Winter 2013 SAMT Journal

The swiss

technical A n a ly s i s Journal

Herbst Winter Autunno inverno Automne hiver Autumn Winter 2013

The Swiss Association of Market Technicians GenÈvE • Lugano • ZÜrich

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• Winter 2013 • The Swiss Technical Analysis Journal

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Willkomm e n

Benvenuto Bienvenue

Welcome

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From the President’s Desk

Dear SAMT members & industry colleagues, The first two debut editions of this SAMT Journal proved to be a real success, with a record of over 5,000 readers following us from around the world.

We look forward to developing future publications of this unique SAMT Journal which is significantly growing in popularity both locally and internationally.

All three tri-lingual regional chapters of the SAMT have been very active with regards to technical analysis events in the last few months and the team shall continue with this positive momentum.

The main event hosted during last October was the IFTA conference in San Francisco, California USA. At this yearly event there were a wealth of market experts and many new developments in technical analysis. This ranged from new technical oscillators to other innovative mathematical calculations. The IFTA event has proven to be very helpful in the past and I am confident it will also be in the future.

It is fundamental to read technical analysis: Join over 5,000 SAMT colleagues locally and around the world that read our SAMT Journal.

I hope everyone who had the chance to participate at this unique global industry event had a good time and gained real value from learning some new technical techniques and ideas.

Finally, I also wish to congratulate everyone who has recently passed their professional CFTe diploma exams, notably Muneera Al Dossary, at Saudi Fransi Capital in the Kingdom of Saudi Arabia that had traveled to Geneva to train with our SAMT immersion course instructors.

We wish all our SAMT members and colleagues the very best success in their future aspirations.

Best wishes for the new year of 2014!

Daniel Daniel Stillhart, President of the Swiss Association of Market Technicians (SAMT)

The Swiss Technical Analysis Journal • Winter 2013 •

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The swiss technical Analysis Journal

Contents From the President’s desk Daniel Stillhart

The Swiss association of market technicians Zurich Chapter Events

An Interview with Robert Prechter Ron William, CMT, MSTA

LEARNING FROM THE PAST - Looking Back at the Last Century

Volume One, Issue 3 Winter 2013 Journal Committee Mario V. Guffanti, CFTe + 39 33 691 91 70 mario.guffanti@samt-org.ch

Mario V. Guffanti, CFTe & Alberto Vivanti

A Book Review & Interview - The Unconventional Van Tharp Thinking Mario Valentino Guffanti, CFTe

Charting the rise of technical analysis Kevin Edgeley, CFA Review of the 34th SFOA BÜrgenstock Forum September 2013 – Geneva

Forecasting versus Monitoring Market Trends Edward Loef, CFTe

THE POLITICS OF PEAK DEBT

Ron William, CMT, MSTA + 41 78 947 53 87 ron.william@samt-org.ch Design & Production Barbara Gomperts +1 978-745-5944 (USA) bgomperts@gmail.com

Brian Whitmer

A Technical Approach to Fundamentals The Jobless Claims Report Alberto Vivanti

The Swiss association of market technicians Geneva Chapter Events

The Swiss association of market technicians Zurich Chapter Events

NEW WYCKOFF SCHEMATIC An Accumulation Gradient of Rising Bottoms Hank Pruden, Ph.D.

Follow SAMT on

The Swiss association of market technicians Geneva Chapter Events

Lugano Fund Forum Mario V. Guffanti, CFTe

Samt Members @ The IFTA Conference San Francisco, CA USA - October 2013

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The Swiss association of market technicians

The Swiss Association of Market Technicians GenÈvE • Lugano • ZÜrich

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Board of Directors

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Journal Submission Guidelines and Advertising Rates

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Membership

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Education

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Partner Societies

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The Swiss Association of Market Technicians (SAMT) is a not-for-profit organization that does not hold a Swiss Financial Services License. It is the aim of the SAMT to promote the theory and practice of technical analysis, and to assist members in becoming more knowledgeable and competent technical analysts, through meetings and encouraging the interchange of materials, ideas and information. In furthering its aims the SAMT offers general material and information through its publications and other media.

The information provided on this Journal has been compiled for your convenience and made available for general personal use only.

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SAMT does not accept any liability for any investment decisions made on the basis of this information, nor any errors or omissions on the Journal. This Journal does not constitute financial advice and should not be taken as such. SAMT urges you to obtain professional advice before proceeding with any investment.

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Before relying or acting on the material, users should independently verify its accuracy, currency, completeness and relevance for their purposes.

The Swiss Technical Analysis Journal • Winter 2013 •

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Zurich Chapter event 14 November “Big Picture on European Markets and the Debt Crisis” Brian Whitmer, European Analyst, Elliott Wave International, Atlanta, GA, USA

Brian’s presentation can be downloaded from the SAMT Uberflip page at http://samtjournal.uberflip.com/ i/232395

13 November - Paris - Presentation to AFATE “Big Picture on European Markets and the Debt Crisis” Brian Whitmer, European Analyst, Elliott Wave International, Atlanta, GA, USA

• Winter 2013 • The Swiss Technical Analysis Journal

Robert Prechter was born in 1949.

He attended Yale University on a full scholarship and received a B.A. in psychology in 1971. He was a professional musician for four years, and in 1973-74 his band recorded an album, now on CD. In 1975, Prechter began his financial career by joining Merrill Lynch’s Market Analysis department under the tutelage of Robert J. Farrell and in 1976 began writing Elliott wave analysis of the financial markets.

In 1979, Prechter founded Elliott Wave International and began publishing monthly market analysis under the masthead, “The Elliott Wave Theorist.”

Prechter served as a member of the board of the Market Technicians Association for nine years and as the MTA’s President in 1990-1991. He currently serves on the advisory board of the MTA Educational Foundation. Over the years, Prechter expanded his business and now employs a staff of analysts who apply the Wave Principle to all major markets around the world. A decade ago Prechter created the Socionomics Institute, which is dedicated to explaining socionomics, and he funds the Socionomics Foundation, which supports academic research in the field. His book Elliott Wave Principle has been translated into a dozen languages, and Conquer the Crash was a New York Times best seller.

Prechter has made presentations on socionomic theory at Oxford, Cambridge, Trinity, the London School of Economics, Georgia Tech and MIT. In 2008 and 2010, the Georgia legislature invited Prechter to testify before its Joint Economic Committee regarding the state’s real estate and economic crises. In 2009, EWI’s bookpublishing division, New Classics Library, published Lewis Little’s “The Theory of Elementary Waves,” which postulates a purely physical, and thus rational, theory of sub-atomic physics. Prechter’s articles on the Shakespeare authorship question have been published in four journals and newsletters. Robert is a member of the Shakespeare Oxford Society, the Shakespeare Fellowship and the Triple Nine Society.

An Interview with Robert Prechter Ron William, CMT, MSTA Mr. Prechter, President of Elliott Wave International, was a guest speaker at the 2013 MTA Symposium in New York, USA “How will the next few years be characterized? Inflation, Deflation or Both?”

Ron William: The Market Technicians Association recognized you as the recipient for their 2013 Annual Award at their 40th Anniversary Gala Dinner. How did you feel being nominated for your life-long outstanding contribution to the development of technical analysis? (Please select link to review the MTA 2013 Award, Robert Prechter acceptance speech)

Robert Prechter: Humble and proud at the same time.

RW: Looking back in time, what intuitively attracted you to the study of financial markets early on in your career?

RP: It was a combination of things. I must have had some interest in money, because as a kid I used to search out rare coins back when it was a viable hobby. At a young age I mowed lawns, sold snow cones with my brother from our driveway, and worked at a grocery store after I got my driver’s license. But earning money was just a means to an end. I took my teenage savings at age 18 and went to Europe with my best friend for seven weeks. This is back when Europe on $10 a day was possible. Now it’s $20 an hour.

In college I had only lukewarm interest in my studies, but each time a course on mass psychology became available I got excited and couldn’t wait to take it. It happened twice, and both times the course was canceled. So I did some reading on my own. At the time my dad subscribed to Richard Russell’s Dow Theory Letters which intrigued me. The world of Dow averages, the advancedecline line and contrary opinion was mysterious at first, but the approach made sense as soon as I understood it. I read dozens of books on markets.

Eventually I figured out that movements in aggregate financial pricing are psychologically motivated.

That’s when the finance and mass psychology interests merged. On the side, I was passionate about pop music. In college I did a study connecting social trends and pop music lyrics. This third interest, which I thought was unconnected, eventually merged with the others.

RW: How much realization did you have of the vast ambitions that lay ahead?

RP: None. I was always driven but perhaps not always realistically. In my early 20s, I wrote songs and co-produced a record album. I wrote a spy novel and got an agent.

In each case, there were good possibilities. Things changed when I decided my passion was to be a technician. That’s when I got really focused. I had discovered things I wanted people to know about: first the Elliott wave model, then socionomics.

RW: What type of influence did your background in psychology and music have in developing your interdisciplinary thinking of the markets?

RP: Psychology underlies all financial markets. Markets, no matter how different, move up and down for the same reasons. I know people who have changed from being fundamentalists to technicians but none who converted the other way around.

I never had to do that. I was a technician from the get-go.

The Swiss Technical Analysis Journal • Winter 2013 •

Music didn’t figure in until early 1976. I was looking at a wall chart of the Dow and thinking about the big change I had felt in popular music around 1965-66. That was the day I had the socionomic insight: Waves don’t just describe stock market action; stock market action coordinates with all kinds of social trends. The motivation behind the parallel changes in the character of social expression had to be something fundamental. I decided that waves of social mood would tie all these trends together and explain them, too. Compatibly, if the market is a patterned hierarchical fractal as R.N. Elliott described, then its fluctuations must arise endogenously from human interaction, not from news. So, financial, economic and political events don’t cause mood changes; they result from mood changes.

RW: How did you progress to working with Bob Farrell, at Merrill Lynch’s market analysis department in New York?

What were the most memorable experiences?

RP: After an unsuccessful job-seeking tour of four major firms in New York, I asked my Merrill Lynch broker if his firm employed technicians. He said they had a whole department of them. Upon calling, he found out that their junior man was quitting. Thirty people had applied for the job. Bob Farrell took a chance on me, and I’ll always be grateful.

It was a department full of stars: Bob Farrell, Dick McCabe, Phil Roth, Steve Shobin and Bob Nurock are among the names people would know. My first mentor in the department, Ilona DeVito, was a Hungarian countess; the New York Times recently interviewed me about her.

York Public Library and paid for print copies. I found copies of his market letters at the copyright office in Washington.

Then I met with the publisher of Financial World magazine and got permission to reprint Elliott’s articles from 1939.

In the end, I published all of Elliott’s books, articles and available market letters as well as the Elliott wave market commentary by Hamilton Bolton, Charles Collins, A.J. Frost and Richard Russell. Now everyone has access.

RW: What was the main purpose behind writing “The Elliott Wave Principle” with A. J. Frost?

RP: I started writing a book on the Wave Principle and found out that Frost was doing the same thing, so I wrote him and suggested collaborating. He agreed and sent me what he had. I melded the two and turned it into a book. When it was published, in November 1978, I started schlepping books around New York in a shopping bag, pitching it to buyers at bookstores with financial sections. Three of them carried it. It started as a shoestring operation.

