The Swiss Technical a N a L Y S I S J O U R N a L

The swiss technical A n a l y s i s J o u r n a l

HerbstWinter Autunnoinverno Automnehiver AutumnWinter 2013

The Swiss Association of Market Technicians

GenÈvE • Lugano • ZÜrich Brian Jannsen Photography

• Winter 2013 • The Swiss Technical Analysis Journal l Zürich Willkommen Benvenuto Bienvenue Welcome l Genève

l Lugano

From the President’s Desk Dear SAMT members & industry colleagues, The first two debut editions of thisSA MT 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 lastO ctober 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 I hope everyone who had the chance to participate at this unique global to read technical industry event had a good time and gained real value from learning some new analysis: Join technical techniques and ideas. over 5,000 SAMT Finally, I also wish to congratulate everyone who has recently passed their colleagues locally professional CFTe diploma exams, notably Muneera Al Dossary, at Saudi and around the Fransi Capital in the Kingdom of Saudi Arabia that had traveled to Geneva to train with our SAMT immersion course instructors. world that read our SAMT Journal. 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)

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US: +1 800 557 2702 UK: 0800 • Winter 680 2013 0428 • The Swiss CH: Technical 0800 Analysis564 888 Journal mav7.com/samt Contents The swiss From the President’s desk technical Daniel Stillhart 3 The Swiss association of market technicians Analysis Zurich Chapter Events 6 Journal An Interview with Robert Prechter Ron William, CMT, MSTA 7

LEARNING FROM THE PAST - Looking Back at the Last Century Mario V. Guffanti, CFTe & Alberto Vivanti 11 Volume One, Issue 3 A Book Review & Interview - The Unconventional Van Tharp Thinking Winter 2013 Mario Valentino Guffanti, CFTe 13 Charting the rise of technical analysis Kevin Edgeley, CFA 17 Journal Committee Review of the 34th SFOA BÜrgenstock Forum September 2013 – Geneva 20 Mario V. Guffanti, CFTe + 39 33 691 91 70 Forecasting versus Monitoring Market Trends [email protected] Edward Loef, CFTe 21

THE POLITICS OF PEAK DEBT Ron William, CMT, MSTA Brian Whitmer 23 + 41 78 947 53 87 A Technical Approach to Fundamentals The Jobless Claims Report [email protected] Alberto Vivanti 25

The Swiss association of market technicians Design & Production Geneva Chapter Events 27 Barbara Gomperts +1 978-745-5944 (USA) The Swiss association of market technicians [email protected] Zurich Chapter Events 28 NEW WYCKOFF SCHEMATIC An Accumulation Gradient of Rising Bottoms Hank Pruden, Ph.D. 29

Follow SAMT on The Swiss association of market technicians Geneva Chapter Events 31

Lugano Fund Forum Mario V. Guffanti, CFTe 32

Samt Members @ The IFTA Conference San Francisco, CA USA - October 2013 33

The Swiss association of market technicians Board of Directors 34 Journal Submission Guidelines and Advertising Rates 35 Membership 37 Education 38 Partner Societies 43

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 Swiss Association The information provided on this Journal 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 Journal. The SAMT directors, affiliates, officers, employees, of Market Technicians 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 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. The material may include views and statements of third parties, which do not necessarily reflect the views of the SAMT. Information on this Journal is maintained by the people GenÈvE • Lugano • ZÜrich and organization to which it relates. The SAMT believes that the material contained on this Journal is based on the information from sources that are considered reliable. Although all care has been taken to ensure the material contained on this Journal is based on sources considered reliable we take no responsibility for the relevance and accuracy of this information. www.samt-org.ch 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 • l Zürich

