm One Moorgate Place Speaker to be confirmed

Tuesday 11 February 6:30pm One Moorgate Place Speaker to be confirmed

Tuesday 14 April 6.30pm One Moorgate Place Speaker to be confirmed

34

SOCIETY OF TECHNICAL ANALYSTS

STA Education: the LSE courses, and the Diploma in Technical Analysis The Education Channel - Monthly meetings videos are available to members here.

July 2019

Murray Gunn

Technical Analysis: Trading tool or social science?

June 2019

Robert Carver

In conversation with Tom Hicks

May 2019

Kevin Bull

Price does not align to time

April 2019

Connie Brown

Global Cash Flow

March 2019

Steven Goldstein

10 things I’ve learned coaching traders and investment professionals

February 2019

Richard Adcock

When Overbought or Oversold Signals Continuation

January 2019

Market Outlook Panel

Panel discussion

November 2018

MiFID II Panel

Panel discussion

October 2018

Dr Van Tharp

Interview with Dr Van Tharp by Ron Williams

September 2018

Mathew Verdouw

Quantitative strategies for technical analysis

STA Library STA members are eligible to join the library as standard adult library members. They need to attend in person to the library to join - bringing with them proof of name (STA membership card, bank card, staff pass etc) and proof of address (driving licence, recent bank statement, utility bill etc). The library address is Barbican Library, Silk Street, London, EC2Y 8DS. For full details on address and opening times, visit www.sta-uk.org/library

The Society of Technical Analysts: www.sta-org.uk

35

The STA Executive Committee

Tom Hicks

Axel Rudolph

Charles Newsome

Clive Lambert

MEng MSTA MSCI Chairman of the STA

BSc (Hons) MSc FSTA MCSI Vice Chairman

MSTA FCSI Vice Chairman

MSTA MCSI Vice Chairman

Eddie Tofpik

David Watts

Leona Mondsee

Richard Adcock

MSTA, ACI-UK, ACSI Head of Marketing

BSc (Hons) CEng MICE MIWEM MSTA Systems and Website Specialist

MBA ACCA MSTA Treasurer

MSTA Journal

Nick Kennedy

Mark Tennyson d’Eyncourt

Ben Tyler

BA (Hons) MSTA Systems and Website Specialist

FSTA Programmes

BA (Econ) FCA MSTA ACSI Finance

Please keep the articles coming in The success of the Journal depends on its authors, and we would like to thank all those who have supported us with their high standard of work. The aim is to make the Journal a valuable showcase for members’ research - as well as to inform and entertain readers.

Keep up to date with the conversation by joining us on:

36

SOCIETY OF TECHNICAL ANALYSTS

Interview with Akif Din, winner of the 2018 Bronwen Wood Prize What is your background and how did you get into the financial industry?

I was in sixth form when I first came across financial markets.

During my two years, I didn’t really find a career or degree of interest to me. I stumbled across a broker website and ended up signing up for a demo account. For some reason, I found watching the prices of commodities and FX change in real time bizarre but interesting. I had no idea what was going on but it definitely caught my attention. After doing some research into the industry on a careers site, my interest grew and I wanted to get involved. In 2017, I went on to study at the London Academy of Trading and attained the highest ever mark on their benchmark course. They helped me gain a position within a small trading firm in late 2017.

What have you done and what is your current role?

I have recently begun a part-time role, working alongside Sejul Gokal MSTA, CFTe, Founder and Chief Technical Strategist of Go-Technikal Insight, where I help provide daily technical analysis and commentary to institutional clients.

I continue to trade my own capital, which I have done for over two years as well as being a contributing analyst on FX Explained. Before this, I had been a proprietary trader for nearly two years, where I had the opportunity to develop my technical analysis and trading skills and gain further knowledge of the derivative markets.

When did you first hear about technical analysis?

I first heard about technical analysis from the London Academy of Trading where I was educated, trained and mentored in various technical analysis methods and techniques alongside various other topics including fundamental analysis, global markets and trading psychology. I learnt the value that TA brought to an analyst or trader in forecasting markets and managing risk. It provided me a platform in building a strategy and following a process as well as remaining disciplined.

What made you decide to take the STA Home Study Course?

I really enjoyed using TA and was interested in developing my knowledge and ability by learning new theories and methods to improve my own trading as well as progressing my career within technical analysis. I wasn’t too sure how to proceed but was recommended the STA by Gavin Pannu MSTA, CFTe, now Senior Market Analyst at Alphachain Capital. It was the best option for how I wanted to advance my career. Many successful technical analysts including those who mentored me (Paddy Osborn and Steve Miley) were also members, so that definitely played a part in choosing the STA. Due to my working hours at the time; I had to take the Home Study Course.