“fluctuations must arise endogenously from human interaction, not from news. So, financial, economic and political events don’t cause mood changes; they result from mood changes”

Bob graciously invited me to the MTA’s first annual conference in 1976, which got me involved with the organization. I guess my most memorable experience was in 1978 when the department held a year-long stock picking contest. That year was made for an Elliott guy. The Dow bottomed on March 1 at a 61.8% retracement of the 1974-1976 rally, rose in five waves into September and then plummeted. I bought all my stocks near the low and sold out in September.

The autumn collapse put everyone else near breakeven, so I won by a good margin. It wasn’t so much stock picking but wave analysis. Luckily, I didn’t have to try to do it again!

RW: During those early years, how accessible was literature on Ralph Nelson Elliott’s Wave Theory*?

RP: It was virtually unavailable. I learned the basics by reading Russell’s and Frost’s analyses in Dow Theory Letters in the early ’70s. I got hold of some thirdhand writings. In 1976, Steve Shobin gave me a fifth-generation Xerox copy of Bolton’s book. Then I went on a quest to find Elliott’s original books. I found them on microfilm in the New

RW: The Elliott Wave Theorist, which is still the flagship of your firm’s wide range of market reports, has been in publication since 1979. Can you describe its evolution over these past 34 years and what is your vision for the future of Elliott Wave International?

RP: My wife and I started the business together. I remember telling her I wanted to keep it just the two of us. Little did I know we would end up with nearly 100 people! The Theorist has changed in that I don’t analyze all the markets every month as I used to. I write on them only when I have something to say.

This has actually made my analysis better. Markets don’t say something important every month, at least not to me.

I also have the flexibility to talk about the big picture and socionomic theory.

We have so much talent here now. Steve Hochberg and Pete Kendall cover the markets monthly and short term in the U.S., while Brian Whitmer, Mark Galaseiwski and Chris Carolan cover Europe and Asia, and Jeff Kennedy covers commodities. These guys are so good at analysis and writing that if I were outside the firm and could read only six people, I would choose them.

We also have a stable of analysts who cover specialty services – currencies, interest rates, energy markets, metals, and commodities – from long term to around the clock. We also have a Flash service, where we make market calls for traders.

We are in the process of refining a computerized expert system that we’re just now beginning to employ in making market calls. We’ll report on the results soon.

• Winter 2013 • The Swiss Technical Analysis Journal

I also formed the Socionomics Institute, which publishes The Socionomist and organizes annual conferences. You can find SI at www.socionomics.net. As for the future, I am working on a collection of studies in socionomics and plan to write a more complete book on Elliott waves.

RW: How do you suggest the Elliott wave model is best used – in isolation or in tandem with cycles or specific market timing indicators?

RP: I have always employed indicators. Whether using them helps or hurts wave analysis is open to debate. My view is that they help in all cases except when readings are surpassing historic extremes.

have done all they can to get prices to hold up. But they’re failing. Credit is already contracting in Europe, Japan is deeply into deflation, China is on the brink of a credit crisis, and interest rates have begun to rise around the world.

I think deflation is going to crush the prices for all investments globally. Many banks and insurance companies will fail, and pension funds will fold. The only thing that will gain in value is cash. At some point in the crisis it will pay to switch to gold and property.

Deflation is still the most contrary opinion in the financial One thing I would state unequivocally is that you can’t employ universe by a huge margin, as I demonstrated at the MTA indicators effectively without understanding the degree of the symposium in April. I think the world will be a strikingly wave in progress. That’s what tells you how different place in just a few years, and extreme to expect the indicators will get. almost no one is properly prepared for it.

Knowing the degree and wave structure of “Credit is already contracting a move has allowed me at times to predict in Europe, Japan is deeply into RW: How would you compare the the levels of indicators, for example in late Kondratieff cycle’s winter phase that some deflation, China is on the brink of a believe we are currently experiencing 2008, early 2009. credit crisis, and interest rates have to the historic depression period of the

begun to rise around the world.”

Another thing I would assert is that 1930s...? quantification of indicators is a path to RP: The Kondratieff cycle has continued failure. Market prices form a fractal, and as to operate since it was first proposed. soon as you apply quantitative parameters, That’s a pretty good sign of something real. Each cycle has you blind yourself to everything outside those parameters. differences, which the Elliott wave model helps explain and Patterns have only relative quantities, not absolute ones. anticipate. The low in 1896, for instance, was mild, fitting RW: What is the best method of using risk the Supercycle-degree third wave advance in progress at the management in the application of the Elliott wave time. The current peaking process is of one degree larger than model? that of 1929, so the mania for investments has been longerRP: Jeff Kennedy and our education specialist Wayne Gorman lived, and the upcoming low should be commensurately more devastating financially, economically and socially than that of have just finished a book for the 1932.

Wiley-Bloomberg Financial Series called the “Visual Guide to Elliott Wave Trading.” They discuss in RW: What key indications are you anticipating for the endgame of the current secular bear market in stocks? detail how they go about entering, RP: The end will come when debtors default, the global exiting and managing risk in trades prompted by Elliott wave analysis. financial obsession disappears, and people swear off financial assets for the rest of their lives.

Most of them are trades they actually made. They also discuss their errors and how to avoid them.

RW: Can government policy help in reducing potential Those interested in this topic should go there. deflationary pressures ahead?

RW: In your book “Conquer the Crash,” you accurately forecasted the credit crisis, the real estate and stock market bubbles. What is your view of the current markets and what do you believe would serve as the best strategy to preserve capital?

RP: I didn’t anticipate the commodity bubbles, but everything otherwise looks to be on track. I’m bearish across the board for stocks, bonds, real estate, commodities and precious metals.

The true top in stocks was in 2000. The top in real estate was in 2006. The top in commodities was in 2008. The top in metals was in 2011.

It’s been 13 years of rotating tops, and the inflationary forces

RP: Government has been the biggest proximate cause of the problem. It fostered debt expansion by creating the Federal Reserve System, the FDIC, the Federal Home Loan Banks, Fannie Mae, Freddie Mac, Ginnie Mae and the student loan programs. Government has pushed credit on people like a heroin dealer in the ghetto. It is the main reason debt has expanded to unsustainable levels. Government can only continue to make things worse and cannot stop the inevitable outcome.

RW: How would you describe the study of socionomics and what level of importance does it have in today’s economic and politically uncertain landscape?

The Swiss Technical Analysis Journal • Winter 2013 •

RP: Socionomics is the study of how waves of social mood influence the character of social actions, in every area from macroeconomic trends to political decisions to trends in music, entertainment and popular culture. Socionomics is always important, but it is especially so when social mood is at extremes. It has been at a positive extreme for much of the past 15 years.

RW: On a personal note, what other passions do you enjoy in life?

RW: In your opinion, to what extent has “the universal applicability of technical analysis” grown over the years?

RP: My weekends over the past 15 years have been devoted to reading the plays, poems and stories of the Elizabethan era for a book I’m writing. I like the camaraderie at our company and enjoy seeing people find their niches. Talking to my market forecasting buddies is still fun, as they are the only ones who know what the life is like. If I can squeeze in a swim at the end of the day, that’s the tops.

RP: People’s beliefs about financial causality change along with the trends in social mood. Technical analysis always gains in popularity when markets move sideways or down, and it loses popularity when they rise. I suspect that relationship will never change.

RW: I also understand that you are an avid reader of Shakespearean literature as member of the Shakespeare Oxford Society and the Shakespeare Fellowship. May I ask if Shakespeare were alive today and were to write a play about the experiences of the financial market what type of play would it be?

RW: What do you recommend the next generation of technicians strive toward in order to ensure further success within the industry?

RP: The markets would start out As You Like It, morph to A Midsummer Night’s Dream, go through The Tempest and end with the bloody massacres of Titus Andronicus. As investors acted out A Comedy of Errors, the misanthropic Timon of Athens would be in the wings, mumbling, “Each one will pay, Measure for Measure.”

RP: Stop resorting to external-cause thinking when performing financial analysis. It can’t work and doesn’t work, because the theory of causality behind it is false; it’s backwards. Economic and political trends and even central-bank actions lag the market; they don’t lead it. Pure technicians are rare. Be one.

* References: R.N. Elliott’s Masterworks; R.N. Elliott’s Market Letters; The Elliott Wave Writings of A.J. Frost and Richard Russell; The Complete Elliott Wave Writings of Hamilton Bolton.

For additional information about Robert Prechter, CMT, go to www.robertprechter.com and Elliott Wave International, go to www.elliottwave.com To learn about the Socionomics Institute, Socionomic Theory and the new DVD “Robert Prechter at Oxford, Cambridge and Trinity,” go to www.socionomics.net The world’s few deflationists: www.deflation.com To contact the author of this interview: Ron William, CMT, MSTA ronwilliamPR@gmail.com www.ronwilliam.com

10 • Winter 2013 • The Swiss Technical Analysis Journal

LEARNING FROM THE PAST Looking Back at the Last Century Mario V. Guffanti, CFTe & Alberto Vivanti History repeats itself. This is one of the basic principles of technical analysis and, therefore, technicians love to detect analogies. If such similarities cover long periods of market history, then the analysis becomes more interesting.

A typical analogy that we have been observing for a long time, like many other observers of the historical trends do, is the evolution of Wall Street since the beginning of this century, compared with that of 1970s. They have wide swings in common with a long sideways trend. In both cases, huge rises have alternated with severe slumps that sometimes halved the value of the most popular indexes.

Thirty years ago such a trendless phase, that lasted almost 15 years, ended with a memorable bull market. The present one has not ended yet, but its temporal phase looks quite ripe.

Chart 1 S&P 500 1953-2013

Chart 1 shows 60 years of history in the S&P500. The similarity between the two periods, 1968-1980 and 2000-2013, is highlighted by red ellipses.

This year’s breakout of the highs, 2000 and 2007, is very similar to that of 1980, when the highs of 1968 and 1972 were exceeded. In both cases the breakout happened after the market had spent 12-13 years sideways. Nevertheless, such a breakout did not signal the beginning of a new bull market, but rather was followed by a sharp downfall that lasted one and half years. The market found a bottom only in 1982, after leaving a good 25% on the ground, which started the memorable bull market that we all know.

In more detail, Charts 2 and 3 show the S&P 500 from 1972 to 1983 and from 2007 through October 2013. The analogies are impressive. In 1973-74 the S&P halved its value just like 2008-2009, but more quickly. A new correction of about 18% followed a strong recovery that lasted one and half years. In 2011 it was much faster than in 1977. A broad triangle is visible in both charts, a continuation pattern that, in the 70s of last century was completed by the breakout of 107 points, with a target at 160 that was reached in 1983.

Today, a similar breakout happened in 2012, beyond 1360: its target is a little above 2000.

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It is also worth noting that in both charts the moves are quite similar in width but, starting from the second lower high in the broad triangle, the moves since 2011 have been 86% faster. The reasons are not easy to explain, even if recent studies show that the huge quantitative easing measures of the Federal Reserve (indicated by the dotted red vertical lines on Chart 3) created large distortions in the markets, especially a value increase in the financial activities, less and less linked with the economic fundamentals.