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 An Interview with musician for four years, and in 1973-74 his band recorded an album, now on CD. In Robert Prechter 1975, Prechter began his financial career Ron William, CMT, MSTA by joining Merrill Lynch’s Market Analysis department under the tutelage of Robert J. Farrell and in 1976 began writing Elliott Mr. Prechter, President of Elliott Wave International, was a guest speaker wave analysis of the financial markets. at the 2013 MTA Symposium in New York, USA In 1979, Prechter founded Elliott Wave International and began publishing “How will the next few years be characterized? Inflation, Deflation or Both?” monthly market analysis under the masthead, “The Elliott Wave Theorist.” Ron William: The Market Technicians Association recognized you as the recipient Prechter served as a member of the board for their 2013 Annual Award at their 40th Anniversary Gala Dinner. How did you of the Market Technicians Association for feel being nominated for your life-long outstanding contribution to the development nine years and as the MTA’s President in of technical analysis? (Please select link to review the MTA 2013 Award, Robert 1990-1991. He currently serves on the Prechter acceptance speech) advisory board of the MTA Educational Foundation. Over the years, Prechter Robert Prechter: Humble and proud at the same time. expanded his business and now employs RW: Looking back in time, what intuitively attracted you to the study of financial a staff of analysts who apply the Wave markets early on in your career? Principle to all major markets around the world. A decade ago Prechter created RP: It was a combination of things. I must have had some interest in money, because the Socionomics as a kid I used to search out rare coins back when it was a viable hobby. At Institute, which is dedicated a young age I mowed lawns, sold snow cones with my brother from our to explaining driveway, and worked at a grocery store after I got my driver’s license. But socionomics, earning money was just a means to an end. I took my teenage savings at age and he funds 18 and went to Europe with my best friend for seven weeks. This is back the Socionomics when Europe on $10 a day was possible. Now it’s $20 an hour. Foundation, which supports In college I had only lukewarm interest in my studies, but each time a course academic research on mass psychology became available I got excited and couldn’t wait to take in the field. His it. It happened twice, and both times the course was canceled. So I did some book Elliott Wave reading on my own. At the time my dad subscribed to Richard Russell’s Dow Principle has been translated into a Theory Letters which intrigued me. The world of Dow averages, the advance- dozen languages, decline line and contrary opinion was mysterious at first, but the approach and Conquer the made sense as soon as I understood it. I read dozens of books on markets. Crash was a New Eventually I figured out that movements in aggregate financial pricing are York Times best psychologically motivated. seller. Prechter has made presentations on That’s when the finance and mass psychology interests merged. On the side, I was socionomic theory at Oxford, Cambridge, passionate about pop music. In college I did a study connecting social trends and Trinity, the London School of Economics, pop music lyrics. This third interest, which I thought was unconnected, eventually Georgia Tech and MIT. In 2008 and 2010, merged with the others. the Georgia legislature invited Prechter to testify before its Joint Economic RW: How much realization did you have of the vast ambitions that lay ahead? Committee regarding the state’s real estate and economic crises. In 2009, EWI’s book- RP: None. I was always driven but perhaps not always realistically. In my early 20s, publishing division, New Classics Library, I wrote songs and co-produced a record album. I wrote a spy novel and got an agent. published Lewis Little’s “The Theory of In each case, there were good possibilities. Things changed whenI decided my passion Elementary Waves,” which postulates a was to be a technician. That’s when I got really focused. I had discovered things I purely physical, and thus rational, theory of sub-atomic physics. Prechter’s articles wanted people to know about: first the Elliott wave model, then socionomics. on the Shakespeare authorship question RW: What type of influence did your background in psychology and music have in have been published in four journals developing your interdisciplinary thinking of the markets? and newsletters. Robert is a member of the Shakespeare Oxford Society, the RP: Psychology underlies all financial markets. Markets, no matter how different, Shakespeare Fellowship and the Triple move up and down for the same reasons. I know people who have changed from Nine Society. 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 York Public Library and paid for print copies. I found copies chart of the Dow and thinking about the big change I had of his market letters at the copyright office in Washington. felt in popular music around 1965-66. That was the day I Then I met with the publisher of Financial World magazine had the socionomic insight: Waves don’t just describe stock and got permission to reprint Elliott’s articles from 1939. market action; stock market action coordinates with all kinds In the end, I published all of Elliott’s books, articles and of social trends. The motivation behind the parallel changes available market letters as well as the Elliott wave market in the character of social expression had to be something commentary by Hamilton Bolton, Charles Collins, A.J. fundamental. I decided that waves of social mood would tie Frost and Richard Russell. Now everyone has access. all these trends together and explain them, too. Compatibly, if the market is a patterned hierarchical fractal as R.N. Elliott RW: What was the main purpose behind writing “The Elliott described, then its fluctuations must arise endogenously from Wave Principle” with A. J. Frost? human interaction, not from news. So, financial, economic RP: I started writing a book on the Wave and political events don’t cause mood changes; they result Principle and found out that Frost was from mood changes. doing the same thing, so I wrote him and suggested collaborating. He agreed RW: How did you progress to working with Bob Farrell, at and sent me what he had. I melded the Merrill Lynch’s market analysis department in New York? two and turned it into a book. When What were the most memorable experiences? it was published, in November 1978, I RP: After an unsuccessful job-seeking tour of four major firms started schlepping books around New in New York, I asked my Merrill Lynch broker if his firm York in a shopping bag, pitching it to employed technicians. He said they had a whole department buyers at bookstores with financial of them. Upon calling, he found out that their junior man sections. Three of them carried it. It started as a shoestring was quitting. Thirty people had applied for the job. Bob operation. Farrell took a chance on me, and I’ll always be grateful. RW: The Elliott Wave Theorist, which “fluctuations must arise endogenously is still the flagship of your firm’s wide It was a department full of stars: Bob from human interaction, not from range of market reports, has been in Farrell, Dick McCabe, Phil Roth, Steve news. So, financial, economic and publication since 1979. Can you describe Shobin and Bob Nurock are among political events don’t cause mood its evolution over these past 34 years the names people would know. My first changes; they result from mood and what is your vision for the future of Elliott Wave International? mentor in the department, Ilona DeVito, changes” was a Hungarian countess; the New York RP: My wife and I started the business Times recently interviewed me about her. together. I remember telling her I wanted Bob graciously invited me to the MTA’s first annual conference to keep it just the two of us. Little did I know we would in 1976, which got me involved with the organization. I end up with nearly 100 people! The Theorist has changed in guess my most memorable experience was in 1978 when the that I don’t analyze all the markets every month as I used department held a year-long stock picking contest. That year to. I write on them only when I have something to say. was made for an Elliott guy. The Dow bottomed on March This has actually made my analysis better. Markets don’t 1 at a 61.8% retracement of the 1974-1976 rally, rose in five say something important every month, at least not to me. waves into September and then plummeted. I bought all my I also have the flexibility to talk about the big picture and stocks near the low and sold out in September. socionomic theory. The autumn collapse put everyone else near breakeven, so I We have so much talent here now. Steve Hochberg and Pete won by a good margin. It wasn’t so much stock picking but Kendall cover the markets monthly and short term in the wave analysis. Luckily, I didn’t have to try to do it again! U.S., while Brian Whitmer, Mark Galaseiwski and Chris Carolan cover Europe and Asia, and Jeff Kennedy covers RW: During those early years, how accessible was commodities. These guys are so good at analysis and writing literature on Ralph Nelson Elliott’s Wave Theory*? that if I were outside the firm and could read only six people, RP: It was virtually unavailable. I learned I would choose them. the basics by reading Russell’s and We also have a stable of analysts who cover specialty services Dow Theory Letters Frost’s analyses in in – currencies, interest rates, energy markets, metals, and the early ’70s. I got hold of some third- commodities – from long term to around the clock. We also hand writings. In 1976, Steve Shobin have a Flash service, where we make market calls for traders. gave me a fifth-generation Xerox copy We are in the process of refining a computerized expert of Bolton’s book. Then I went on a system that we’re just now beginning to employ in making quest to find Elliott’s original books. I market calls. We’ll report on the results soon. found them on microfilm in the New

• Winter 2013 • The Swiss Technical Analysis Journal I also formed the Socionomics Institute, which publishes The have done all they can to get prices to hold up. But they’re Socionomist and organizes annual conferences. You can find failing. Credit is already contracting in Europe, Japan is SI at www.socionomics.net. As for the future, I am working deeply into deflation, China is on the on a collection of studies in socionomics and plan to write a brink of a credit crisis, and interest rates more complete book on Elliott waves. have begun to rise around the world.

RW: How do you suggest the Elliott wave model is best I think deflation is going to crush the used – in isolation or in tandem with cycles or specific market prices for all investments globally. Many timing indicators? banks and insurance companies will fail, and pension funds will fold. The only RP: I have always employed indicators. Whether using them thing that will gain in value is cash. At helps or hurts wave analysis is open to debate. My view is some point in the crisis it will pay to that they help in all cases except when readings are surpassing switch to gold and property. historic extremes. 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 deflation, China is on the brink of a Kondratieff cycle’s winter phase that some 2008, early 2009. credit crisis, and interest rates have believe we are currently experiencing to the historic depression period of the Another thing I would assert is that begun to rise around the world.” 1930s...? quantification of indicators is a path to failure. Market prices form a fractal, and as RP: The Kondratieff cycle has continued soon as you apply quantitative parameters, to operate since it was first proposed. 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 longer- RP: Jeff Kennedy and our education specialistW ayne Gorman lived, and the upcoming low should be commensurately more have just finished a book for the devastating financially, economically and socially than that of Wiley-Bloomberg Financial Series 1932. 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, exiting and managing risk in trades RP: The end will come when debtors default, the global prompted by Elliott wave analysis. financial obsession disappears, and people swear off financial Most of them are trades they actually assets for the rest of their lives. 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 RP: Government has been the biggest proximate cause of the forecasted the credit crisis, the real estate and stock market problem. It fostered debt expansion by creating the Federal bubbles. What is your view of the current markets and what Reserve System, the FDIC, the Federal Home Loan Banks, do you believe would serve as the best strategy to preserve Fannie Mae, Freddie Mac, Ginnie Mae and the student loan capital? programs. Government has pushed credit on people like a RP: I didn’t anticipate the commodity bubbles, but everything heroin dealer in the ghetto. It is the main reason debt has otherwise looks to be on track. I’m bearish across the board for expanded to unsustainable levels. Government can only stocks, bonds, real estate, commodities and precious metals. continue to make things worse and cannot stop the inevitable The true top in stocks was in 2000. The top in real estate was outcome. in 2006. The top in commodities was in 2008. The top in metals was in 2011. RW: How would you describe the study of socionomics and what level of importance does it have in today’s economic It’s been 13 years of rotating tops, and the inflationary forces and politically uncertain landscape?