Akif Din MSTA, CFTe, winner of the 2018 Bronwen Wood Prize, receiving certificate.

“I found the course to be outstanding.

Each unit began from the very start, providing a background to the technique followed by detailed explanations of different approaches and methods to give me a toolkit that I could test and apply.”

Akif Din MSTA, CFTe

The Society of Technical Analysts: www.sta-org.uk

SOCIETY OF TECHNICAL ANALYSTS

How did you find the course and what was your favourite part?

I found the course to be outstanding. Each unit began from the very start, providing a background to the technique followed by detailed explanations of different approaches and methods to give me a toolkit that I could test and apply. Each unit ends with a recommended reading section, which was my favourite part. If I want to look into a certain technique or approach in more detail, then I can purchase or borrow the book/s recommended by the lecturers.

Did it meet your expectations? And why?

The course went beyond my expectations. It was full of information with many worked examples throughout each unit. The units were easy to follow and well written, which allowed me to grasp concepts very quickly. Not only did the course cover TA, it included vital areas of trading, such as risk management, money management and psychology.

How was the exam?

The part one exam is a multiple-choice exam comprising of 120 basic to intermediate questions. The part one exam tests knowledge of various techniques and concepts within technical analysis and trading.

The Part 2 exam is an advanced, higher level written exam spilt into two sections. In section one, you must draw and annotate charts as well as writing a complete top-down technical report. Section two involves a long, essay style question and two shorter answer questions.

I really enjoyed taking the Part 2 exam, especially writing the technical report as that is what I would like to advance my career in. Section one is very difficult as it tests your knowledge and application of various techniques whilst writing a professional report with clear advice and reasoning.

I spent a little longer than I would’ve liked on section one but I made sure to manage my time appropriately for the remaining questions.

Any advice you would like to give future students?

Taking your time is key whilst taking the Part 1 exam.

Answering 120 questions may become tedious causing you to misread questions. Just take your time and eventually, you will be done.

Part 2 requires a lot of preparation so create a plan.

Planning a structure to your technical report is possibly the most important prep you could do (other than having a comprehensive knowledge of TA). Set out a possible structure then take a mock test under timed conditions.

If you feel the structure requires changing, then make the appropriate changes and take a second test. By your final mock, you should have a process that works for you. And yes, attempt all the mock exams STA provides you! Only through preparation will you be able to manage your time.

What do you like about technical analysis, how do you use it and what areas would you like to concentrate on?

One of the key reasons I like TA is its ability to identify key

37

turning points in trends. Whether you use classical chart and candlestick patterns or Elliott Wave and divergence signals, technical analysis strongly deepens your understanding of potential retracements or changes in trends. Moreover, TA provides you a process to analysing markets. It allows the analyst to think logically and make sensible decisions and this overall improves trading.

I use Heikin-Ashi charts along with a combination of Exponential Moving Averages, momentum tools, support/ resistance levels and chart patterns. For confirmation and candle patterns, Japanese candlestick charts are used.

I have been working on a few different ideas including cycles, Elliott Wave and Renko charting. I have been interested in trying out market profile/volume profile for a long time and is what I would like to concentrate on in the near future.

“The STA offers a complete course that is directed by industry leaders. Whether it be for personal or professional reasons, the STA Diploma will definitely assist you in your future aspirations.”

Akif Din MSTA, CFTe

Would you say studying with the STA has helped your dayto-day job and career?

Yes, certainly. The STA course has vastly improved my analysis and trading. My decision-making has improved as well as my general understanding of what the ‘technicals’ are telling me. Even my understanding and the way I use simple techniques (eg moving averages) has developed.

I use technical analysis as a single approach or in combination with fundamental analysis. Fundamentals only play a tiny part of the overall strategy and are used to confirm the underlying technical theme of the market.

At times, at least in my experience, the fundamentals distort the technical picture and this is where the knowledge of various technical approaches truly helps.

Moreover, my report writing and commentary has massively improved. The course has given me the essential knowledge to build my own structure for professional report writing and I am able to put across my analysis and opinions more clearly.

Would you recommend the Home Study Course to anyone thinking about taking the diploma exams?

Most definitely. The STA offers a complete course that is directed by industry leaders. Whether it be for personal or professional reasons, the STA Diploma will definitely assist you in your future aspirations.