Chart 2: S&P 500 1972-1983

Chart 3: S&P 500 2007–October 2013

To conclude, the scenario is optimistic but insidious: as noted before, the market had spent two horrible years before starting a new bull market in the 80s. In fact, a severe slump occurred in 1981 and 1982. It is also true that when history repeats itself it does not happen exactly the same way. Therefore, it would be naive to implement a strategy just based on analogies. Instead, we need to rely on the classical analysis that suggests, at this stage, to watch the support of the August 2013 low (1625) before considering a reversal in the medium period up-trend.

Mario Valentino Guffanti, CFTe is a Financial Advisor, Certified Financial Technician and Researcher. He is the Assistant Vice President of the Swiss Italian Chapter of the Swiss Association of Market Technicians (SAMT) and also a Lecturer in Technical Analysis at the Centro di Studi Bancari in Vezia (CH).

Alberto Vivanti, Independent analyst, founder of Vivanti Analysis in 2003. Alberto is a technical and quantitative analyst since the early 1980’s, with a sound experience as an asset manager with Swiss Institutions. Author of a technical newsletter, lecturer for institutions and instructor in Technical Analysis courses in Switzerland for the IFTA Certification, author of articles and books, has been co-author of a book with Perry Kaufman. Alberto chaired the IFTA conference held in Lugano in 2006. He has been official speaker at the IFTA Conferences 1998 in Rome and 2006 in Lugano.

Alberto is Vice President of the Swiss Association of Market Technicians, representing the Swiss Italian Chapter.

12 • Winter 2013 • The Swiss Technical Analysis Journal

Book Review

Title: Trading Beyond the Matrix: The Red Pill for Traders and Investors Author: Dr. Van K. Tharp Publisher: John Wiley & Sons – NJ – 2013 – 397 pages

A Book Review & Interview the unconventional Van Tharp thinking Mario Valentino Guffanti, CFTe The Review Guru Gerald Loeb (1899-1974) notes in one of his books1, “The most important single factor in shaping security markets is public psychology.” He synthetizes one of the main factors on which technical analysis is based: for technicians, it is important to understand the psychology of investors which is then manifested in different kinds of patterns in price charts. Why?—because every pattern has an underlying explanation, a story based on market psychology and crowd action and reaction2.

It seems that understanding psychology allows the trader more possibilities of profits from his activity. While in the past it was more complicated to explain and scientifically measure the presence of the psychological world in financial markets, recent academic studies and the emergence of behavioral finance have increasingly reinforced the link between psychology and finance, so, this is still a human game3.

Furthermore, technicians who play the game are human beings. Can a trader’s psychology enhance his strategies in order to have better result in terms of trading performance?

One of the first psychologists that extensively studied this topic is Dr. Van K. Tharp, known for his interview in Jack Schwager’s Market Wizards4, and for his acclaimed books.

Dr. Tharp has spent a good part of his career studying how stress affects human performance. The focus of his research has mainly been about interviewing and studying top traders in order to create a model for success. As we read in Schwager’s book, his basic theory is that by teaching the winning traits of the top traders (not specific trading methodologies), he can dramatically improve the performance of less successful traders and investors. He now works with his clients for 4-6 years in his Super Trader program. During the program they have continual communication and feedback from Dr. Tharp and can attend all of his workshops while they make at least five major psychological transformations, develop a trading business plan with three systems, and prove they can trade the plan with at least 95% efficiency5.

I think that Tharp’s latest book, Trading Beyond the Matrix, could be considered a cornerstone of this project as not only a personal look inside the performances and experiences of the traders who have and are completing the program, but also what it takes and the milestones you must succeed to become a Super Trader.

I must warn the reader that this is an unconventional book. This is not a book about trading or money management techniques with a part about psychology like that of Tharp’s mostrecognized book, Trade Your Way to Financial Freedom. Dr. Tharp is well aware of the many good trading techniques, which are mainly exposed in his other books. This new book focuses on the entire process of enhancing one’s trading skills based on the trader as human being and the best techniques of self-work and improvement. If the reader knows the basics of psychology or other

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mind techniques, he will appreciate the content of this book. On the other hand, if this is the first time the reader has been exposed to the ideas it could require a second reading to fully understand “Tharp Think”, particularly the second part of the second section and the third section of the book.

The title of the book refers to the metaphor contained in science fiction action film, The Matrix (1999). This metaphor suggests that we are all programmed and we live in a world of illusion shaped by our programming. We have two possibilities, as Morpheus says in the movie, we can take the blue pill and go back to a comfortable sleep where nothing changes. Or, we can take the red pill and see how deep the rabbit hole goes. Van Tharp’s book is that of the red pill where the author states that nothing would change until we change and provides the method to transform ourselves to be Super Traders: this is the basic idea of performing well in the Matrix and going beyond it.

The book is divided in three sections. Each section deals with a level of transformation described in detail.

Level I Transformation of the trading game. The first level is related to the transformation of the trading game that is, as Dr. Tharp says, from rules that assure big money wins to rules that give the astute trader a huge edge. We have a detailed chapter dedicated to these rules that the traders must know and understand. These rules are “Tharp Think concepts”, not only created by Dr. Tharp, but also derived from the modeling work with great traders.

Level II Understanding the Matrix and reprogramming yourself. The second level of transformation is the related to the metaphor of the book’s title. Dr. Tharp asserts the whole world is shaped by our beliefs and, for that reason, we must analyze them: we don’t trade the markets, we trade our beliefs about the markets; and, if our beliefs are not useful, we are in trouble.

Once we have realized that our beliefs control our reality, we have the opportunity to completely change our experience of the world by changing our beliefs. Dr. Tharp suggests various techniques in order to identify and eliminate or alter the non-useful beliefs. An entire chapter is dedicated to the techniques that deal with our conflicting parts, the first being parts negotiation. Parts negotiation is based on the idea that we have many different parts inside us.

The author explores this idea and how to join our parts together.

There is also a chapter that is dedicated to transformational techniques with a strong spiritual component. The author finds that these techniques are the ones that tend to be life-changing.

All these techniques are given because most people have difficulties in adopting the first level of transformation: they are controlled by their beliefs, by the emotional charges attached to those beliefs, and by the various parts of themselves. For this reason many people must undergo a great deal of personal transformation to adopt Level I transformations.

Level III Trading beyond the Matrix. The third level of transformation deals with changing our level of consciousness— that is, our level of

awareness. The author suggest that you quantitatively measure this level through the work of David Hawkins6, a successful psychiatrist that had a very high level of consciousness and performed many miracles on his patients. Hawkins describes human consciousness using a log scale from 1 to 1.000. The numeric level that separates the positive from negative is 200. According to Hawkins, Gandhi had a consciousness of 700 and was able to defeat the British Army, whose collective consciousness was 175. Raising one’s level of consciousness doesn’t only help people like Gandhi, it can help us as traders. If we are trading at a low level of consciousness we are probably trading out of fear, greed or desperation. Raising our level of consciousness will bring us to the point where we can see what’s happening in the market without a lot of internal interference: a state where trading will become easy for us.

The next level of transformation, level IV, requires one to reach a state where consciousness reamins permanently over 600 on Hawkins scale.

At the end of the book, the author considers two important application areas: (1) learning Tharp Think concepts and (2) transform ourselves in order to adopt these concepts along with three other key areas. The third area talks about how to develop a personal business handbook for trading/investing (a checklist for that work is included in the book). The fourth area is about assessing our preparation for trading which includes another checklist in order to help the trader attain this level of transformation. The last area is about understanding our trading mistakes.

The book has been created from the experience collected from several years of workshops and research. For this reason, Dr. Tharp has written his book exposing his theory based on his pragmatic work that also includes many chapters written by Super Trader candidates. They contribute to the project by sharing their experiences about their transformations throughout the course of their study under Dr. Tharp.

The book it is not just a description of theoretical “Tharp thinking”, but a real step-by-step manual with exercises that allow the reader to enhance his mind and his work.

The Interview Mario V. Guffanti (MVG) - Since your first interview in Schwager’s book many years have passed, but the principles that you outlined in that interview are still mentioned in your book Trading Beyond The Matrix. Which are the new topics that you discovered in your research path and how these topics influenced the creation of this new book?

Dr. Van Tharp - So much is new since 1989 when that book came out. I’m an NLP modeler. Since that time, I’ve modeled things like system development, how to use position sizing™ strategies to meet your objectives, how to measure market types and how to design different systems for different market types. In 1989, I was still just scratching the surface of the impact of psychology as it applies to trading and one’s life. Now we talk about levels of consciousness and getting to levels of consciousness that were formerly reserved for a very few spiritual gurus. Yes, a lot is new.

MVG - In your book you said that we don’t trade the markets, but we trade our belief about the markets. And if our beliefs are

14 • Winter 2013 • The Swiss Technical Analysis Journal

not useful we need to replace them. I think this is the starting point from where we need to use psychological techniques to start our personal transformation in Super Traders. I guess the really great traders you have encountered in your work have the most part of right beliefs: do you think they have reached their situation with a personal research or it is just a matter of a natural and rare attitude?

Dr. Van Tharp - Well, I tend to gravitate toward the NLP proposition that if one person can do it, anyone else can do it- but there are a lot of caveats to that. While certain types of people can do it, the more you understand and apply transformation techniques, the more likely you are to succeed.

For example, as you mentioned, we create our reality through our beliefs. So you can start to transform your reality when you start to look at your beliefs. Then you can ask the question, “is this useful or not?” If the belief isn’t useful, it is easy to transform unless it is cemented in place by a lot of emotional charge and then you have to release the charge.

MVG - Galileo Galilei said: “Measure what can be measured, and make measurable what cannot be measured”.

I would like to share with you this concept in explaining your new book. I mean when people read about trading systems, money management, position sizing and so on, all is comprehensible: we all have a reference mental model for these things. But when we speak of psychological or spiritual techniques, a person without specific knowledge on these topics could have difficulty to understand what is proposed to him.

Some readers, especially on the part of the path about spiritual techniques, may feel this topic very subjective and therefore could not agree on what you suggest. Did you find measurement parameters for everybody that allowed you to suggest certain techniques instead of others?

Dr. Van Tharp - Well, I actually give a measurement for consciousness level in the book. The higher the level of consciousness, the more you can see the market for what it is and then less likely you are to be controlled by your beliefs and conditioning. Here I’m referring to David Hawkins scale. It is a numeric scale numbered from 1 to 1000, where 1000 is the level reached by Buddha, Jesus, Krishna, etc. Fear comes in at about 75, greed comes at 125. I wouldn’t expect people to do well as traders until they reach at least 350 — the level of acceptance.

David Hawkins says there is a direct correlation between happiness and level of consciousness. So I developed a happiness test that ranges in scores of negative 55 to positive 85. Most people who graduate from the first level of the Super Trader Program tend to have a permanent happiness score (at least as a far as I can tell it’s permanent) of 70 or higher. (Anyone can take this test, it’s http:// vantharphappy.appspot.com/)

MVG - I am fascinated by your new goal: to fully understand and describe a new target for the Super Trader to reach a state where consciousness is permanently over 600 on Hawkins scale. Can you tell us more about that?