The Swiss Technical Analysis Journal • Winter 2013 • RP: Socionomics is the study of how waves of social mood RW: On a personal note, what other passions do you enjoy influence the character of social actions, in every area from in life? macroeconomic trends to political decisions to trends in RP: My weekends over the past 15 years have been devoted to music, entertainment and popular culture. Socionomics is reading the plays, poems and stories of the Elizabethan era for always important, but it is especially so when social mood is a book I’m writing. I like the camaraderie at our company and at extremes. It has been at a positive extreme for much of the enjoy seeing people find their niches. Talking to my market past 15 years. 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 RW: In your opinion, to what extent has “the universal applicability of technical analysis” grown over the years? end of the day, that’s the tops. RP: People’s beliefs about financial causality change along RW: I also understand that you are an avid reader of with the trends in social mood. Technical analysis always gains Shakespearean literature as member of the Shakespeare in popularity when markets move sideways or down, and it Oxford Society and the Shakespeare Fellowship. May I loses popularity when they rise. I suspect that relationship ask if Shakespeare were alive today and were to write a play about the experiences of the financial market what will never change. type of play would it be? RW: What do you recommend the next generation of RP: The markets would start out As You Like It, morph to A technicians strive toward in order to ensure further success Midsummer Night’s Dream, go through The Tempest and end within the industry? with the bloody massacres of Titus Andronicus. As investors RP: Stop resorting to external-cause thinking when performing acted out A Comedy of Errors, the misanthropic Timon of financial analysis.I t can’t work and doesn’t work, because the Athens would be in the wings, mumbling, “Each one will pay, theory of causality behind it is false; it’s backwards. Economic Measure for Measure.” 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 [email protected] 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.

The Swiss Technical Analysis Journal • Winter 2013 • 11 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 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.W hy?—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 most- recognized 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 Book Review Book

The Swiss Technical Analysis Journal • Winter 2013 • 13 mind techniques, he will appreciate the content of this book. On awareness. The author suggest that you quantitatively measure this the other hand, if this is the first time the reader has been exposed level through the work of David Hawkins6, a successful psychiatrist to the ideas it could require a second reading to fully understand that had a very high level of consciousness and performed many “Tharp Think”, particularly the second part of the second section miracles on his patients. Hawkins describes human consciousness and the third section of the book. using a log scale from 1 to 1.000. The numeric level that separates the positive from negative is 200. According to Hawkins, Gandhi The title of the book refers to the metaphor contained in science had a consciousness of 700 and was able to defeat the British Army, fiction action film, The Matrix (1999). This metaphor suggests that whose collective consciousness was 175. Raising one’s level of we are all programmed and we live in a world of illusion shaped by consciousness doesn’t only help people like Gandhi, it can help us our programming. We have two possibilities, as Morpheus says in as traders. If we are trading at a low level of consciousness we are the movie, we can take the blue pill and go back to a comfortable probably trading out of fear, greed or desperation. Raising our level sleep where nothing changes. Or, we can take the red pill and see of consciousness will bring us to the point where we can see what’s how deep the rabbit hole goes. Van Tharp’s book is that of the red happening in the market without a lot of internal interference: a pill where the author states that nothing would change until we state where trading will become easy for us. change and provides the method to transform ourselves to be Super Traders: this is the basic idea of performing well in the Matrix and The next level of transformation, level IV, requires one to reach going beyond it. a state where consciousness reamins permanently over 600 on Hawkins scale. The book is divided in three sections. Each section deals with a level of transformation described in detail. At the end of the book, the author considers two important application areas: (1) learning Tharp Think concepts and (2) Level I transform ourselves in order to adopt these concepts along with Transformation of the trading game. The first level is related to the three other key areas. The third area talks about how to develop a transformation of the trading game that is, as Dr. Tharp says, from personal business handbook for trading/investing (a checklist for rules that assure big money wins to rules that give the astute trader that work is included in the book). The fourth area is about assessing a huge edge. We have a detailed chapter dedicated to these rules our preparation for trading which includes another checklist in that the traders must know and understand. These rules are “Tharp order to help the trader attain this level of transformation. The last Think concepts”, not only created by Dr. Tharp, but also derived area is about understanding our trading mistakes. from the modeling work with great traders. The book has been created from the experience collected from Level II several years of workshops and research. For this reason, Dr. Tharp has written his book exposing his theory based on his pragmatic Understanding the Matrix and reprogramming yourself. The work that also includes many chapters written by Super Trader second level of transformation is the related to the metaphor of candidates. They contribute to the project by sharing their the book’s title. Dr. Tharp asserts the whole world is shaped by our experiences about their transformations throughout the course of beliefs and, for that reason, we must analyze them: we don’t trade their study under Dr. Tharp. the markets, we trade our beliefs about the markets; and, if our beliefs are not useful, we are in trouble. 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 Once we have realized that our beliefs control our reality, we have to enhance his mind and his work. the opportunity to completely change our experience of the world by changing our beliefs. Dr. Tharp suggests various techniques in The Interview order to identify and eliminate or alter the non-useful beliefs. An entire chapter is dedicated to the techniques that deal with our Mario V. Guffanti (MVG) - Since your first interview in conflicting parts, the first being parts negotiation. Parts negotiation Schwager’s book many years have passed, but the principles is based on the idea that we have many different parts inside us. that you outlined in that interview are still mentioned in your The author explores this idea and how to join our parts together. book Trading Beyond The Matrix. Which are the new topics that you discovered in your research path and how these There is also a chapter that is dedicated to transformational topics influenced the creation of this new book? techniques with a strong spiritual component. The author finds Dr. Van Tharp - So much is new since 1989 when that book came that these techniques are the ones that tend to be life-changing. out. I’m an NLP modeler. Since that time, I’ve modeled things like All these techniques are given because most people have difficulties system development, how to use position sizing™ strategies to meet in adopting the first level of transformation: they are controlled your objectives, how to measure market types and how to design by their beliefs, by the emotional charges attached to those beliefs, different systems for different market types. In 1989, I was still and by the various parts of themselves. For this reason many people just scratching the surface of the impact of psychology as it applies must undergo a great deal of personal transformation to adopt to trading and one’s life. Now we talk about levels of consciousness Level I transformations. and getting to levels of consciousness that were formerly reserved for a very few spiritual gurus. Yes, a lot is new. Level III Trading beyond the Matrix. The third level of transformation deals MVG - In your book you said that we don’t trade the markets, with changing our level of consciousness— that is, our level of 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 MVG - I am fascinated by your new goal: to fully understand point from where we need to use psychological techniques to and describe a new target for the Super Trader to reach start our personal transformation in Super Traders. I guess a state where consciousness is permanently over 600 on the really great traders you have encountered in your work Hawkins scale. Can you tell us more about that? have the most part of right beliefs: do you think they have Dr. Van Tharp - Well, it’s called awakening. It requires Divine reached their situation with a personal research or it is just a matter of a natural and rare attitude? Grace to be given. When it happens there are actual changes to the brain. For example, the left parietal lobe, which gives you Dr. Van Tharp - Well, I tend to gravitate toward the NLP proposition a sense of separation (and self), must shut off. The pre-frontal that if one person can do it, anyone else can do it- but there are a cortex, involved in natural joy and bliss, must become more active. lot of caveats to that. While certain types of people can do it, The Oneness movement of India says that each awake person will the more you understand and apply transformation techniques, the influence 100,000 other people so that when 70,000 people were more likely you are to succeed. awake, it would be enough to transform the seven billion people For example, as you mentioned, we create on the planet. According to the beings at Oneness University who our reality through our beliefs. So you can can measure the awakened state, the planet start to transform your reality when you start reached 70,000 awake people in August to look at your beliefs. Then you can ask the 2012. Right now 100,000 people are question, “is this useful or not?” If the belief “waking up” every month and Oneness says isn’t useful, it is easy to transform unless it there are now over a million awake people is cemented in place by a lot of emotional on the planet. Very soon we will start to see charge and then you have to release the major changes in the way people interact charge. with each other as awake people exert more and more impact on humanity. At least MVG - Galileo Galilei said: “Measure seven of my supertraders are now “officially what can be measured, and make awake.” And as of September 21, 2013, measurable what cannot be measured”. there are officially over 1.3 million awake I would like to share with you this people on the planet according to the concept in explaining your new book. I people at Oneness University who have mean when people read about trading a high enough level of consciousness to systems, money management, position assess the situation. sizing and so on, all is comprehensible: we all have a reference mental model I have heard about one person in Hong for these things. But when we speak of Kong who read Trading Beyond the Matrix psychological or spiritual techniques, in March. He immediately took the two a person without specific knowledge day blessing giver’s course in Hong Kong on these topics could have difficulty to and went to India for a 28-day depending understand what is proposed to him. course where he was pronounced “officially” Some readers, especially on the part of the path about spiritual techniques, may awake. Everything changed for him and I feel this topic very subjective and therefore could not agree think we’ll see many more stories like that soon. on what you suggest. Did you find measurement parameters This might seem a little far-out to someone who is not awake, but for everybody that allowed you to suggest certain techniques what is really happening is that when you wake up, personal suffering instead of others? tends to disappear and you are generally happy all the time. That Dr. Van Tharp - Well, I actually give a measurement for consciousness certainly is the case for me now. And what’s more interesting is that level in the book. The higher the level of consciousness, the more you can see things as they really are. The lady who wrote chapter you can see the market for what it is and then less likely you are to 16 of Trading Beyond the Matrix had reached that state and you can be controlled by your beliefs and conditioning. Here I’m referring see the impact on her trading from that interview. to David Hawkins scale. It is a numeric scale numbered from 1 to Whether you accept this or not is a little like the subtitle of the 1000, where 1000 is the level reached by Buddha, Jesus, Krishna, book. If you take the blue pill you go back to sleep and everything etc. Fear comes in at about 75, greed comes at 125. I wouldn’t remains the same. If you take the red pill, by reading the book and expect people to do well as traders until they reach at least 350 having more awareness, then “welcome to wonderland where I’ll — the level of acceptance. show you how deep the rabbit hole goes.” David Hawkins says there is a direct correlation between happiness But of course, this is an area of ongoing study. If you want to and level of consciousness. So I developed a happiness test that really understand what it’s like to be awake, then a great example of ranges in scores of negative 55 to positive 85. Most people who that can be had by readying Byron Katie’s book A Thousand Names graduate from the first level of the Super Trader Program tend to for Joy. 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/)

