From the desk of Tom Bruni @BruniCharting
Below is a summary of last weekend’s Chart Summit I wrote for the CMT Association, so I wanted to share it here as well.
Also check out JC’s post from last week for his thoughts and dope photos.
Before we get going, if you want to access the video presentations from the weekend please visit ChartSummit.com and register to receive a notification when they’re made available.
Day one started off with a “Technical Analysis In Social Media” panel with host Sean McLaughlin (@chicagosean), Howard Lindzon (@howardlindzon), Brian Shannon (@alphatrends), Ian McMillan (@the_chart_life), and Brian Lichtor (@blichtor).
The biggest takeaway from that presentation was how social media has the ability to accelerate the learning curve of financial markets and investing by providing access to information and mentors. The ability to identify and collaborate with a community of people who have similar interests is something that was much more difficult just a decade or two ago. As with anything there are bad actors out there, but if you put in the work to figure out who you are following and why, you end up with a curated stream that provides value day in and day out.
The next presentation was Matthew Verdow (@Optuma), CEO of Optuma, who walked us through the basics of “A Quant Approach For Any Technical Analyst.”
When people think of Quantitative Analysis, there’s a tendency to jump to “black box” programming, but Matthew showed us that no matter what approach we have to the market, we need to show that our work is statistically significant. A backtest alone is no a quant process because it has too many axis of freedom, so this presentation walked us through the four steps of the testing process: Idea Generation, Signal Testing, Trade Testing, and Back Testing.
At the end of the day we all want to add value; quantitative methods can help us determine what value our process is adding and how we can continue to improve it over time. Definitely check out the rest of Matthew’s presentation, there’s a lot to unpack there.
JC Parets (@allstarcharts) was up next, ripping through more than 100 charts in 45 minutes to provide a “Top/Down View of Financial Markets.”
Some key themes he spoke about were the potential for the US Dollar (both Trade Weighted and the traditional Dollar Index) to roll over from current levels.
A weaker US Dollar may bode well for Emerging Markets and JC pointed out an interesting divergence between the Emerging Markets ETF $EEM and the S&P 500 during four key lows over the last two decades. Each time we saw Emerging Markets make a higher low as the S&P 500 made a lower low, a signal that JC says indicates improving risk appetite for equities.
He then got into some International Equity Indices in their local currency, pointing out that it’s hard to make the bear case if the London FTSE 100 is above its 2000, 2007, and 2014 highs.
Market Breadth is a hot topic today given the market’s aggressive rally off the December lows. JC shared a chart showing the NYSE Common Stock Only Advance-Decline Line hitting all-time highs, which is one data point suggesting strong market internals.
What can continue to fuel this rally to the upside you might ask? Cash….and a lot of it. This Bank of America Fund Manager Survey indicates that the percentage of its participants were overweight cash is the highest it’s been since January 2009.
Last but not least, no presentation would be complete without a chart of Palladium. This has been and continues to be the leader in the Precious Metals space. What a trend since 2016…
After a little booze, food, and discussion about “Direct Market Access” with Don Hensley (@DonaldRHensley) from Speedtrader, we were onto Todd Gordon’s (@toddgordontrade) presentation about “The Similarities Between Ski Racing and Stock Trading.” For those who don’t know, Todd majored in economics at St. Lawrence University and competed on their Division 1 Ski Racing Team. Being an expert in charts AND Skiing was just unfair for the rest of us, because he definitely killed it on the slopes and with his presentation.
We can’t get into every similarity, but here’s a teaser of the 10 that were discussed.
Todd’s also a big Elliott Wave guy, so he dropped some knowledge for everyone in attendance about what that discipline is and how he incorporates it into his process.
One thing that stood out during the last section of his presentation “Controlled Aggression”, was when he talked about having the courage to make money when you’re right. Not every trade setup or market condition is the same, so being aggressive when the odds are in your favor is critical to helping offset the small losses you’re taking over time.
Todd also had a great “Bonus Section” of his slide deck that included more analysis of the current market environment, as well as some of the trade setups he’s watching.
Kathy Donnelly (@KGD_Investor) has been a Proprietary Equity Trader since 1992 and spoke to us about “The Lifecycle of a Super Growth Stocks” and how to trade it. Her trading style is growth oriented with a holding period of 1-1.5 years or more, so it was definitely an interesting contrast to many of the other presenters who have a shorter timeframe.
