Chartered Market Technician
As we work our way through 2018, we have a lot going on here at All Star Charts. It’s been over 2 years now since our first major transition after the original launch in 2010. I am happy to say Allstarcharts.com entered its 8th year this March. The idea for the website first came up in 2010 with the intention on being a technical analysis blog to share ideas about what I’m seeing around the market. This small blog quickly turned into 10s of thousands of unique visitors, invites to come and talk about my charts on TV, quotes in news publications all over the world and speaking engagements including some of the top financial conferences in the country and institutions like Harvard, Duke, NYU and the University of Chicago. Since the start of All Star Charts, I’ve been fortunate to have my work featured regularly on Bloomberg, ABC, Wall Street Journal, CNBC, Fox Business, Yahoo Finance, Barron’s, CNN and Canada’s Business News Network, among other media outlets.
In 2012 I founded Eagle Bay Capital with the goal of managing money through one portfolio in a limited partnership. In addition, after several years of requests from all over the world, we launched the All Star Charts Research Platform in September of 2014 to provide technical analysis commentary across all asset classes to investors worldwide. This new venture was more successful than we ever imagined. A little bit over a year later, instead of continuing to outsource our back-end, we rolled out a major expansion in the research platform directly through Allstarcharts.com itself.
This is what you see here today. We also just launched All Star Charts EDU last year, which is an Educational section of the site dedicated to helping users grow their knowledge of technical analysis. Meanwhile, Season 1 of the All Star Charts Podcast was just completed. You can find all 25 episodes on TechnicalAnalysisRadio.com – I encourage you to go check out this list of interviews. Although we do touch on process and approach to markets, these are conversations about the current market environment filled with actionable ideas.
So far in 2018, we launched the new All Star Options which is designed to turn the Technical Analysis that is already being done into actionable and easy to execute options strategies for Active Traders, Hedge Funds, Banks and any other participants in the options market. If you’re interested at all in options, I think you should go check out what Sean and I are doing over there.
On a more International front, Allstarcharts India was also launched this year. We have taken the analysis being done for investors around the world, and dedicated a specific platform for investors living and trading Indian Markets. This is the only one of its kind and the feedback we’ve received so far has been amazing!
A little bit about me – I grew up in Miami, FL and I’m a big sports fan. When I’m not looking through charts, I’m probably either cooking and eating or watching a game. Many times it’s a combination of the all of them. I’m not really a golfer. I’ve only met Carl Icahn once and his advice was, “If you shoot over 90 you have no business on a golf course. If you shoot under 90 you have no business!” So I’m more of a skier these days and a little bit of boxing lately. Growing up from Cuban born parents in Miami, needless to say, I played a lot of baseball. I was even fortunate to be able to pitch a little at the NCAA Division 1 level. I graduated from Fairfield University with a degree in Finance and immediately started paying my dues. After growing up in Miami, I spent 15 years total in New York City and the surrounding areas. I lived in Fairfield, CT and Hoboken, NJ until ultimately moving into Manhattan in 2006. Currently, I am living in beautiful Sonoma Valley, CA. It’s wine country here and pretty incredible weather all year around. I’m a quick drive to Lake Tahoe or down to Monterey. I’ve been here since September 2015 trying to focus 100% of my attention on growing the Allstarcharts into something really special. Prior to moving here I was spending a lot of time running around New York City between meetings, live TV appearances and constant night time events. From a business perspective, it made little sense to continue to live that lifestyle. First of all, no one watches basic cable anymore, and second, I still have just as many meetings today over the phone or via skype. And sure I miss my friends. But I left Miami when I was 18, so I’ve done this before. Right now I’m 100% focused on growing what I’ve built so far into something really incredible. I think we’re on our way!
But this didn’t happen overnight. The whole technical analysis thing first started for me back in 2005 when I realized that I didn’t know anything about the stock market. What scared me even more was that there were people sitting around me at work that were twice my age, and in some cases 3 times my age, that swore up and down that they had a handle on the market. I guess I was just lucky at the time to be aware enough to realize that these guys didn’t know anything and were doing themselves and their clients a disservice.
Yogi Berra once said, “When you come to the fork in the road, take it!”. For me this fork was essentially fundamental or technical analysis. Do I want to study for the CFA and learn about companies? Or do I want to study for the CMT and learn about the stocks and the market? It seemed like an easy choice at the time but little did I know how important that decision would eventually become and how much it would impact life.