The Swiss Technical Analysis Journal • Winter 2013 • 15 MVG - You introduced new concepts like “to be awake” that MVG - This seems an interesting path that requires a needs a reading of Byron’s Katie book to be really understood. deepening of these new topics: in Trading Beyond the Matrix And you said that this is an area of ongoing study. It would be there is an appendix of core readings for that. The book is interesting if you can tell us more about it. written very clearly, but it is also very complex. The techniques you mentioned and the exercises that you suggested are Dr. Van Tharp - Okay, we can probably say the following: What something of brand new for the most part of the readers. Can you know of as you, Mario Valentino, is just a collection of parts you give advice to first time readers? or roles you play in life. There are several chapters in Trading Beyond the Matrix devoted to understanding parts better. When Dr. Van Tharp - I knew the book would be difficult for some people you are not awake, you think those parts are you. You think there and it would turn off a lot of people because of the spiritual beliefs is someone in there who is thinking, listening, seeing, doing, etc. contained in it. However, I wrote the book with the idea that You think there is a controller. But in reality, that is something that I wouldn’t hold anything back. Every Tharp Think principle is in your brain is doing as an illusion. Part I, listed in tabular form. Each transformational technique is described and well-illustrated with examples, so people are able to Your left parietal lobe, as a survival function, creates a sense of you. do them. Just read the book with an open mind and do it. For many, many years, that function has been important for survival — to think that you are separate from everyone else. But as you You might start by finding 200 identity level beliefs. These start awaken, the left parietal lobe tends to shut down and more activity with the words “I am” and are then followed by some description. tends to occur in the prefrontal cortex. And the net result is that For example, “I am not worthwhile” is a belief that a lot of unhappy the illusion of a separate you tends to disappear. Now things like people might have. Run each belief through the belief examination thinking, seeing, listening, doing still occur but there is no sense paradigm given in the book. If you decide the belief is not useful, of someone separate is doing them. Instead, everything happens then replace it with something more useful. This should be easy automatically. 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 As a result, there is no “you” around to judge things. There is no you not worthwhile” would have, then use the feeling release techniques around to say, there is a way things should be and if they are not that described in the book to release that. Doing this exercise might way, then there is something wrong with me or them or it. Instead, take a long time, but it will have a huge impact on just about anyone you tend to see “what is” as being perfect. This is very obvious who is willing to complete it. You don’t need anything more than when you read Byron Katie’s book, A Thousand Names for Joy. to read the book to do it. The sense of you disappears, so there is no controller, no seer, no And, of course, that is just the beginning of the journey down the doing, no listener, no thinker. rabbit hole. Since there is no controller, you have a sense of things happening MVG – And, as Marcel Proust said: “We don’t receive wisdom; automatically, either based upon your conditioning (which doesn’t we must discover it for ourselves after a journey that no one necessarily disappear when you awaken) or based upon simply can take for us or spare us”. following your internal guidance. Thank you, Dr. Tharp. n 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. Footnotes And for traders, you can see the markets for what they are. You can 1 G. M. Loeb – The Battle for Investment Survival – Wiley – 2007; see what is actually happening at any given time and respond to it 2 a. Lo and J. Hasanhodzic – The Evolution of Technical Analysis – in the now. This is whatI call trading in the now and it tends to be Bloomberg Press – 2012 – Chapter 5 – Chart Patterns; easier and more profitable than reacting to the market and judging 3 a. Lo and J. Hasanhodzic – The Heretics of Finance – Bloomberg Press it (or worse yet, listening to other people’s judgments). – 2009 – What did we learn from interviews?; 4 J. D. Schwager – Market Wizards – Marketplace Books – 2006 – pp. I don’t know if that helped or confused things but you asked 411-430; what awakening is. You really are not that much different. Before 5 op. cit. J.D. Schwager - p. 411-412; awakening you chopped wood and carried water and after awakening 6 D. R. Hawkins – Power vs. Force: the Hidden Determinants of Human you do the same, except that you see the natural perfection of what Behavior – Carlsbad, CA – Hay House – 1995. is and are much happier. And you stop suffering because you judge and then resist what is.