Dr. Van Tharp - Well, it’s called awakening. It requires Divine Grace to be given. When it happens there are actual changes to the brain. For example, the left parietal lobe, which gives you a sense of separation (and self), must shut off. The pre-frontal cortex, involved in natural joy and bliss, must become more active.

The Oneness movement of India says that each awake person will influence 100,000 other people so that when 70,000 people were awake, it would be enough to transform the seven billion people on the planet. According to the beings at Oneness University who can measure the awakened state, the planet reached 70,000 awake people in August 2012.

Right now 100,000 people are “waking up” every month and Oneness says there are now over a million awake people on the planet. Very soon we will start to see major changes in the way people interact with each other as awake people exert more and more impact on humanity. At least seven of my supertraders are now “officially awake.” And as of September 21, 2013, there are officially over 1.3 million awake people on the planet according to the people at Oneness University who have a high enough level of consciousness to assess the situation.

I have heard about one person in Hong Kong who read Trading Beyond the Matrix in March. He immediately took the two day blessing giver’s course in Hong Kong and went to India for a 28-day depending course where he was pronounced “officially” awake. Everything changed for him and I think we’ll see many more stories like that soon.

This might seem a little far-out to someone who is not awake, but what is really happening is that when you wake up, personal suffering tends to disappear and you are generally happy all the time. That certainly is the case for me now. And what’s more interesting is that you can see things as they really are. The lady who wrote chapter 16 of Trading Beyond the Matrix had reached that state and you can see the impact on her trading from that interview.

Whether you accept this or not is a little like the subtitle of the book. If you take the blue pill you go back to sleep and everything remains the same. If you take the red pill, by reading the book and having more awareness, then “welcome to wonderland where I’ll show you how deep the rabbit hole goes.”

But of course, this is an area of ongoing study. If you want to really understand what it’s like to be awake, then a great example of that can be had by readying Byron Katie’s book A Thousand Names for Joy.

The Swiss Technical Analysis Journal • Winter 2013 • 15

MVG - You introduced new concepts like “to be awake” that needs a reading of Byron’s Katie book to be really understood.

And you said that this is an area of ongoing study. It would be interesting if you can tell us more about it.

Dr. Van Tharp - Okay, we can probably say the following: What you know of as you, Mario Valentino, is just a collection of parts or roles you play in life. There are several chapters in Trading Beyond the Matrix devoted to understanding parts better. When you are not awake, you think those parts are you. You think there is someone in there who is thinking, listening, seeing, doing, etc.

You think there is a controller. But in reality, that is something that your brain is doing as an illusion.

Your left parietal lobe, as a survival function, creates a sense of you.

For many, many years, that function has been important for survival — to think that you are separate from everyone else. But as you awaken, the left parietal lobe tends to shut down and more activity tends to occur in the prefrontal cortex. And the net result is that the illusion of a separate you tends to disappear. Now things like thinking, seeing, listening, doing still occur but there is no sense of someone separate is doing them. Instead, everything happens automatically.

MVG - This seems an interesting path that requires a deepening of these new topics: in Trading Beyond the Matrix there is an appendix of core readings for that. The book is written very clearly, but it is also very complex. The techniques you mentioned and the exercises that you suggested are something of brand new for the most part of the readers. Can you give advice to first time readers?

Dr. Van Tharp - I knew the book would be difficult for some people and it would turn off a lot of people because of the spiritual beliefs contained in it. However, I wrote the book with the idea that I wouldn’t hold anything back. Every Tharp Think principle is in Part I, listed in tabular form. Each transformational technique is described and well-illustrated with examples, so people are able to do them. Just read the book with an open mind and do it.

As a result, there is no “you” around to judge things. There is no you around to say, there is a way things should be and if they are not that way, then there is something wrong with me or them or it. Instead, you tend to see “what is” as being perfect. This is very obvious when you read Byron Katie’s book, A Thousand Names for Joy.

You might start by finding 200 identity level beliefs. These start with the words “I am” and are then followed by some description.

For example, “I am not worthwhile” is a belief that a lot of unhappy people might have. Run each belief through the belief examination paradigm given in the book. If you decide the belief is not useful, then replace it with something more useful. This should be easy to do if the belief doesn’t have a lot of emotion stored in it. If it does have a lot of emotion stored in it, as I would suspect “I’m not worthwhile” would have, then use the feeling release techniques described in the book to release that. Doing this exercise might take a long time, but it will have a huge impact on just about anyone who is willing to complete it. You don’t need anything more than to read the book to do it.

The sense of you disappears, so there is no controller, no seer, no doing, no listener, no thinker.

And, of course, that is just the beginning of the journey down the rabbit hole.

Since there is no controller, you have a sense of things happening automatically, either based upon your conditioning (which doesn’t necessarily disappear when you awaken) or based upon simply following your internal guidance.

MVG – And, as Marcel Proust said: “We don’t receive wisdom; we must discover it for ourselves after a journey that no one can take for us or spare us”.

There is no judgment, so you can begin to see the perfection of what is. The natural joy that is inside starts to shine through and you become much, much happier, but for no reason.

And for traders, you can see the markets for what they are. You can see what is actually happening at any given time and respond to it in the now. This is what I call trading in the now and it tends to be easier and more profitable than reacting to the market and judging it (or worse yet, listening to other people’s judgments).

I don’t know if that helped or confused things but you asked what awakening is. You really are not that much different. Before awakening you chopped wood and carried water and after awakening you do the same, except that you see the natural perfection of what is and are much happier. And you stop suffering because you judge and then resist what is.

Thank you, Dr. Tharp. n

Footnotes 1 G. M. Loeb – The Battle for Investment Survival – Wiley – 2007; 2 A. Lo and J. Hasanhodzic – The Evolution of Technical Analysis – Bloomberg Press – 2012 – Chapter 5 – Chart Patterns; 3 A. Lo and J. Hasanhodzic – The Heretics of Finance – Bloomberg Press – 2009 – What did we learn from interviews?; 4 J. D. Schwager – Market Wizards – Marketplace Books – 2006 – pp.

411-430; 5 Op. cit. J.D. Schwager - p. 411-412; 6 D. R. Hawkins – Power vs. Force: the Hidden Determinants of Human Behavior – Carlsbad, CA – Hay House – 1995.

Mario Valentino Guffanti, CFTe is a Financial Advisor, Certified Financial Technician and Researcher. He is the Assistant Vice President of the Swiss Italian Chapter of the Swiss Association of Market Technicians (SAMT) and also a Lecturer in Technical Analysis at the Centro di Studi Bancari in Vezia (CH).

16 • Winter 2013 • The Swiss Technical Analysis Journal

Reprinted with permission. Professional Investor, Autumn 2009, www.cfauk.org

Charting the rise of

technical analysis Kevin Edgeley, CFA

T

echnical analysis is gaining more popular acceptance with advances in behavioural finance, with which it shares many beliefs. The Random Walk theorist and the technical analyst have been prickly adversaries for over 30 years. Burton Malkiel’s best-selling book A Random Walk Down Wall Street was first published in 1973 after a 20 year bull market; a “golden age” of growth, low inflation and minimal unemployment.

The book suggests that markets fluctuate with no set pattern around an intrinsic fair value. If the theory holds, prices will reflect all available information and any residual excess return will be random; the best strategy in the stock market in such an environment is one of buy-and-hold. The book suggests no excess return can be generated by the use of technical or fundamental analysis. Certainly, in the years preceding 1973, buy-and-hold seemed to be the best course of action for equities, but in the 10 years thereafter it was significantly less profitable.

The crowd drives the trend

Executive Summary • Fundamental analysis is far more widely used than technical analysis.

• Studies of markets show that they are not random and investors’ behaviour can be predicted.

• Technical analysis is proving its worth in the current difficult market conditions.

The investment profession has long been divided over the benefits of technical analysis, but the approach is gaining popularity. Kevin Edgeley, CFA, takes a look at how it works.

The rational investor, Homo Economicus, beloved in the ivory towers of academia, bases his decisions on the maximisation of wealth and utility. However, he is an illusive creature once he steps on to Wall Street and his progress is far from random. The advances and recognition of behavioural finance with its basis in cognitive and emotional biases do not explicitly commend technical analysis, but the technical and behavioural approaches share many beliefs. Traditional economics proposes that the rational investor will learn from past mistakes, but a psychological approach would argue against this. Psychologists and technical analysts suggest that past behaviour is the best predictor of future behaviour; cognitive biases cause sentiment to fluctuate cyclically from extreme optimism to extreme pessimism Kondratieff, Schumpeter and Kitchin, among others, have identified repetitive cyclical rhythms in economic activity. It is the interaction of cycles of different length that give the appearance of randomness, but in reality this interaction is far more predictable. The cyclical rotation out of stocks and into commodities in the 1970s may be before the memory of many currently in the market place, but again, after a 20 year bull run in equities, we have seen a similar rotation since the 2000 stock market peak. Politicians may make claims to reduce boom and bust, but attempts to smooth out economic activity are often in vain, as we are now discovering.

The Swiss Technical Analysis Journal • Winter 2013 • 17

STATS

The argument of what drives asset returns is one of the logical against the psychological. The “rational” investor may exist in isolation, but when he enters the market place he becomes one of the crowd and is governed by the group mentality. This herding behaviour is often driven by expectations based on prior price action; in this respect the individual can become influenced by the sentiment of the crowd. The market reaction to a news release is based on how the outcome differs from the pre-announcement consensus forecast. Crowds can sometimes reflect better the sum of the individual members’ knowledge but can also behave irrationally when trends extend; hence the old Wall Street adage - “right during trends, but wrong at both ends”. As Charles Dow said “The market reduces to a bloodless verdict all knowledge bearing on finance”. In this respect technical analysis agrees with Fama’s Efficient Market Hypothesis in that prices discount everything, reflecting shifts in supply and demand; where it differs is in emphasizing the potential for crowd psychology to drive trend activity.

The trends are in the distribution tails Biases prevail in almost all market behaviour; these can range from overconfidence in a price forecast to the rejection of data or analysis that contradicts one’s current trading position. An expectations bias can develop when relying on a past correlation between two securities to continue indefinitely. Optimism and confidence dominate decision making and investors tend to overestimate their knowledge, underestimate risk and exaggerate their ability to control their emotions.

A key argument against the random walk theory is extreme price movement. Prices do find a long-run equilibrium, albeit a rising one in stocks linked to economic growth, but there are also periods of serial correlation. How often do moves of three, four or more standard deviations from the mean occur? Certainly more than a normal distribution would allow. Market returns do not follow a normal path, the distribution being more leptokurtic, with fatter tails at the distribution extremes reflecting the trend activity that a technical analyst looks for.