Half way through John Murphy’s Technical Analysis of Financial Markets I thought I was the next Paul Tudor Jones. I was day trading options based on MACD crossovers throwing back sandwiches from Fiore’s in Hoboken, NJ two at a time. Best Roast Beef / Fresh Mozzarella you ever had. (Thursdays & Saturdays only).
Anyway, the point is that I had a lot to learn. There was some good news and that was that I didn’t have much money at the time. So how much could I really lose? Veterans in this business will tell you that the money you lose trading early on in your voyage is your tuition. You don’t learn this stuff in school. You have to go out and figure it out on your own. That costs time and money. This is your tuition. I truly believe this to be the case and would tell that to anyone new to trading and investing in publicly traded and liquid markets.
Fast forward to 2008 and I have now finished reading the curriculum for all 3 levels of the CMT program as suggested by the Market Technicians Association. It didn’t matter that I passed all 3 levels, I already thought that I knew everything there was to know about the market. Well, wrong again. I needed a few bull and bear market cycles to really wrap my head around the fact that I don’t know anything at all. No one does. The market is going to do what it wants and it doesn’t care what any of us think, especially me. It’s the Socrates quote: “I know one thing: that I know nothing”.
So now that I’ve figured out that I can’t tell you what will happen next and no one else can either, it’s been an evolution of a process. I can’t predict the future, but I’m willing to bet that the evolution of my process is not yet complete. It’s something that I will continue to adjust as time goes on, hopefully for several decades to come.
My timeframe is simple: I look out weeks and months. I am not a day-trader, but I also don’t care what happens next year. It’s an intermediate-term time horizon. Not long-term and not too short-term either.
I use candlestick charts for my every day charting. Once a week I go through the 3000 charts in my arsenal with just bars. No moving averages or momentum or anything else on the chart – just bars. You’d be surprised how much you can see when you simply get everything the heck out of the way.
For ratio analysis I use line charts. This helps with the day to day or week to week changes in a ratio. Remember that not everything opens up every day at the same time. If you’re using candlesticks or bar charts for ratios, you’re going to have bad data all the time, most of the time really. So line charts are very useful to me as well.
For momentum I use a 14-period Relative Strength Index, or RSI as the cool kids call it. I don’t change my RSI periods and I don’t smooth them out like others do. Not that there is anything wrong with that, it’s just that 14-periods works for me. Also, when I say “periods”, I mean daily and weekly. So if I’m looking at a chart with weekly candles I’m using a 14-week RSI. If we’re analyzing a daily chart, I’m using a 14-day RSI. See: (JC and Momentum)
Smoothing Mechanisms: I only use a 200 period simple moving average. This is for both daily and weekly timeframes (like in momentum). I’m pretty sure I picked this one up years ago from Paul Tudor Jones. For my timeframe a 50 period moving average is too noisy. It doesn’t help, it just hurts. Also, I don’t use moving averages for support and resistance purposes as I see being done so frequently. This is an invisible line, as far as I’m concerned, with no supply and demand history whatsoever. Therefore I use the smoothing mechanism to help with trend recognition. Is it an upward sloping 200 day? Downward sloping? Or is it flat? I hate when prices are near flat 200 period moving averages (see here: Price Near Flat 200 Day = Headaches).
I don’t look at volume on stock charts. Sorry Charlie Dow. I know this is sacrilegious in some circles but I don’t really care. Charlie Dow wrote down his Dow Theory Tenets in the late 1800s well before the derivative markets existed. I think that volume can be seen elsewhere, not just in stock charts. If someone really wants in, are they going to buy the common? Or are they going to use options leverage? It depends. So my point is we don’t know. I look at volume just to make sure a market is liquid enough market for me to participate in, but that’s it. It’s not a confirmation of any kind for me, just more noise. (see here: 5 Things Every Investor Should Know About Dow Theory)
I think you guys get the idea. There are other tools that I use like Sentiment and Correlation analysis to supplement all of the price activity across markets. But in terms of my chart by chart work, this is my process and it is as a result of many failures and successes over a lot of years. It’s not perfect and it’s always a work in progress. I think you need to be a fool to think your process has been perfected.
The market has taught me, the hard way, to check my ego at the door and always remember that none of us know anything. It doesn’t matter how loud they get on TV, how many blog posts they write about a subject, or how long they’ve been the Chief Strategist of **fill-in-the-blank** sell side wall street firm, they don’t know anything that you don’t know about what will happen tomorrow or next year. This is a fact. So it all boils down to how well you manage risk. Remember, it’s not about being right, it’s about making money.
Thank you for coming to the site. I invite you to join us in a more official capacity.