38

SOCIETY OF TECHNICAL ANALYSTS

STA Education: Get qualified in technical analysis Booking is well underway for the CISI and IFTA accredited STA Diploma Part 1 and Diploma Part 2 courses.

Special Journal offer!

We have put together a great offer for you.

Book onto any of our courses, including the Home Study Course, before 31st October 2019 and save £50.

Simply click here and enter code JNLPROMO in the coupon box to redeem your £50 discount.

These two courses have been designed to cater for newcomers and experienced professionals who are looking to challenge themselves. They will learn to develop the methodology, tools and confidence to make better informed trading and investment decisions in any asset class, anywhere in the world.

STA Diploma Part 1 Course 6x1 evening a week classes One evening exam preparation session Two-hour exam Qualification accredited by CISI and IFTA

Begins

Wednesday 16 October 2019

Price

£995 if booked by 1 October 2019; £1,195 thereafter.

Course Description

This course is designed for those with little or no previous experience and individuals looking to initiate themselves in the practice of technical analysis.

The course will give you an introduction to technical analysis and provide you with the tools to progress to the Diploma Part 2 Course. The Diploma Part 1 schedule enables you to maximise your learning while complementing your work and home life. The course is accredited for Continuing Professional Development (CPD) by the Chartered Institute for Securities and Investment (CISI).

Programme at a glance

• Introduction to technical analysis and comparison to fundamental analysis • Construction and interpretation of Line, Bar, Point and Figure and Candlestick • charts; introduction to Heikin-Ashi, Three-Line Break, Renko and Kagi charts • Support and resistance, theory, identification, utilisation, breakouts • Trend and return lines, where and how to draw them • Fibonacci numbers and retracements • Reversal and continuation patterns, target projection from patterns • Moving averages, different types and how to interpret them • Momentum, indicators/oscillators, relative strength, sentiment measures; • • definition, interpretation and how to use them • Dow Theory, introduction to Elliott Wave Theory - how to use technical • • analysis strategically Take the next step! Apply Here

The Society of Technical Analysts: www.sta-org.uk

SOCIETY OF TECHNICAL ANALYSTS

39

Gave a good overview of the topics and receiving experienced opinion from subject matter experts to save us from simple pitfalls. Practical application of the theory's where demonstrated well.

The experts are great contacts to have and make networking within STA worthwhile.

Yee Lun, EEX, student on the Diploma Part 2 Course 2019.

STA Diploma Part 2 Course 12x1 evening a week classes Exam preparation video and guide booklet Three-hour exam Qualification accredited by CISI and IFTA

Begins

Wednesday 15 January 2020

Price

£1,995 if booked by 31 December 2019; £2,995 thereafter.

Course Description

The Part 2 Course provides you with advanced professional knowledge, understanding and skills to use technical analysis as a vital investment tool or to pursue a career in technical analysis within the investment community. Basic technical analysis knowledge is a prerequisite for attending this course.

During the 12-week programme you will learn from leading experts and develop both theory and practical experience in the major techniques, analytical tools and indicators to enable you to select the most advantageous portfolios, trades, hedges and much more for your clients, your employers or your own trading systems.

The Diploma Part 2 Course provides you with a deeper understanding of technical analysis, added confidence and the capabilities to further develop your career. The course is accredited for Continuing Professional Development (CPD) by the Chartered Institute for Securities and Investment (CISI).

Programme at a glance

• The practical application of support, resistance and price objectives by • • market professionals - how they build on the essential basics and add • • advanced techniques eg Fibonacci projections; working in different time • frames.

• Construction and advanced applications of Candlestick and Point and Figure • • charts, including Point and Figure moving averages and indicators.

• Advanced moving average, momentum indicator and oscillator techniques; • • use of market breadth and sentiment measures.

• The practical application by market professionals of Dow, Elliott Wave and • • Gann Theory; Ichimoku Charts; Market Profile®; Behavioural Finance; Risk • • Management - and much, much more.

Videos of lectures are available to students who miss a session. Also copies of all lecturers’ presentations are emailed to students on the day following each session.

Take the next step! Apply Here

40

Balance professional development and your personal life with the STA Home Study Course© WHY PURCHASE THE HOME STUDY COURSE? The world-class e-learning Home Study Course (HSC)© is written by leading industry practitioners, making it one of the best online products available on the technical analysis market. Whether this is your first introduction to technical analysis, you want to refresh your existing knowledge, or you wish to become a qualified technical analyst, the STA offers a tailored Home Study Course as part of our portfolio of world respected courses preparing students for our internationally accredited STA Diploma qualification.