Her presentation focused on IPOs, so she first she walked us through the lifecycle phases of a stock: IPO Advance Phase, Institutional Due Diligence Phase, and Institutional Advance Phase.
Kathy used Tesla as an example to walk us through what these phases look in real time and how and when she traded this stock in particular.
This lead into a discussion of the six potential patterns of a stock’s lifecycle, each of which have a clever name that helps indicate the type of action it’s describing.
Some other interesting tidbits from her study of IPOs were that 55% of IPOs undercut their day 1 low within three weeks, 91% of stocks eventually undercut their day 1 low, and only 20% of IPOs gain 100% from their first trading day close within 1 year.
If you’re interested in IPO investing, Kathy’s presentation was full of great information.
We ended the night with a “Fireside Chat” between Sean McLaughlin and Jon Najarian (@jonnajarian), where they discussed trading and options. Jon talked about the importance of knowing the time, strike, and whether the trade occurred on the bid or the offer when analyzing options activity. Generally when there’s large institutional buying or selling there’s a reason for it, so by scanning for those outsized trades he (and other market participants) can find opportunities to ride the trend created by those institutions.
They also discussed the 16 option exchanges and how they all are dark, but that some market participants pay for access to see the feed for bid/offers nanoseconds before people with slower connections so that they can take advantage of it.
They covered too many topics to summarize, but for anyone interested in trading, options, and institutional order flow, this was a real treat.
Day two began with JC Parets and Howard Lindzon discussing “Chart Art”. This panel was interesting because JC works primarily in the public markets, whereas Howard is primarily in the private markets. Howard offered his perspective on how he uses information from the public markets to inform decisions in the private markets and vice versa.
They also spoke about the next potential trend in the markets and fintech being around “Data Visualization”. Access to markets and information has never been better, but now people need the tools to organize all of that data in a way that helps them inform decisions.
Another topic was on Howard’s advice for kids today. In the past decades it was something like “learn a second language”, but now it’s learn to code, or if you can’t, go work for a company whose product is already good so you can learn about how to run a business (sales, marketing, operations, etc.).
It was a great discussion and this summary doesn’t do it justice, so definitely check it out.
Dan Mirkin and David Aferiat (@TradeIdeas) spoke about “Quantitative Intelligence and the Significance of Server Technology”. They discussed the role of Artificial Intelligence in trading/investing, some market structure trends they’re seeing, as well as a breakdown of their program “Holly” and how it works.
Some of the market structure trends they’re watching are below, but the one that sticks out is the rise of CMTs as future data scientist. Matthew Verdow spoke about this as well in his presentation about quantitative methods.
Here’s an overview of “Holly” that they walked through in more detail during the presentation.
The TradeIdeas team made a great case for humans partnering with machines to improve their process and get better results in the market. It doesn’t have to be one or the other, and in many cases using both can improve your edge in the market.
Check out their full presentation for more information about A.I. in markets.
Next, Tom Bruni (@BruniCharting) discussed “Market Breadth” from an educational perspective, describing how the Allstarcharts team approaches it and what they’re seeing in the current market environment.
First he discussed some traditional indicators, like the S&P 500 Advance-Decline Line, which broke out well ahead of the S&P 500 and continues to lead to the upside.
Equally-Weighted charts are another important part of Tom’s process. He discussed how the largest 10 stocks in the S&P 500 account for 20% of the weighting, so divergences between an equally-weighted chart of those ten stocks and the cap-weighted S&P 500 cannot remain intact over the long-term and needs to resolve itself by one catching up (or down) to the other.
He even gave some great examples from India’s stock market where the largest 10 stocks make up 40% of the index and one stock accounts for 60% of the Energy sector!
Using a free online tool, Koyfin, Tom showed that it’s never been easier to analyze the breadth of an index, ETF, etc. by looking at the weighting and attribution of each holding.
Another point made was that the number of stocks in the Russell 3000 getting overbought, or showing positive momentum characteristics, exceeded its 2018 highs despite prices of the index being several percent off their highs. Another sign of expanding, not narrowing, participation.
To finish off his presentation, Tom walked the audience through the results of his “eye test” where he went through the top 200 stocks in the S&P 500 and shared those that had the characteristics he looks for when shorting stocks (downward-sloping 200-day moving average & momentum in a bearish range). After finding only 5-6 names, the conclusion was that if charts like Altria are the best setups the bears can muster, we probably don’t want to be shorting stocks on any sort of intermediate or long-term timeframe.