Technical tools The ability to identify clearly the prevailing phase of the market is critical to successful analysis. A range-bound market of price fluctuations around a stationary mean provides trading opportunities if one can identify when prices will revert to the mean. By using a bounded oscillator such as the Relative Strength Index it is possible to time entry and exit points to trade the range. A trending market provides quicker returns, but oscillators are often a poor tool in such an environment; they will gravitate to the upper or overbought area in a bull trend and the lower or oversold area in a down trend. The more traditional tool for trading a trend is a moving average system which will maintain directional positions as the trend develops, but the problem remains – which is the best moving average? The significance of a break

“Investors tend to overestimate their knowledge, underestimate risk and exaggerate their ability to control their emotions.”

18 • Winter 2013 • The Swiss Technical Analysis Journal

‘Technical analysts have often been accused, probably rightly in many cases, of a lack of rigour in testing their beliefs.” above or below a moving average is often over-emphasized. Contrary to popular opinion, the optimal average length varies across time and across asset class. The identification and measurement of trend strength is the key determinant in investment selection; an indicator such as Wilder’s Average Directional Index (ADX) can be used to measure the relative trend performance of different assets but note that this indicator measures the strength of a trend, not its direction. Many funds and managed programs use variations on these themes for price direction and market timing purposes.

Complementary analysis The technical and fundamental approaches are not necessarily contradictory. Fundamental analysis looks at the cause of economic change – supply and demand, productivity, industrial development; technical analysis looks at the effect. These fundamental drivers impact on the market consensus and thereby on price. Price can and does vary from a fundamental fair value. Opinions may differ, particularly at turning points, but the objective of identifying a trading opportunity, whether from repetition of historical movements in accounting ratios or from repetition of psychological behaviour, drives both disciplines. The difference can often be one of value against momentum. In fundamental terms, a stock may look cheap and worthy of a buy recommendation but technically, the momentum of a price trend may make the stock cheaper still, as the move enters the fat tail of the distribution. The net result may be a buy at the same level as a fundamental strategy buys against the trend on the way down, while a technical strategy buys with the trend on the way back up.

Professional fundamental analysts vastly outnumber those using a technical approach, but the technical contingent is growing and is supported by regional societies in the same way as the CFA. The UK Society of Technical Analysts (STA) was founded in 1968 to promote the use and understanding of technical analysis as an investment tool.

The STA now numbers over 800 members of which around 80% work professionally in investment companies and multinational organisations. It is also a founder member of the worldwide body - the International Federation of Technical Analysts (IFTA).

Many regional chapters run an education syllabus; in the UK this leads to the STA Diploma, and on further study to the IFTA Master of Financial Technical Analysis. This education process aims to provide more rigorous support for technical methods.

The current market environment is supportive of further growth in the use of technical methods. In the 1970s, the US stock market changed phase from trend to range and although there were periods of serial correlation within this range, these trends were short term and fluctuated around a fairly stationary long term mean.

This period led to a number of innovations in the technical world and it is likely that the current market conditions will engender further expansion in the use of technical analysis.

Technical analysts have often been accused, probably rightly in many cases, of a lack of rigour in testing their beliefs. There have been a number of empirical tests on the validity of chart patterns, with varying results as these subjective patterns are difficult to quantify. Others have found persistent serial correlation in prices - the so-called momentum effect. Many academics, however, remain sceptical of technical analysis due to its inconsistency with traditional financial theory. Blind adherence to a moving average breakout Kevin Edgeley, CFA or a particular chart pattern as a signal for Kevin Edgeley, CFA is a technical analyst a price move does not endear technicians at Caxton Europe LLP, a macro hedge to the broader market. However, in the fund. He has worked in the financial same way a fundamental analyst would industry for over 30 years and spent not rely purely on a low P/E ratio for 15 years as a trader on LIFFE. He has recommending a stock purchase, sound an MSc in Finance from the London Business School, is a CFA charter holder technical analysis relies on a mix of and a member of the Chartered Institute different indicators to generate a trade for Securities and Investments. He is a recommendation. Technicians make no member of the UK Society of Technical claims to get the market right every time, Analysts, the American Association of but more and more empirical research Professional Technical Analysts an also on behavioural principles reinforces holds the Master of Financial Analysis the case for technical analysis to play a from IFTA. more prominent part in the investment process.

The Swiss Technical Analysis Journal • Winter 2013 • 19

Reprinted with Permission. IFA’s Wealth Gram, Vol. II - N° 21 - Octobre 2013

Review of the 34th SFOA BÜrgenstock Forum 25-27 September, 2013 – Geneva “SFOA presented this year’s meeting in partnership with the Futures Industry Association (FIA), a logical pairing with both organizations sharing the same issues.

The choice of Geneva as a new location was equally logical, as this beautiful city is an important center for the derivatives industry.

Beyond the warm welcome addressed by SFOA Chairman, Otto Nägeli, and Walt Lukken, President & Chief Executive Officer, Futures Industry Association, the participants were also welcomed

by Guillermo Valles Galmés, Director, Division for International Trade in Goods and Services and Commodities, UNCTAD (United Nations Conference on Goods and Trade and Development). The close association between UNCTAD and SFOA goes back many years. They jointly launched the Emerging Markets Forum, which has been an essential part of the meeting since 1999. As the organization approaches its 50th anniversary, it looks back a long history of helping developing nations adjust and prepare for international markets by building up industry knowledge.

The fact that 50% of trades today originate from and among emerging nations testifies to this organization’s success in helping these countries join the global marketplace.

And yet, five years after the crisis, he sees many underlying vulnerabilities and feels the industry and systems are less prepared today than they were back then. A sobering thought. UNCTAD is callingf or a redesign of the global financial structure in the post Bretton Woods world to encourage these emerging economies. Such a move would

foster sustainable growth and be conducive to creating a fair trading system and a level playing field.

physical and financial markets, as well as their importance in terms of price discovery and transparency.

David Wright, Secretary General, International Organization of Securities Commissions (IOSCO), looks back on a brilliant career in international relations, including his contributions to the successful WTO Uruguay Round. The current international regulatory revision is now in its 7th year. The vast number of international work streams involved bears the danger of there being too many cooks in the kitchen, resulting in difficult coordination. Because on the global level work is conducted on a consensus basis, the standards that result may not be as grandiose as originally intended. The Financial Stability Board was set up to ensure that all members commit to implementing the regulations agreed upon. But one of the greatest challenges still faced after seven years is a lack of data. He sees a real need for ex-ante analysis, to take a closer look at the economic effect of how policies interact, as well as challenges emerging with the technical implementation of political declarations made at the G29 level by heads of states.

He mentioned yesterday’s speech by International Monetary Fund Chief Christine Lagarde to the United Nations General Assembly, in which she pointed out the IMF’s role in protecting the planet from environmental damage. She pointed out the need for 21st century financial policies to meet 21st century challenges.

The same applies for the new regulatory body for the financial industry. It needs to be implemented in a coherent manner to avoid simply displacing systemic risk elsewhere. Its important to make changes now when there are just a handful of large capital markets, for it will be much more difficult in the future in a world with many more large capital markets. Needed are more granular standards set on a global level and stronger institutions with some enforcement powers.”

He spoke of the divergence in rulemaking among the various jurisdictions, while there are high-level agreements for “substituted compliance”, these agreement contain “hidden ambiguities” that are proving difficult to resolve.

Read more on www.sfoa.org Michael Brewer, Word+Image Inc., SFOA Conference Journalist, mbrewer@ wordandimage.ch

For a full transcript of the whole conference www.gscgi.ch/wealthgram/

The derivatives market is a critical part of the overhaul of the financial regulatory system. Though plenty of progress has been made, it is being driven on the local level and then cobbled together on the global level. Mr. Wright would prefer to see change launched on a global level to work its way downward. We still have a long way to go, it seems. Mr. Wright also went on to talk about the positive aspects and potential of the derivatives industry, particularly its important role in the interlinking of

20 • Winter 2013 • The Swiss Technical Analysis Journal

SAMT members: Ron William and Cosima Barone, editor of IFA’s Wealth Gram

Forecasting versus Monitoring Market Trends Edward Loef, CFTe

It is said ‘Technical Analysis is the study of market action, primarily through the use of charts, for the purpose of forecasting price trends’.1 I prefer not to foretell, but I rather manage the information on the move by adopting quantitative based rules to determine the direction and the strength of the market trends. These criteria should sound logical according to the Technical Analysis Philosophy, objective in backtesting, easy to use and of course functional for every type of trader or investor. I call this the LOEF-approach.

It is also often heard ‘Technical Analysis is an Art, not Science’. So it seems the chartist or technician has various ways in trying to control the trends and turning points in market prices. I remember the IFTAconference held in London, Thursday October 10th, 2002. That late afternoon the S&P 500 index opened at 776,76 and tested succesfully the former low of July 24th, 2002 (775,68) and hit the low of the bear market episode 2000 – 2002.

Back at my office Monday October 14th, 2002 I found a U.S. Equity tech@lert send right at the time of the panic low shouting a headline ‘RISK STILL EVIDENT’.

Another message send by fax at the same time called ‘No place to hide?’. It’s funny, because the theme of the IFTA-conference was about ‘Applying Technical Analysis to Enhance Returns’. Those technical analysts who were left at their tradingdesks on October 10th, had their doubts, that’s for sure.

The Financial Times published on October 10th, 2002 published about ‘Economists rewarded for work on rationality’. Profs Daniel Kahneman and Vernon Smith were rewarded the Nobel prize for economics.

They found that ‘many people make seemingly irrational decisions and retreat to unscientific “rules of thumb” when faced with uncertainty’.3 The real problem of most investors and financial analysts is about

dealing with the ongoing noise in daily information and meanwhile tying to staying in a mental state of control. On the one hand they have too much self-confidence, on the other hand they are afraid taking risks. They are just ordinary people. So it is completely understandable one can read researchletters with messages like “The bull market continues, but watch out for the short term”. However, the recent press release about the new Nobel prize winners Fama, Hansen and Shiller confirms the risks of failures of trend spotting in asset markets in the near future: ‘There is no way to predict the price of stocks and bonds over the next few days or weeks. But it is quite possible to foresee the broad course of the prices over longer periods, such as the next three to five years’.2 This statement is an implicite compliment to the Dow Theory about the minor trends, which are meaningless in themselves and unreliable since it is the only trend which can be manipulated. Primary and Secondary Trends cannot be manipulated.3 The Secondary Trend normally last from three weeks to as many months and Primary Trends may run for several years.

So it’s a real challenge in technical analysis to recognise which changes in the short run do matter and which don’t. We chartists pretend to be as exact as possible when we publish our market calls. That’s easier said than done.

The LOEF-approach is designed to bridge the gap between the expectations of retail investors based on tradtional pattern recognition and the experiences of the professional certified technicians using trendfollowing models. More than in the past trade-executions are nowadays triggered by computerized algorithms. Will mechanical trading disturb the expected outcome of the studies of the charts? How does it affects the short term and longer term trends and patterns? These questions are raised when we have to rationalize our

thinkings and conclusions with the help of the charts.