16 • Winter 2013 • The Swiss Technical Analysis Journal Reprinted with permission. Professional Investor, Autumn 2009, www.cfauk.org

Charting the rise of Technical analysis is gaining more popular acceptance with advances in behavioural finance, with which it shares many beliefs. TheRandom Walk theorist technical analysis and the technical analyst have been prickly adversaries for over 30 years. Burton Malkiel’s best-selling book Kevin Edgeley, CFA 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 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 Executive Summary behavioural approaches share many beliefs. Traditional • Fundamental analysis is far economics proposes that the rational investor will learn more widely used than technical analysis. from past mistakes, but a psychological approach would • Studies of markets show that they argue against this. Psychologists and technical analysts are not random and investors’ suggest that past behaviour is the best predictor of behaviour can be predicted. future behaviour; cognitive biases cause sentiment to • Technical analysis is proving its worth in the current difficult fluctuate cyclically from extreme optimism to extreme market conditions. pessimism Kondratieff, Schumpeter and Kitchin, among others, have identified repetitive cyclical rhythms in economic activity. It is the interaction of cycles of different length The investment profession has long been that give the appearance of randomness, but in reality this interaction is far more predictable. The cyclical divided over the benefits of technical rotation out of stocks and into commodities in the 1970s may be before the memory of many currently analysis, but the approach is gaining in the market place, but again, after a 20 year bull run in equities, we have seen a similar rotation since the popularity. Kevin Edgeley, CFA, takes a 2000 stock market peak. Politicians may make claims look at how it works. 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 The argument of what drives asset returns is one of the logical against the psychological. The “rational” investor may exist in isolation, but STATS 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 Professional fundamental analysts vastly outnumber those using a technical approach, ‘Technical analysts have often been accused, but the technical contingent is growing and is supported by regional societies in the probably rightly in many cases, of a lack of same way as the CFA. The UK Society of Technical Analysts (STA) was founded in rigour in testing their beliefs.” 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 above or below a moving average is often over-emphasized. Contrary to popular opinion, in investment companies and multinational the optimal average length varies across time and across asset class. The identification and organisations. It is also a founder member measurement of trend strength is the key determinant in investment selection; an indicator of the worldwide body - the International such as Wilder’s Average Directional Index (ADX) can be used to measure the relative trend Federation of Technical Analysts (IFTA). performance of different assets but note that this indicator measures the strength of a trend, Many regional chapters run an education not its direction. Many funds and managed programs use variations on these themes for syllabus; in the UK this leads to the STA price direction and market timing purposes. Diploma, and on further study to the IFTA Complementary analysis Master of Financial Technical Analysis. This education process aims to provide more The technical and fundamental approaches are not necessarily contradictory. Fundamental rigorous support for technical methods. 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 The current market environment is market consensus and thereby on price. Price can and does vary from a fundamental fair supportive of further growth in the use of value. Opinions may differ, particularly at turning points, but the objective of identifying a technical methods. In the 1970s, the US trading opportunity, whether from repetition of historical movements in accounting ratios stock market changed phase from trend to or from repetition of psychological behaviour, drives both disciplines. The difference can range and although there were periods of often be one of value against momentum. In fundamental terms, a stock may look cheap serial correlation within this range, these and worthy of a buy recommendation but technically, the momentum of a price trend may trends were short term and fluctuated make the stock cheaper still, as the move enters the fat tail of the distribution. The net result around a fairly stationary long term mean. may be a buy at the same level as a fundamental strategy buys against the trend on the way This period led to a number of innovations down, while a technical strategy buys with the trend on the way back up. in the technical world and it is likely that the current market conditions will engender Technical analysts have often been accused, probably rightly in many cases, of a lack of rigour further expansion in the use of technical in testing their beliefs. There have been a number of empirical tests on the validity of chart analysis. 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 technical analysis relies on a mix of Business School, is a CFA charter holder different indicators to generate a trade and a member of the Chartered Institute recommendation. Technicians make no for Securities and Investments. He is a claims to get the market right every time, member of the UK Society of Technical 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 foster sustainable growth and be conducive physical and financial markets, as well as partnership with the Futures Industry to creating a fair trading system and a level their importance in terms of price discovery Association (FIA), a logical pairing with playing field. and transparency. both organizations sharing the same issues. David Wright, Secretary General, He mentioned yesterday’s speech by The choice of Geneva as a new location International Organization of Securities International Monetary Fund Chief was equally logical, as this beautiful city Commissions (IOSCO), looks back on a Christine Lagarde to the United Nations is an important center for the derivatives brilliant career in international relations, General Assembly, in which she pointed industry. including his contributions to the successful out the IMF’s role in protecting the planet WTO Uruguay Round. The current from environmental damage. She pointed international regulatory revision is out the need for 21st century financial now in its 7th year. The vast number policies to meet 21st century challenges. of international work streams involved The same applies for the new regulatory bears the danger of there being too body for the financial industry. It needs many cooks in the kitchen, resulting to be implemented in a coherent manner in difficult coordination. Because on to avoid simply displacing systemic risk the global level work is conducted elsewhere. Its important to make changes on a consensus basis, the standards now when there are just a handful of large that result may not be as grandiose capital markets, for it will be much more Beyond the warm welcome addressed by as originally intended. The Financial difficult in the future in a world with many SFOA Chairman, Otto Nägeli, and Walt Stability Board was set up to ensure that more large capital markets. Needed are Lukken, President & Chief Executive all members commit to implementing the more granular standards set on a global Officer, Futures Industry Association, regulations agreed upon. But one of the level and stronger institutions with some the participants were also welcomed greatest challenges still faced after seven enforcement powers.” by Guillermo Valles Galmés, Director, years is a lack of data. He sees a real need Read more on www.sfoa.org Division for International Trade in Goods for ex-ante analysis, to take a closer look and Services and Commodities, UNCTAD at the economic effect of how policies Michael Brewer, Word+Image Inc., SFOA Conference Journalist, mbrewer@ (United Nations Conference on Goods interact, as well as challenges emerging with wordandimage.ch and Trade and Development). The close the technical implementation of political association between UNCTAD and declarations made at the G29 level by heads SFOA goes back many years. They jointly of states. For a full transcript of the whole conference launched the Emerging Markets Forum, www.gscgi.ch/wealthgram/ He spoke of the divergence in rulemaking which has been an essential part of the among the various jurisdictions, while there meeting since 1999. As the organization are high-level agreements for “substituted approaches its 50th anniversary, it looks compliance”, these agreement contain back a long history of helping developing “hidden ambiguities” that are proving nations adjust and prepare for international difficult to resolve. markets by building up industry knowledge. The fact that 50% of trades today originate The derivatives market is a critical part of from and among emerging nations testifies the overhaul of the financial regulatory to this organization’s success in helping system. Though plenty of progress has these countries join the global marketplace. been made, it is being driven on the local And yet, five years after the crisis, he sees level and then cobbled together on the many underlying vulnerabilities and feels global level. Mr. Wright would prefer to see the industry and systems are less prepared change launched on a global level to work its way downward. We still have a long way today than they were back then. A sobering SAMT members: Ron William and thought. UNCTAD is callingf or a redesign to go, it seems. Mr. Wright also went on to Cosima Barone, editor of IFA’s of the global financial structure in the post talk about the positive aspects and potential Wealth Gram Bretton Woods world to encourage these of the derivatives industry, particularly emerging economies. Such a move would its important role in the interlinking of