After that, Scott St. Clair (@Zeninthemarkets) presented the “IBD Stock Investing Philosophy.” The 4 pillars of performance are: Stock Selection, Concentration (and Leverage) vs Diversification, Market Timing, and Money Management.
Each section had its own nuggets, but these were a few that stuck out.
In the stock selection section, this quote from William O’Neil was really interesting. “You can come up with the idea from the charts. But it (the stock price) is not going up because of the chart.” This ties well into what Tyler spoke about in his presentation, that over the long-term fundamentals drive the stock price, but technicals can help us navigate the difference between the market value and its intrinsic value in the short and intermediate-term.
In terms of concentration vs diversification, Steve Birch (William O’Neil + Co, CEO) has this to say “When I started out as a novice investor I was always trying to figure out what to buy. After I experienced a few bear markets I figured out when to buy. Now I spend most of my time thinking about how much to buy.”
As for market timing, William O’Neil had this to say about patience, “Investors who can be right and sit tight are rare. It takes time for a stock to make a large gain.”
Apple didn’t get to where it is today overnight folks.
The last thing Scott left us with was a quote from William O’Neil on money management, “You positively must understand and accept the first rule for the highly successful individual investor is…always cut short and limit every single loss.” Not sure there’s a better way to end a presentation with a reminder that capital preservation is a must in trading and investing.
If you’re interested in learning more about William O’Neil’s approach and Investor’s Business Daily, be sure to check out the rest of Scott’s presentation.
His presentation kept it simple from the start, helping answer three simple questions: What is technical analysis, what is the CMT program, and where are the career opportunities?
The great infographic below helps answer that first question.
There were even a few shout-outs in his presentations to CMTs like David Keller, who uses this infographic in his presentations to outline the uses of technical and fundamental analysis across the three different timeframes: short, medium, and long-term.
Due to time limitations Tyler didn’t get into the CMT Designation process or career paths, but there were some great slides at the back of his deck discussing just that.
And here is a great chart of the diverse career paths of current CMT Charterholders.
If you’re interested in learning more about the CMT Association and Designation, be sure to check out the rest of Tyler’s presentation.
The next panel, “Women in Technical Analysis” was hosted by Rachelle Daglis (@SocialDaglis) and featured Kathy Donnelly and Kim Sokoloff.
It was an interesting contrast to see Kathy and Kim on a panel together because of their two opposing timeframes, Kathy being long-term and Kim being short-term. What the two did have in common though is the theme that women traders have an advantage over men because of their patience, smaller egos, and a variety of other factors.
The two also shared their approach to trading and daily routine in more detail, offering interesting insight into the schedules and habits of two full-time traders.
Overall it was a great discussion between three awesome women in finance, so check out the video to hear the full conversation.
The second to last presentation of the night “The Future of Technical Analysis” featured Dan Ushman and Jake Wujastyk walking us through their platform TrendSpider.
First Dan explained the problem that his team’s platform is looking to solve: Technical analysis is hard! It’s difficult to be consistent if you’re relying solely on your ability to interpret a chart and make discretionary decisions based on it. The subjectiveness of our field can often lead to profit-killing mistakes and traps.
So what is TrendSpider? It’s a platform that offers charting, technical analysis automation, multi-timeframe analysis automation, and alert automation.
All of those features combine to help reconfigure your trading workflow into a more efficient, easier to manage process that’s designed to drive consistency.
Jake gave a great demo during the rest of the session, so I’d highly recommend you check that out if you’re interested in learning more about what the TrendSpider team is doing.
Last but not least, Brian Shannon walked us through his “Favorite Swing Trade Setup.” He began his presentation outlining what swing trading is, market structure, trend alignment, and two tools he uses to help with that process: Moving Averages and the Anchored VWAP.
Next he got into the specifics of swing trading timeframes, starting with trend alignment.
So you’ve identified the trend, now what? Brian says you have to answer these two important questions before entering any trade.
He ended his presentation with his “4 Steps For Success, The Alphatrends Way!”
Brian also shared a number of trade setups he’s watching now, as well as other information about his overall process. If you’re interested in Swing Trading, check out his full presentation!
And that’s a wrap! Chart Summit 2019 is in the books. Thank you to everyone that helped make this event a success, it takes a village.
One last reminder before we let you go. To access the video presentations from the weekend please visit ChartSummit.com and register. You’ll receive a notification when they’re available.
Thanks for reading. We hope to see you next year for Chart Summit 2020.