No single indicator or method will pave the way in correctly signaling trend directions and best tactics. Finally we all end up facing reality, which can be different from various points of view. A preferred solution is found in what we (personally) can manage and understand. I.e. the combination of the 20-day and 120-day simple moving average along with the actual market price provides a practical guidance through the trading cycles (see overview trend definition/ criteria/visual output). Don’t underestimate the importance of the famous idiom ‘Seeing is believing’ recorded in 16394 that means only physical or concrete evidence is convincing. The technical trader/investor asks for evidence-proof strategies. I personally like to communicate by ranking, screening and showing the repetitional changes of the cycles in market prices (with trend- and trade alerts) The 20-day SMA comes close to the minor trend of Dow Theory. The combination with the 120-day SMA catches the intermediate trend in most asset classes and it helps to determine whether to buy on weakness or sell on strength. The directional movement indicator (DMI) and relative strength index (RSI) is a great help to adopt trendfollowing techniques in trending markets or when it’s about time to emphasize riskmanagement.

I.e. an ADX(14) above 40 in combination with (divergences in) RSI(14) will provide an high alert of an important market top or bottom (see yellow candles at selling climaxes). It only takes additional conditions to hit the trigger to act.

The Swiss Technical Analysis Journal • Winter 2013 • 21

Trend definition

= Trend criteria

Candles

Uptrend

= close > SMA 20 and SMA 20 > SMA 120

Green

Correction phase

= close < SMA 20 and SMA 20 > SMA 120

Light Green

Downtrend

= close < SMA 20 and SMA 20 < SMA 120 Red

Recovery phase

= close > SMA 20 and SMA 20 < SMA 120 Orange

Topping phase

= close < SMA 120 and SMA 20 > SMA 120

Black

Bottoming phase

= close > SMA 120 and SMA 20 < SMA 120

Black

Strong Uptrend

= rising ADX(14) and PDI(14) > MDI(14)

Blue

Strong Downtrend

= rising ADX(14) and MDI(14) > PDI(14)

Purple

Overshooting

= ADX(14) > 40 and RSI(14) > 70 or < 30 Yellow

SPDR S&P 500 ETF Trust (tickersymbol SPY) - is showing the simulated results in graphic form since 2007 long/short, no trade commissions involved.

Charts / Source data / software: VWD Group, www.vwd.eu / Metastock End-of-Day version 10.0 Sources / references: 1 ‘Technical Analysis of the Futures Markets’ (1986), John J. Murphy, page 1 2 Press Release October 14th, 2013 Kungl.Vetenskaps Akademien (The Royal Swedish Academy of Science, http://kva.se and http://nobelprize.org 3 ‘Technical Analysis of Stock Trends, New Enhanced Edition, 1991, International Technical Analysis Publishers, Boston, Massachusetts, Robert D. Edwards and John Magee, page 29 4 http://en.wikipedia.org/wiki/Seeing_Is_Believing Edward Loef CFTe is CEO of LOEF Technical Analysis BV founded in 2010, De Meern, The Netherlands. Edward started his career at Rabobank in 1985 and became office-manager in 1987. His interest within the investment field was triggered by the Wall Street Crash of 1987 and the chart parallels of 1929. In 1989 he became an investment advisor and thereafter in 1996 joined the Dutch Society of Technical Analysts, preferring charts over the fundamental perspective. Between 1998 and 2005 Mr. Loef served private retail clients at the ‘trading desk’ at CenE Bankiers (Utrecht) and became senior chartist 2005-2010 Theodoor Gilissen Bankiers Amsterdam.

He hosted frequent interviews with CNBC TV and contributed “The Technical Analyst Discussion Series” (UK) in 2010. Since 2010 Mr. loef has served as CEO of LOEF Technische Analyse BV providing technical analysis research for both retail and institutional clients. Nowadays Mr. loef is also a regular columnist (publishing weekly editorials) in leading Dutch financial newspaper ‘Het Financieele Dagblad’.

For more information: phone 0031(0)651365476 / www.edwardloef.com / mail@edwardloef.com

22 • Winter 2013 • The Swiss Technical Analysis Journal

THE POLITICS OF PEAK DEBT Brian Whitmer Europe is already mired in depression, but until the Continent’s main stock indexes move lower, the public will continue to fixate on recovery. On August 17, the press applauded the eurozone’s return to economic growth. “The prayed-for recovery ... has finally come to pass,” wrote The Economist. Indeed, eurozone GDP rose 0.3% in the second quarter, ending 18 consecutive months of recession. Less often reported, however, was this fact: The eurozone economy is still contracting year-over-year, continuing a trend that’s been in place since March 2012. Meanwhile, the economy’s steady deterioration shows up in a host of other indicators. The one shown here ­– Europe’s Composite PMI ­– amalgamates business surveys in five subsectors of European manufacturing: production levels, new orders, supplier deliveries, inventories and employment. The index peaked in June 2006, one year ahead of the Euro Stoxx 50 index, and then recorded a lower peak alongside the Euro Stoxx in February 2011. So far, the index has barely poked back above 50, the level that signals economic improvement.

As we keep saying, overhanging debt underpins most of the economy’s long-term deflationary trends. Our May 2013 Special Section, “Public Policy in a Time of Peak Debt,” made the case for a historic reversal in debt levels, one that should more or less coincide with a final peak in stocks. At the time, we highlighted Italy’s spending spree, observing that “debt will reach a post-war record of more than 130% of GDP....” The August 6 chart (left) from Bloomberg Briefs ­– an excellent look at 150 years of Italy’s debtGDP ratio ­– puts this massive number into its historical context. The chart also captures the political upheaval that attended Italy’s last great borrowing binge.

The most important facet of this chart, however, is shown by the massive plunge in debt-toGDP that accompanied Italy’s last Great Depression in the 1930s and 1940s. If you believe that a similar debt implosion won’t happen again, take note of the parallel path being traversed in the Italian Parliament.

The Swiss Technical Analysis Journal • Winter 2013 • 23

According to Bloomberg, Berlusconi’s People of Liberty party threatens a “mass resignation of parliamentary deputies that will bring down the coalition government....” More important, however, are the elected officials who will jockey to fill the void. Take, for instance, the former comedian turned political activist Beppe Grillo, whose Five Stars Movement party received the second-highest number of votes in February’s general election. On August 8, 2013, Grillo sat down with Bloomberg Businessweek and explained how he would resolve Italy’s untenable debt: Bloomberg: You’ve been at war with the Italian media.

Grillo: Yes. They see us as a threat to Europe. Because we want to renegotiate the debt. We don’t want to talk about the euro. We want to renegotiate about the billions of euros of interest a year that’s eating us alive.

Bloomberg: You’re talking about default?

Grillo: When you have a debt that’s strangling you, you’re not growing. You need to go and say, ‘Let’s do it in a different way.’ The problem is that so much of our debt is in the hands of French and German banks, and they want the money. We couldn’t go bankrupt because we’d drag down Europe with us.

We’ve said it before, but we’ll say it again: Much of Europe is de facto bankrupt already, and once social mood waxes sufficiently negative, Germany and France will end the era of financial rescues. The only question is, who will get stuck with the bill when that happens.

The Greek and Cypriot templates say that authorities will first inflict losses on bondholders -- as they should have from the start. Ultimately, however, they will force ordinary bank depositors to pony up. Nothing we see says that bank deposits in Italy are any safer.

Brian Whitmer is editor of Elliott Wave International’s European Financial Forecast and contributes the European stock section of EWI’s Global Market Perspective. Brian will be presenting his latest forecasts to MTA and IFTA members in various European cities from November 9-15. He’s making stops in London, Paris and Zurich.

Our friend’s at EWI have arranged for you to read Whitmer’s “Public Policy in a Time of Peak Debt” for free. Please visit www.elliottwave.com/wave/PublicPolicy to get your free copy.

24 • Winter 2013 • The Swiss Technical Analysis Journal

A Technical Approach to Fundamentals The Jobless Claims Report Alberto Vivanti

Table 1 Yearly Returns of Buy and Hold Compared to the Strategy

S&P 500

Jobless Claims Strategy

1988

12%

7%

1989

27%

15%

1990

-7%

2%

1991

24%

17%

1992

7%

8%

1993

7%

6%

1994

-2%

-1%

1995

34%

8%

1996

23%

6%

1997

24%

2%

1998

31%

8%

1999

20%

6%

2000

-10%

1%

2001

-12%

-4%

2002

-25%

-13%

2003

25%

10%

2004

11%

13%

2005

3%

10%

2006

14%

5%

2007

4%

9%

2008

-41%

-1%

2009

28%

30%

2010

13%

10%

2011

0%

-2%

2012

12%

9%

2013

18%

14%

The number of individuals filing for unemployment insurance for the first time is released every week in the United States. The data, published every Thursday, refers to the previous week. This is a good indication regarding the shape of the economy: an increasing trend in the number of claims suggests a deteriorating labour market; a decrease in the number of new unemployed is a sign of improvement.

The rationale is quite immediate: the fewer people filing for unemployment benefits, the more have jobs, and so spending power. Spending fuels retails sales and so company sales.

Technicians know well that analysing the fundamentals is not the best way to detect the market direction, or worse, it contradicts the principles of technical analysis.

But the initial jobless claims is one of the 10 components of the Composite Leading Indicators, another one is the Standard & Poor’s 500 itself, since the stock market usually anticipates the economy. Analysing the trend of the initial jobless claims can be useful to anticipate the trend of the equity market. This is especially true when a healthy employment favours the growth of equity prices. On the other hand, in certain periods in the past, the improvements in the economy had a negative impact on the stock market. This is, in fact, the downside to employment growth: when the number of job seekers grows, then an inflationary pressure may arise, giving room to monetary tightening.

A simple strategy, based on the trend of the number of jobless claims, applied to the S&P 500 gives a raw idea about which results we can obtain in the equity market by following this indicator.

Here are the rules Every Thursday we know the number of new jobless claims, together with the 4-week average of the indicator. Since the data is released toward the end of the following week, we simulate buying the S&P 500 (can be realized through an ETF like SPY) when the jobless claims are trending downwards. We close the position on opposite circumstances.

The strategy is long only.

Technicians can detect a trend in several ways. We used the following: The momentum at one week (a simple 1-week change) of a double smoothing of the indicator and a 4-week simple average of the 4-week average. A negative change delivers a buy signal; a positive change we exit the position.