20 • Winter 2013 • The Swiss Technical Analysis Journal Forecasting versus Monitoring Market Trends Edward Loef, CFTe

It is said ‘Technical Analysis is the study of dealing with the ongoing noise in daily market action, primarily through the use of information and meanwhile tying to staying charts, for the purpose of forecasting price in a mental state of control. On the one trends’.1 I prefer not to foretell, but I rather hand they have too much self-confidence, manage the information on the move on the other hand they are afraid taking by adopting quantitative based rules to risks. They are just ordinary people. So it determine the direction and the strength is completely understandable one can read of the market trends. These criteria researchletters with messages like “The bull thinkings and conclusions with the help of should sound logical according to the market continues, but watch out for the short the charts. Technical Analysis Philosophy, objective term”. However, the recent press release No single indicator or method will pave the in backtesting, easy to use and of course about the new Nobel prize winners Fama, way in correctly signaling trend directions functional for every type of trader or Hansen and Shiller confirms the risks of and best tactics. Finally we all end up facing investor. I call this the LOEF-approach. failures of trend spotting in asset markets reality, which can be different from various in the near future: ‘There is no way to predict It is also often heard ‘Technical Analysis is points of view. A preferred solution is found the price of stocks and bonds over the next few an Art, not Science’. So it seems the chartist in what we (personally) can manage and days or weeks. But it is quite possible to foresee or technician has various ways in trying understand. I.e. the combination of the the broad course of the prices over longer to control the trends and turning points 20-day and 120-day simple moving average periods, such as the next three to five years’.2 in market prices. I remember the IFTA- along with the actual market price provides conference held in London, Thursday This statement is an implicite compliment a practical guidance through the trading October 10th, 2002. That late afternoon to the Dow Theory about the minor trends, cycles (see overview trend definition/ the S&P 500 index opened at 776,76 which are meaningless in themselves criteria/visual output). Don’t underestimate and tested succesfully the former low of and unreliable since it is the only trend the importance of the famous idiom ‘Seeing July 24th, 2002 (775,68) and hit the low which can be manipulated. Primary and is believing’ recorded in 16394 that means of the bear market episode 2000 – 2002. Secondary Trends cannot be manipulated.3 only physical or concrete evidence is Back at my office Monday October 14th, The Secondary Trend normally last from convincing. The technical trader/investor 2002 I found a U.S. Equity tech@lert send three weeks to as many months and asks for evidence-proof strategies. I right at the time of the panic low shouting Primary Trends may run for several years. personally like to communicate by ranking, a headline ‘RISK STILL EVIDENT’. So it’s a real challenge in technical analysis screening and showing the repetitional Another message send by fax at the same to recognise which changes in the short run changes of the cycles in market prices (with time called ‘No place to hide?’. It’s funny, do matter and which don’t. We chartists trend- and trade alerts) because the theme of the IFTA-conference pretend to be as exact as possible when we The 20-day SMA comes close to the minor was about ‘Applying Technical Analysis to publish our market calls. That’s easier said trend of Dow Theory. The combination with Enhance Returns’. Those technical analysts than done. the 120-day SMA catches the intermediate who were left at their tradingdesks on The LOEF-approach is designed to bridge trend in most asset classes and it helps to October 10th, had their doubts, that’s for the gap between the expectations of retail determine whether to buy on weakness or sure. investors based on tradtional pattern sell on strength. The directional movement The Financial Times published on October recognition and the experiences of the indicator (DMI) and relative strength index 10th, 2002 published about ‘Economists professional certified technicians using (RSI) is a great help to adopt trendfollowing rewarded for work on rationality’. Profs trendfollowing models. More than in techniques in trending markets or when it’s Daniel Kahneman and Vernon Smith were the past trade-executions are nowadays about time to emphasize riskmanagement. rewarded the Nobel prize for economics. triggered by computerized algorithms. Will I.e. an ADX(14) above 40 in combination They found that ‘many people make mechanical trading disturb the expected with (divergences in) RSI(14) will provide seemingly irrational decisions and retreat to outcome of the studies of the charts? How an high alert of an important market unscientific “rules of thumb” when faced with does it affects the short term and longer top or bottom (see yellow candles at uncertainty’.3 The real problem of most term trends and patterns? These questions selling climaxes). It only takes additional investors and financial analysts is about are raised when we have to rationalize our 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 hebecamean 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 / [email protected]

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 debt- GDP 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-to- GDP 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

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 Table 1 the number of claims suggests a deteriorating labour market; a decrease in the number of new unemployed is a sign of improvement. Yearly Returns of Buy and Hold Compared to the Strategy 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. Jobless Claims Technicians know well that analysing the fundamentals is not the best way to detect the S&P 500 Strategy market direction, or worse, it contradicts the principles of technical analysis. 1988 12% 7% But the initial jobless claims is one of the 10 components of the Composite Leading 1989 27% 15% Indicators, another one is the Standard & Poor’s 500 itself, since the stock market usually 1990 -7% 2% anticipates the economy. Analysing the trend of the initial jobless claims can be useful to 1991 24% 17% anticipate the trend of the equity market. This is especially true when a healthy employment 1992 7% 8% 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 1993 7% 6% fact, the downside to employment growth: when the number of job seekers grows, then an 1994 -2% -1% inflationary pressure may arise, giving room to monetary tightening. 1995 34% 8% A simple strategy, based on the trend of the number of jobless claims, applied to the S&P 1996 23% 6% 500 gives a raw idea about which results we can obtain in the equity market by following 1997 24% 2% this indicator. 1998 31% 8% 1999 20% 6% Here are the rules 2000 -10% 1% Every Thursday we know the number of new jobless claims, together with the 4-week 2001 -12% -4% 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 2002 -25% -13% jobless claims are trending downwards. We close the position on opposite circumstances. 2003 25% 10% The strategy is long only. 2004 11% 13% Technicians can detect a trend in several ways. We used the following: The momentum at 2005 3% 10% one week (a simple 1-week change) of a double smoothing of the indicator and a 4-week 2006 14% 5% simple average of the 4-week average. A negative change delivers a buy signal; a positive 2007 4% 9% change we exit the position. 2008 -41% -1% 2009 28% 30% Statistics Jobless 2010 13% 10% 1988 - August 2013 Claims 2011 0% -2% S&P 500 Strategy 2012 12% 9% Total Return 1988 - August 2013 570% 393% 2013 18% 14% Yearly Return (compounded) 8.0% 6.7% Standard Deviation on Weekly Returns (Annualized) 17% 11% Table 2 Reward/Risk Ratio 0.48 0.62 Maximum Drawdown -56% -29% Figures Number of Trades (round trip) 125 Average Trades per Year 5.1 Time in the Market 100% 52%

The Swiss Technical Analysis Journal • Winter 2013 • 25 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: n 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.