You can learn from the comfort of your home at times that best suit you. Although website based, it is fully downloadable and may be used online or offline via PC, Mac, iPad or Android machines.

WHAT WILL IT COVER? • The syllabi for both STA Diploma Part 1 & Part 2 examinations • 15 in-depth subject teaching units • Exercises to self-test progress • Exam preparation module & video • Advice on report writing. ...find out more here

Since the HSC is International Federation of Technical Analysts (IFTA) syllabus compliant it can also be used to prepare candidates for both the IFTA CFTe I and II examinations.

WHO IS THE COURSE FOR? The course is intended for individuals who want to use technical analysis in a professional manner or who want to become a qualified technical analyst and advance their career. Enrol and start studying now!

For more details click here or contact the STA office on +44 (0) 207 125 0038 or info@sta-uk.org WHEN WOULD YOU LIKE TO START? Learn at your own pace rather than in a classroom - the HSC course is designed for those who need a truly part-time study option with maximum flexibility!

Buy now: £1,195.00

41

Congratulations to the latest STA Diploma MSTAs Distinction Thomas Rees Cummings John Leiper

Pass Afnan Firdaus bin Abdul Shukor Aiman Fadzil Ben Claxton Bongani Ndlovu Bublee (Sanchayita Sharma) Goswami Cristian Stoian Danny Hoe Zi Jie David Broderick Eno Ikenna Eteng Erik Hansen Florentine Dusannier Freddie Humfrey GrĂŠgory Andre Idzkandar Bin Idzhar Marappan John Marshall Weir Joshua Waterworth Khoo Chai Teng Shirley

Leon A E Brown Lim Chin Pei Markus Boehmer Michael Rabindranath Tambyraja Mohamed Mustafa Fulad Mohamad Najib Mat Pa Mohamed Sabri Abdelmaguid Elbaz Sheir Neville Bradley Nikolaos Tsoukas Oliver Miles Sanderson Pink Parameshwor Khati Patrick Lee PC Peter Nielsen Ramlah binti Kabul Ranveer Singh Raymond Gilmour Sophie Jamaludin

42

STA Advertising Rates 2019/20 The Society of Technical Analysts Journal “The Market Technician” is a bi-annual publication, published in pdf format only.

The STA will accept advertisements in this publication if the advertising does not interfere with its objectives.

The appearance of advertising in the Market Technician is neither a guarantee nor an endorsement by the STA.

Position

Price

Specification

Inside Cover

£500.00

A4 Portrait, 210mm (w) x297mm (h), plus 3mm bleed

Full Page

£500.00

A4 Portrait, 210mm (w) x297mm (h), plus 3mm bleed

Half Page

£300.00

Landscape, 198mm (w) x 139.5mm (h)

Quarter Page

£200.00

96mm (w) x 139.5mm (h)

Circulation The Market Technician has a circulation of approximately 1500. Readership includes technical analysts, traders, brokers, dealers, fund managers, portfolio managers, market analysts, other investment professionals, and private investors.

Contact Contact Katie Abberton, Society of Technical Analysts on info@sta-uk.org or +44 (0) 207 125 0038 for more information.

Advertising policy Advertising is subject to approval by the STA Journal Committee. All advertisements must be non-discriminatory and comply with all applicable laws and regulations.

The STA reserves the right to decline, withdraw and/or edit at their discretion.

The Society is not responsible for any material published in The Market Technician and publication of any material or expression of opinions does not necessarily imply that the Society agrees with them. The Society is not authorised to conduct investment business and does not provide investment advice or recommendations. Articles are published without responsibility on the part of the Society, the editor or authors for loss occasioned by any person acting or refraining from action as a result of any view expressed therein.

Society of Technical Analysts Dean House Vernham Dean Andover Hampshire SP11 0JZ tel: +44 (0) 20 7125 0038 info@sta-uk.org www.@sta-uk.org

The Society of Technical Analysts (STA) is recognised worldwide as one of the largest and most widely respected not-for-profit organisations which trains and accredits members of the investment community, from industry professionals to private individuals, interested in the study of technical analysis. We have been setting the standards in technical analysis for nearly 50 years and have been teaching at several UK universities such as LSE, King’s College, Queen Mary etc. for nearly 25 years.

www.sta-uk.org www.@sta-uk.org