Statistics 1988 - August 2013

S&P 500

Table 2 Figures

Jobless Claims Strategy

Total Return 1988 - August 2013

570%

393%

Yearly Return (compounded)

8.0%

6.7%

Standard Deviation on Weekly Returns (Annualized)

17%

11%

Reward/Risk Ratio

0.48

0.62

-56%

-29%

Number of Trades (round trip)

125

Maximum Drawdown

Average Trades per Year Time in the Market

The Swiss Technical Analysis Journal • Winter 2013 • 25

100%

5.1 52%

Chart 1 $100 invested in 1988 in the S&P 500 compared to $100 invested into a strategy based on the trend in the number of initial jobless claims (profits reinvested)

Chart 2 Comparing Drawdown

Conclusions The result of the simulation over 25 years, from January 1988 to August 2013, takes us to the following conclusions: In the long run, the strategy tends to yield less than the market, yet the volatility is sensibly lower, and so the drawdown: the big downtrends can be avoided, consequently, the reward/risk ratios favour the strategy. n The strategy stays invested about half of the time: cash could be rewarded in the meantime. n A negative of the strategy is the risk to miss certain historical opportunities: the strong double digit returns from 1995-1999 could not be caught. The reason is the following: during the last stage of the bull market of the 90s, the negative signals on the job front were interpreted as good signs, because of inflation concern caused by an economy poised to overheating. The effect of the economic figures on the equity market is not always the same. This explains the weaknesses of a strategy based on fundamentals. n

Alberto Vivanti, Independent analyst, founder of Vivanti Analysis in 2003. Alberto is a technical and quantitative analyst since the early 1980â&#x20AC;&#x2122;s, with a sound experience as an asset manager with Swiss Institutions. Author of a technical newsletter, lecturer for institutions and instructor in Technical Analysis courses in Switzerland for the IFTA Certification, author of articles and books, has been co-author of a book with Perry Kaufman. Alberto chaired the IFTA conference held in Lugano in 2006. He has been official speaker at the IFTA Conferences 1998 in Rome and 2006 in Lugano. Alberto is Vice President of the Swiss Association of Market Technicians, representing the Swiss Italian Chapter.

26 â&#x20AC;˘ Winter 2013 â&#x20AC;˘ The Swiss Technical Analysis Journal

l

Genève

Geneva Chapter events

6 November Presenter: Murray Gunn, Head of Technical Analysis at HSBC Bank plc, London ‘Long-Term Cycles in Global Macro Markets’ http://samtjournal.uberflip.com/i/233247 Dukascopy event with Rick Bensignor in July

9 July SAMT Geneva event with Jean Francois Owczarczak

The Swiss Technical Analysis Journal • Winter 2013 • 27

l

Genève

Geneva Chapter events 3 December ‘World Investment Strategy’ Presenter: Robin Griffiths, Chief Technical Strategist of the Global Macro Team for ECU Group, London Robin’s presentation can be downloaded from the SAMT Uberflip page http://samtjournal.uberflip.com/i/232398 Watch his Dukascopy TV interview at http://www.dukascopy.com/tv/en/view/115588#10

28 • Winter 2013 • The Swiss Technical Analysis Journal

NEW WYCKOFF SCHEMATIC An Accumulation Gradient of Rising Bottoms Hank Pruden, Ph.D. Gradient of Ascending Bottoms The chart below depicts a new or added schematic for accumulation that I wish to name “The Accumulation Gradient of Rising Bottoms.” This new Schematic is an attempt to fill an obvious gap in the conceptual body of technical market analysis in general and the Wyckoff Method in particular. In brief, Wyckoff has had two Schematics for distribution, but only one Schematic for accumulation. The new Schematic for Accumulation is a counterpart to the Schematic for Distribution that features descending price peaks. Richard D. Wyckoff and his associates time and again had pointed out the power of ascending bottoms in a base of accumulation or re-accumulation. They also underscored the efficacy of a pattern of distribution composed of descending price peaks.

The logic for ascending bottoms and descending peaks is rooted in Wyckoff’s concept of the Composite Operator. Within a trading range the Composite Man is seen to accumulate a line of stock from the public who become especially frightened during the down‑thrusts.

The Composite Man will play the short side of the market during the trading range of accumulation so long as he can attract a sufficient public following of sellers. But, as the trading range precedes, the new schematic emphasizes that fewer and fewer sellers remain to propel stocks downward in price. As a consequence, the down‑waves become sorter

The Swiss Technical Analysis Journal • Winter 2013 • 29

and shorter in length (the bottoms rise) and the Composite Man as a result accumulates an increasing line of stock. Ultimately, with so few sellers left to coax to the downside, the Composite Man reverses, and spurs prices upward and out of the trading range (SOS and LPS.) A markup campaign now gets underway led by the Composite Man. Elsewhere Dr. Pruden has conducted studies of market behavior with the aid of the Cusp Catastrophe Theory (CAT) from mathematics/behavioral finance. CAT theory shows dissipative gradients and accumulation gradients that occur within a trading range just prior to a selling panic or a buying stampede. My label of “Accumulation Gradient” for the new Schematic was inspired by that Cusp Catastrophe model of market behavior. Moreover, the literature of Catastrophe Theory describes how the “managers” (e.g., Composite Man) in an unstable situation will keep price swings in a close proximity until all the marginal, regional support has been exhausted. [See Swiss Techncial Analysis Journal, Summer 2013 edition] The observations of Wyckoff, the logic behind the Composite Man and the models from Catastrophe Theory combine to buttress the addition of a new Schematic for Accumulation to complete the conceptual body of the Wyckoff Method in regard to Schematics. Hence, this new Schematic should add a powerful visual tool for Wyckoff Analysis.

Moreover, the Wyckoff Accu plicity and the power observable on the right‑hand side of trading ranges.

References • Hank Pruden “Cusp Catastrophe Theory: A Model for Technical Market Analysis”, Swiss Techncial Analysis Journal, Summer 2013 edition • Hank Pruden, The Three Skills of Top Trading (Wiley, 2007)

To read an interview with Hank Pruden with Ron William, please go to http://samtjournal.uberflip.com/i/232932

Henry O. (Hank) Pruden, Ph.D., is a Professor of Business and Director of the Technical Market Analysis Program at Golden Gate University, San Francisco, CA, USA. He is also a Chairman of the Technical Securities Analysts Association of San Francisco (TSAASF.)

30 • Winter 2013 • The Swiss Technical Analysis Journal

l Zürich

Zurich Chapter event

4 December ‘World Investment Strategy’ Presenter: Robin Griffiths, Chief Technical Strategist of the Global Macro Team for ECU Group, London

Robin’s presentation can be downloaded from the SAMT Uberflip page http://samtjournal.uberflip.com/i/232398

The Swiss Technical Analysis Journal • Winter 2013 • 31

At the end of November, the Third Lugano Fund Forum (LFF) took place in Lugano. This most important event focused on Asset Management, Investment Tools (covered warrants, certificates, ETF, structured bonds, unit linked, etc.) and Fundamental Analysis, organized in the Italian part of Switzerland (the Canton of Ticino).

Lugano l

3o Lugano

The Forum was held at the prestigious Palazzo dei Congressi, and hosted a group of specialized conferences with the special guest speaker, Nouriel Roubini, and an exhibition area. SAMT participated in this Forum as a partner and the article contained on pages 11and 12, appeared in the Forum’s catalogue.

Fund forum 25-26 November 2013

In the audience photo below from the Lugano Fund Forum are Alberto Vivanti, Vice President of Lugano Chapter; Ron William, Vice President of Geneva chapter; Mario Valentino Guffanti, Assistant Vice President of the SAMT Lugano Chapter

32 • Winter 2013 • The Swiss Technical Analysis Journal

SAMT members at the IFTA Conference October 2013

1

Photos: Clockwise from top 1. Hank Pruden with IFTA President and SAMT member, Rolf Wetzer 2. Chris Glon and Patrick Pfister 3. Ron William, Martin Pring and Roman Bogomazov 4. Elaine Knuth 5. Jean-Francois Owczarczak receiving the Bronwen Wood Memorial Award 6. Jack Schwager and Patrick Pfister

2

3

6

5 The Swiss Technical Analysis Journal â&#x20AC;˘ Winter 2013 â&#x20AC;˘ 33

4

SAMT Board of Directors

Daniel Stillhart President daniel.stillhart@samt-org.ch

& Officers

The Swiss Association of Market Technicians (SAMT) is a non-profit organisation (Civil Code Art 60ff) of market Founded 1987 analysis professionals in Switzerland, founded in 1987. SAMT is a member of the International Federation of Technical Analysts (IFTA).

The Swiss Association of Market Technicians

Technical analysis is the study of prices and markets. It examines price behavior on an emprirical and statistical basis. It extends to the study of all published information on price trends, volatility, momentum, cycles and the interrelationship of prices, volume, breadth, sentiment and liquidity. A comprehensive understanding of technical analysis requires a knowledge of statistics and pattern recognition, a familiarity with financial history and cycles.

Patrick Pfister, CFTe Vice President and Head of Zürich Chapter patrick.pfister@samt-org.ch

Ron William, CMT, MSTA Vice President and Head of Geneva Chapter ron.william@samt-org.ch

Alberto Vivanti Vice President and Head of Lugano Chapter alberto.vivanti@samt-org.ch

Mario Valentino Guffanti, CFTe Assistant Vice President of Lugano Chapter mario.guffanti@samt-org.ch

Louis Grosjean Head of Treasury louis@grosjean.ch

Tim Straiton, FGA Head of Website Development info@stoploss.ch

SAMT encourages the development of technical analysis and the education of the financial community in the uses and applications of technical research and its value in the formulation of investment and trading decisions. SAMT has a wide range of activities including: n

Organising meetings on a broad range of technical subjects encouraging the exchange of information and knowledge of technical analysis for the purpose of adding to the knowledge of its members.

n

Preparing its members to sit for the Certified Financial Technician (CFTe) exams and the Masters level degree Master of Financial Technical Analysis (MFTA) in Switzerland. These exams are controlled by IFTA.

n

Developing CFTe preparatory courses.

Marco Zahner Auditor ma_zahner@bluewin.ch

34 • Winter 2013 • The Swiss Technical Analysis Journal

We would especially like to see contributions that draw from areas not previously examined, and/or topics tangential to technical analysis.

THE Swiss

The list is just a guide and should in no way be considered restrictive. We wish to make the Journal open to new and innovative ideas from all areas of technical analysis and those that connect with it.

technical analysis journal

Submitting Contributions Submission of contributions to ronwilliamPR@gmail.com

The Swiss Technical Analysis Journal is a quarterly publication established

by The Swiss Association of Market Technicians (SAMT). It is compiled by a committee of SAMT colleagues.

The Swiss Technical Analysis Journal is essential reading for academics, students and practitioners of technical analysis in all arenas. It is an excellent reference source for anyone interested in technical analysis, containing a wealth of resource material.

Credibility And Recognition The Swiss Technical Analysis Journal has original contributions from its members covering developments in technical analysis in global markets.

The Journal’s aim is to reach leading practitioners and students of technical analysis throughout the world.

The Swiss Technical Analysis Journal is a professional resource. Its online publication on the SAMT website will make its work available as a future resource to the community of technical analysts.

Topics SAMT is seeking papers that cover developments impacting, either directly or indirectly, on the field of technical analysis; they may be drawn from such areas as: • Basic market analysis techniques • Indicators—sentiment, volume analysis, momentum, etc.

• Global and intra-global technical analysis • Styles of technical analysis • Data • The changing role of technical analysis in the investment community.

Language Contributions must be submitted in English with British grammar required.

Material deadline for the Spring 2014 issue

Writing Style Papers should be written in a thesis style.

28 February 2014

References All texts referred to in the paper must be appropriately referenced with a bibliography and endnotes (footnotes will not be accepted.)

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

Responsibility for the accuracy of references and quotations is the author’s. We expect the authors to check thoroughly before submission.

All references are to be included as endnotes. No separate list of references or bibliography should be provided.

Figures, Charts and Tables Illustrations and charts must be referred to by Figure Number and source (when applicable). Tables must be referred to by Table Number and source.