26 • Winter 2013 • 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 thatI 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 newS chematic 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 inW yckoff’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.,C omposite 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 newS chematic 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). The Forum was held at the prestigious Palazzo deiC ongressi,

Lugano l 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 3o Lugano 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

6 3

5 4

The Swiss Technical Analysis Journal • Winter 2013 • 33 SAMT Board of

Directors Daniel Stillhart President & Officers [email protected]

Patrick Pfister, CFTe Ron William, CMT, MSTA Vice President and Vice President and The Swiss Association of Head of Zürich Chapter Head of Geneva Chapter The Swiss Association Market Technicians (SAMT) [email protected] [email protected] of Market Technicians is a non-profit organisation Founded 1987 (Civil Code Art 60ff) of market analysis professionals in Switzerland, founded in 1987. SAMT is a member of the International Federation of Technical Analysts (IFTA). 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 Alberto Vivanti Mario Valentino Guffanti, CFTe on price trends, volatility, momentum, cycles and the Vice President and Assistant Vice President interrelationship of prices, volume, breadth, sentiment Head of Lugano Chapter of Lugano Chapter and liquidity. A comprehensive understanding of technical [email protected] [email protected] analysis requires a knowledge of statistics and pattern recognition, a familiarity with financial history and cycles. 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 Louis Grosjean Tim Straiton, FGA Head of Treasury Head of Website Development knowledge of technical analysis for the purpose of adding [email protected] [email protected] 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 [email protected]

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 technical wish to make the Journal open to new and innovative ideas from all areas analysis of technical analysis and those that connect with it. journal Submitting Contributions Submission of contributions to [email protected]

The Swiss Technical Analysis Journal Language is a quarterly publication established Contributions must be submitted by The Swiss Association of Market in English with British grammar Material deadline for the Technicians (SAMT). It is compiled required. Spring 2014 issue by a committee of SAMT colleagues. The Swiss Technical Analysis Journal Writing Style 28 February 2014 is essential reading for academics, Papers should be written in a thesis students and practitioners of technical style. analysis in all arenas. It is an excellent reference source for anyone interested References in technical analysis, containing a Advertising wealth of resource material. All texts referred to in the paper must The Swiss Technical Analysis Journal be appropriately referenced with a is published three times a year and is Credibility And Recognition bibliography and endnotes (footnotes published in A4 size, in pdf format only. will not be accepted.) The Swiss Technical Analysis Journal SAMT will accept advertisements in has original contributions from its Responsibility for the accuracy of this publication if the advertising does members covering developments in references and quotations is the not interfere with its objectives. technical analysis in global markets. author’s. We expect the authors to The appearance of advertising The Journal’s aim is to reach leading check thoroughly before submission. in SAMT publications is neither a practitioners and students of technical All references are to be included guarantee nor an endorsement by analysis throughout the world. as endnotes. No separate list of SAMT. The Swiss Technical Analysis Journal references or bibliography should be is a professional resource. Its online provided. Advertising Policy publication on the SAMT website will Advertising is subject to approval by make its work available as a future Figures, Charts and Tables SAMT. All advertisements must be resource to the community of technical Illustrations and charts must be non-discriminatory and comply with analysts. referred to by Figure Number and all applicable laws and regulations. source (when applicable). Tables SAMT reserves the right to decline, Topics must be referred to by Table Number withdraw and/or copy edit at their SAMT is seeking papers that cover and source. discretion. Every care is taken to avoid developments impacting, either mistakes, but responsibility cannot be directly or indirectly, on the field of Length of Contribution accepted for clerical error. technical analysis; they may be drawn Papers should be approximately from such areas as: 1,200 to 3,000 words, with supporting Advertising Rates Rate Size • Basic market analysis techniques graphs and charts. Inside covers 750 CHF 21.0 x 29.7 cm • indicators—sentiment, volume Format analysis, momentum, etc. Full page 500 CHF 19.3 x 26.9 cm We ask for submission in MS Word • Global and intra-global technical or other text format. PDF format will 1/2 page 350 CHF 19.3 x 13.4 cm analysis not be accepted. Charts and graphs Payment • Styles of technical analysis may be in gif or jpeg, but we ask that authors also keep a tif format in case Pre-payment by wire transfer is • Data it is required. required for all ads. Bank details will • The changing role of technical be provided upon request. analysis in the investment community.

The Swiss Technical Analysis Journal • Winter 2013 • 35 Samt encourages the development The Cost of Membership of technical analysis and the n Initial one time registration fee of education of the financial community CHF 50. in the uses and applications of the SAMT technical research and its value in the n Annual membership fee of CHF formulation of investment and trading 150. (The total cost for the first year is CHF 200.) Membership decisions. n Only fully paid-up members have SAMT offers the following benefits: access to the member area. n The organisation of meetings on a n The subscription cost for each broad range of technical subjects subsequent year is CHF 150. encouraging the exchange of information and knowledge of n Subscription expiry results in technical analysis for the purpose blocked access to the member of adding to the knowledge of the area. A standing annual payment members. order is therefore recommended. n The organisation of presentations Subscription Payments from guest speakers from around the world. Please use the Register Here link below for executing your payment and n The possibility to sit for don’t forget to make sure your name is the Certified Financial mentioned in the payment (especially Technician(CFTe) exams at a for members whose subscription is discounted rate. These exams are paid by/through their employers). controlled by IFTA. Also please note that by registering n The “IFTA Update” - a quarterly as a member of SAMT you declare newsletter from the International that you have read, fully understand Federation of Technical Analysts. and agree to the content of the n Access to the SAMT database SAMTDisclaimer statement which covering trading strategies, chart appears below. pattern recognition, technical Payments are made to: indicators and a glossary of terms. Swiss Association of Market n A generous discount on the annual Technicians S.A.M.T. IFTA Conference admission fee. Swiss Postal account Nr. 80-52569-5 IBAN: CH77 0900 0000 8005 2569 5