Length of Contribution Papers should be approximately 1,200 to 3,000 words, with supporting graphs and charts.

Format We ask for submission in MS Word or other text format. PDF format will not be accepted. Charts and graphs may be in gif or jpeg, but we ask that authors also keep a tif format in case it is required.

The appearance of advertising in SAMT publications is neither a guarantee nor an endorsement by SAMT. Advertising Policy Advertising is subject to approval by SAMT. All advertisements must be non-discriminatory and comply with all applicable laws and regulations.

SAMT reserves the right to decline, withdraw and/or copy edit at their discretion. Every care is taken to avoid mistakes, but responsibility cannot be accepted for clerical error.

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Payment Pre-payment by wire transfer is required for all ads. Bank details will be provided upon request.

The Swiss Technical Analysis Journal • Winter 2013 • 35

SAMT Membership

Samt encourages the development of technical analysis and the education of the financial community in the uses and applications of the technical research and its value in the formulation of investment and trading decisions.

The Cost of Membership n Initial one time registration fee of CHF 50. n

Annual membership fee of CHF 150. (The total cost for the first year is CHF 200.)

SAMT offers the following benefits:

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Only fully paid-up members have access to the member area.

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The subscription cost for each subsequent year is CHF 150.

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Subscription expiry results in blocked access to the member area. A standing annual payment order is therefore recommended.

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The organisation of meetings on a broad range of technical subjects encouraging the exchange of information and knowledge of technical analysis for the purpose of adding to the knowledge of the members.

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The organisation of presentations from guest speakers from around the world.

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Subscription Payments Please use the Register Here link below for executing your payment and don’t forget to make sure your name is mentioned in the payment (especially for members whose subscription is paid by/through their employers).

Also please note that by registering as a member of SAMT you declare that you have read, fully understand and agree to the content of the SAMTDisclaimer statement which appears below.

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The information provided on the SAMT website has been compiled for your convenience and made available for general personal use only.

SAMT makes no warranties implied or expressly, as to the accuracy or completeness of any information contained on the SAMT web site. The SAMT directors, affiliates, officers, employees, agents, contractors, successors and assigns, will not accept any liability for any loss, damage or other injury resulting from its use.

SAMT does not accept any liability for any investment decisions made on the basis of this information, nor any errors or omissions on the SAMT website. This web site does not constitute financial advice and should not be taken as such. SAMT urges you to obtain professional advice before proceeding with any investment.

The material may include views and statements of third parties, which do not necessarily reflect the views of the SAMT. Information on this website is maintained by the people and organization to which it relates. The SAMT believes that the material contained on this website is based on the information from sources that are considered reliable. Although all care has been taken to ensure the material contained on this website is based on sources considered reliable we take no responsibility for the relevance and accuracy of this information.

Before relying or acting on the material, users should independently verify its accuracy, currency, completeness and relevance for their purposes. Before making any financial decision it is recommended that you seek appropriate professional advice. The SAMT website may contain links to other websites, these are inserted merely as a convenience and the presence of these links does not constitute an endorsement of the material at those sites, or any associated organizations, products or services.

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36 • Winter 2013 • The Swiss Technical Analysis Journal

Preparation Course for the April CFTe Exam

SAMT Education

When:

Saturday, 22 March & Sunday, 23 March 2014

Where:

Geneva

Hours:

9:00 until 17:30 each day 15 hours of Immersion Training

Class Size: 5 minimum; 10 maximum

New SAMT achiever has passed the CFTe exam

Cost: SAMT Members: CHF 1150 Non Members: CHF 1350

Muneera Al Dossary, CFTe manages equity mutual funds at Saudi Fransi Capital, an investment arm of Banque Saudi Fransi one of the largest banks in the Kingdom of Saudi Arabia. She has 10 years experience in the banking and investment industry.

Early Bird Cost: SAMT Members: CHF 1050 Non Members: CHF 1250

How do you feel about achieving the CFTe diploma?

Registration Deadline: Wednesday, 5 March 2014

It felt really good, very big achievement to get an international recognition in technical analysis after all the hard work that I have put into it.

Complete information at www.samt-org.ch

How useful was our SAMT Geneva Immersion Course in helping you prepare for the exam?

Taking the SAMT Geneva Immersion Course was one of the best decisions I made before the examination. It offered great guidelines to how you can prepare for the exam and it gave a very good strategy on how you answer the exam questions in a very efficient and timely way. The course was presented by very professional members of SAMT who were dedicated to help us during and after the course.

What value does the CFTe diploma qualification provide within your career?

Being a certified financial technician has given me great confidence because the international recognition by IFTA has helped me in getting the respect of my clients & employer and my technical analysis became much more reliable.

Registration Deadline: Friday, 14 March 2014 Early Bird Deadline: Friday, 7 March 2014 The course will be presented in English.

IFTA Exam: Wednesday, 6 April 2014

Contact:

ronwilliamPR@gmail.com

Technical Securities Analysts Association San Francisco (TSAA-SF) Webinars Each month the TSAA-SF presents webinars that are often free or require a prepayment of a small fee. The webinars are offered as various times during the day - some early in the morning (Pacific Time), some at noon or in the evening. Because of the time difference between San Francisco and Switzerland (9 hours), SAMT members could view some of the webinars during CEST evening hours.

The next webinar is on Saturday, 13 April on Integrating Signals from the Credit Market into Equity Trading Strategies by Dave Klein, partner and co-founder of Capital Context LLC. This webinar will be from 10:00-11:30 AM PDT (19:00-20:30 CEST). The fee for this webinar is $US 10 (the member fee).

Click to see the schedule of webinars available.

TSAA-SF is the oldest society in the U.S. devoted to the study and development of technical analysis of stocks and commodities.

TSAA-SF is an IFTA Member Society.

IFTA Certified Financial Technician (CFTe) Program The IFTA Certificate (Certified Financial Technician) consists of CFTe I and CFTe II, which together constitute a complete professional program.

The two examinations culminate in the award of this internationally recognised professional qualifi cation in Technical Analysis.

Examinations The exams test not only technical skills, but also international market knowledge.

CFTe I This multiple-choice exam covers a wide range of technical knowledge and understanding of the principals of Technical Analysis, usually not involving actual experience.

The CFTe I exam is offered in English, French, Italian, German, Spanish, and Arabic, and is available, year-round, at testing centers throughout the world, from IFTA’s computerbased testing provider, Pearson VUE.

CFTe II This exam incorporates a number of questions requiring an essay based analysis and answers. For this, the candidate should demonstrate a depth of knowledge and experience in applying various methods of technical analysis. The exam provides a number of current charts covering one specific market (often an equity), to be analysed, as though for a Fund Manager.

The CFTe is offered in English, French, Italian, German, Spanish and Arabic bi-annually, typically in April and October.

Curriculum The program is designed for self-study. Local societies may offer preparatory courses to assist potential candidates. Syllabus and Study Guides are available on the IFTA website.

To Register Please visit the website for registration details. http://www.ifta.org/certifications/financial/

Cost IFTA Member Colleagues CFTe I $500 US CFTe II $800* US

Non-Members CFTe I $700 US CFTe II $1,000* US *Additional Fees (CFTe II only): $250 US translation fee applies to non-English exams $100 US applies for non-IFTA proctored exam locations

The Swiss Technical Analysis Journal • Winter 2013 • 37

SAMT Partner Societies

International Federation of Technical Analysts (IFTA) IFTA is a non-profit federation of 26 individual country societies who individually and jointly dedicate themselves to n

n

n

n

n

Research, education, camaraderie and dissemination of technical analysis of world markets. The IFTA societies support sharing technical analytical methodology that at its highest level is a valid, and often-indispensable element in the formulation of a reasonable basis for investment decisions.

Promotion of the highest standards of professional conduct, international cooperation and scholarship between all its Member and Developing Societies within all arenas of technical analysis.

Providing centralized international exchange for information and data of various financial centers while respecting individual country and Society business practices, legal structures and customs.

Encouraging the standardization of education and testing of its constituent members in technical analysis, making sure that each individual country’s security analyst licensing, legal and language /communication priorities continue to be individually accepted.

Fostering the establishment of individual societies of technical analysts without bias in regard to race, creed or religion.

It supports the need for maintaining a free and open worldwide markets under normal, and in particular crisis periods.

Centro di Studi Bancari Founded by the Ticino’s Banking Association in 1990, Centro di Studi Bancari (CSB) is an institution that promotes and provides education, training and continuous update for banking, fiduciary, insurance and legal-financial professionals in the financial markets. CSB provides courses, training courses for various certifications and hosts conferences.

The training programs are recognized at local, national and international levels, as well as by many private associations, such as SwissBanking.

CSB can also organise tailor-made training, leveraging on its interdisciplinary competences in the field of banking, finance, compliance, management and taxation. www.csbancari.ch Groupement Suisse des Conseils en Gestion Independats (GSCGI) CSCGI is a group of economic interests formed by specialized independent financial intermediaries who are confirmed professionals in the financial services industry. The group is open to contacts with any person interested in the business of wealth management seeking to promote dialogue with the banking partners and authorities at all levels.

Their goals are to: • Promote contacts between professionals motivated by the same desire for independence, wishing to maintain and develop relationships with counterparts.

• Find common ground for exchanging experiences and ideas, a field where diversity and novelty are prevailing.

As a growing bridge of communication worldwide, IFTA remains open to methods of technical analysis, while encouraging the consideration and support of membership for both developing and established societies.

• The enrichment of the links that can be forged on a friendly and professional level within a well defined and recognized framework to favour professional consultation and close dialogues.

www.ifta.org

www.gscgi.ch

Swiss Futures and Options Association The Swiss Futures and Options Association (SFOA), previously the Swiss Commodities, Futures and Options Association, was founded in 1979 as a non-profit professional association for the purpose of promoting derivative financial instruments, particularly standard futures and options contracts on financial instruments and commodities, to the widest possible audience, and to serve the interests of its members.

SFOA serves users of commodity and financial derivatives, as well as professionals, their institutions and the exchanges. www.sfoa.org

Swiss CFA Society The Swiss CFA Society boasts over 2,400 members in Switzerland, against barely 100 in 1996 at inception. It is the largest CFA Institute society in continental Europe. With more than 2,000 candidates taking the rigorous Chartered Financial Analyst® (CFA®) exam in Switzerland each year, the society’s impact on the Swiss investment community is self-evident.

It was the first society of CFA charterholders in the EMEA region to be directly affiliated with the prestigious CFA Institute, which includes more than 110,000 members in 139 countries.

The vision of the Swiss CFA Society is to be a leader in fostering the highest level of knowledge, professionalism, and integrity in the investment business. www.cfasociety.org/switzerland

38 • Winter 2013 • The Swiss Technical Analysis Journal

Weihnachtsgrüße und die besten Wünschefür ein erfolgreiches 2014

Auguri di buone feste e di un felice 2014

Meilleurs vœux pour les fêtes de fin d’année et excellente année 2014

Season’s greetings and best wishes for a successful 2014

The Swiss Association of Market Technicians GenÈvE • Lugano • ZÜrich 40 • Winter 2013 • The Swiss Technical Analysis Journal