SAMT Disclaimer 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 website and publications therein. 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 IFTA Certified Financial the April CFTe Exam Technician (CFTe) When: Saturday, 22 March & Program Sunday, 23 March 2014 The IFTA Certificate (Certified Financial SAMT Technician) consists of CFTe I and CFTe Where: Geneva II, which together constitute a complete Education Hours: 9:00 until 17:30 each day professional program. 15 hours of Immersion Training The two examinations culminate in the award of this internationally recognised professional Class Size: 5 minimum; 10 maximum qualifi cation in Technical Analysis. New SAMT achiever has Cost: SAMT Members: CHF 1150 Examinations passed the CFTe exam Non Members: CHF 1350 The exams test not only technical skills, but also international market knowledge. Muneera Al Dossary, CFTe Early Bird Cost: SAMT Members: CHF 1050 CFTe I manages equity mutual Non Members: CHF 1250 This multiple-choice exam covers a wide range funds at Saudi Fransi of technical knowledge and understanding of the principals of Technical Analysis, usually Capital, an investment arm Registration Deadline: Friday, 14 March 2014 not involving actual experience. of Banque Saudi Fransi The CFTe I exam is offered in English, French, one of the largest banks Early Bird Italian, German, Spanish, and Arabic, and in the Kingdom of Saudi Deadline: Friday, 7 March 2014 is available, year-round, at testing centers Arabia. She has 10 years throughout the world, from IFTA’s computer- The course will be presented in English. based testing provider, Pearson VUE. experience in the banking CFTe II and investment industry. IFTA Exam: Wednesday, 6 April 2014 This exam incorporates a number of questions requiring an essay based analysis How do you feel about achieving the Registration and answers. For this, the candidate should CFTe diploma? Deadline: Wednesday, 5 March 2014 demonstrate a depth of knowledge and experience in applying various methods of It felt really good, very big achievement to technical analysis. The exam provides a number of current charts covering one specific get an international recognition in technical Complete information at www.samt-org.ch analysis after all the hard work that I have market (often an equity), to be analysed, as Contact: [email protected] though for a Fund Manager. put into it. The CFTe is offered in English, French, Italian, German, Spanish and Arabic bi-annually, How useful was our SAMT Geneva typically in April and October. Immersion Course in helping you Curriculum prepare for the exam? Technical Securities The program is designed for self-study. Local Analysts Association - societies may offer preparatory courses to Taking the SAMT Geneva Immersion assist potential candidates. Syllabus and Study Course was one of the best decisions I San Francisco (TSAA-SF) Guides are available on the IFTA website. made before the examination. It offered Webinars To Register great guidelines to how you can prepare for Each month the TSAA-SF presents webinars Please visit the website for registration the exam and it gave a very good strategy that are often free or require a prepayment details. of a small fee. The webinars are offered as http://www.ifta.org/certifications/financial/ on how you answer the exam questions in various times during the day - some early in a very efficient and timely way. The course the morning (Pacific Time), some at noon or Cost was presented by very professional members in the evening. Because of the time difference IFTA Member Colleagues between San Francisco and Switzerland (9 of SAMT who were dedicated to help us CFTe I $500 US hours), SAMT members could view some of CFTe II $800* US during and after the course. the webinars during CEST evening hours. Non-Members The next webinar is on Saturday, 13 April on What value does the CFTe diploma Integrating Signals from the Credit Market CFTe I $700 US qualification provide within your into Equity Trading Strategies by Dave Klein, CFTe II $1,000* US career? partner and co-founder of Capital Context *Additional Fees (CFTe II only): LLC. This webinar will be from 10:00-11:30 $250 US translation fee applies to non-English AM PDT (19:00-20:30 CEST). The fee for this Being a certified financial technician has exams webinar is $US 10 (the member fee). given me great confidence because the $100 US applies for non-IFTA proctored exam Click to see the schedule of webinars international recognition by IFTA has locations available. helped me in getting the respect of my TSAA-SF is the oldest society in the U.S. clients & employer and my technical devoted to the study and development of analysis became much more reliable. technical analysis of stocks and commodities. TSAA-SF is an IFTA Member Society.

The Swiss Technical Analysis Journal • Winter 2013 • 37 Centro di Studi Bancari SAMT Founded by the Ticino’s Banking Swiss Futures and Options Association in 1990, Centro di Studi Association Partner Bancari (CSB) is an institution that The Swiss Futures and Options promotes and provides education, Association (SFOA), previously the training and continuous update for Swiss Commodities, Futures and Societies banking, fiduciary, insurance and Options Association, was founded legal-financial professionals in the in 1979 as a non-profit professional financial markets. CSB provides association for the purpose of courses, training courses for various promoting derivative financial certifications and hosts conferences. instruments, particularly standard The training programs are recognized futures and options contracts on at local, national and international financial instruments and commodities, levels, as well as by many private to the widest possible audience, and International Federation of associations, such as SwissBanking. to serve the interests of its members. Technical Analysts (IFTA) CSB can also organise tailor-made SFOA serves users of commodity IFTA is a non-profit federation of 26 training, leveraging on its inter- and financial derivatives, as well as individual country societies who individually disciplinary competences in the field professionals, their institutions and and jointly dedicate themselves to of banking, finance, compliance, the exchanges. management and taxation. n research, education, camaraderie and www.sfoa.org dissemination of technical analysis www.csbancari.ch of world markets. The IFTA societies support sharing technical analytical methodology that at its highest level is a Groupement valid, and often-indispensable element Suisse des in the formulation of a reasonable Conseils basis for investment decisions. en Gestion Independats Swiss CFA Society n Promotion of the highest standards (GSCGI) The Swiss CFA Society boasts over of professional conduct, international 2,400 members in Switzerland, against cooperation and scholarship between CSCGI is a group of economic all its Member and Developing Societies interests formed by specialized barely 100 in 1996 at inception. It is within all arenas of technical analysis. independent financial intermediaries the largest CFA Institute society in continental Europe. With more than n Providing centralized international who are confirmed professionals in the financial services industry. The 2,000 candidates taking the rigorous exchange for information and Chartered Financial Analyst® (CFA®) data of various financial centers group is open to contacts with any while respecting individual country person interested in the business exam in Switzerland each year, and Society business practices, of wealth management seeking to the society’s impact on the Swiss legal structures and customs. promote dialogue with the banking investment community is self-evident. n Encouraging the standardization of partners and authorities at all levels. It was the first society of CFA education and testing of its constituent Their goals are to: charterholders in the EMEA region members in technical analysis, making • Promote contacts between to be directly affiliated with the sure that each individual country’s prestigious CFA Institute, which security analyst licensing, legal and professionals motivated by the same desire for independence, includes more than 110,000 language /communication priorities members in 139 countries. continue to be individually accepted. wishing to maintain and develop relationships with counterparts. The vision of the Swiss CFA n Fostering the establishment of individual societies of technical analysts without • Find common ground for Society is to be a leader in fostering bias in regard to race, creed or religion. exchanging experiences and the highest level of knowledge, It supports the need for maintaining a ideas, a field where diversity and professionalism, and integrity in the free and open worldwide markets under novelty are prevailing. investment business. normal, and in particular crisis periods. • The enrichment of the links that www.cfasociety.org/switzerland As a growing bridge of communication can be forged on a friendly and worldwide, IFTA remains open to methods of technical analysis, while encouraging professional level within a well the consideration and support of defined and recognized framework membership for both developing and to favour professional consultation established societies. and close dialogues. www.ifta.org www.gscgi.ch

38 • Winter 2013 • The Swiss Technical Analysis Journal Weihnachtsgrüße Meilleurs vœux und die besten Auguri di pour les fêtes Season’s greetings Wünschefür ein buone feste e di de fin d’année et and best wishes for erfolgreiches 2014 un felice 2014 excellente année a successful 2014 2014 The Swiss Association of Market Technicians

GenÈvE • Lugano • ZÜrich

40 • Winter 2013 • The Swiss Technical Analysis Journal