Disclaimer: I attended the MTA symposium this year in NYC.

The following notes were written based on the speaker lectures in various events I attended. These are for educational purposes only, and I take no responsibility towards the accuracy of the content.

The MTA Symposium: A Summary

Author: Vipul H. Ramaiya, CFTe CMT Email: vipulramaiya@gmail.com The theme at this years symposium was Fusion analysis: an attempt to combine different disciplines of research, namely Technical, Fundamental, Quantitative, Economic and Behavioral sciences. It was an interesting mix of analysis and strategies that a diverse range of presenters discussed, while those who held key positions in the Buy side industry showcased methodologies that combined inputs from various disciplines. I came away quite impressed from different topics that attempted to overlap technical analysis with various metrics, giving an identifiable edge to a strategy, that is otherwise not discovered. Following is a list of individual events I attended along with my notes and views:

P/E Ratios: Ultimate Sentiment Indicator, with Steve Leuthold

Greed and fear are critical stock market elements and also the twin barriers on the road to long term investment success. Herere a few lessons Steve learnt over his long career: o It is important to know your strengths and weaknesses o Discipline is the key to success: Plan your trade, trade your plan o Risk/Reward: The most important relationship in making decisions o Cash is not Trash: It reduces portfolio risk, provides cushion and buying power in times of distress. Its very valuabl e at these times: You have it when others dont (Market tops); you invest when others liquidate (Market bottoms) o Always try to consider market crisis as a potential buying opportunity: employ leverage near market bottoms / washed out levels / panic sell -offs to invest in blue-chip stocks o Short-term trading is a losers game o History is experience: learn from it (Like CJ says: History doesnt repeat, it Rhymes) o Every Bull market has different Leaders: Dont assume todays great companies will also lead in the next bull market. No growth is permanent! Valuations the key to market returns: Steve particularly discusses long term analysis of market returns for various levels of Price/Earnings and Price/Cash Flow ratios. Currently, the S&P 500 is in the 8 decile of historical recordings as far as P/E ratios are concerned. These th are calculated after normalizing quarterly earnings to reduce the impact of business cycles. From the 8 decile, historical annual returns (Median 3-Yr CAGR) is 9.8%, but most of these returns came from stock market bubbles. Cash Flow: As of now, the SPX index is in the 9 decile of historical readings for the Price/Cash Flow ratio where the subsequent average 3-Yr CAGR is 5.2%, while the median 10-Yr CAGR is 7.3%. Steve perceives the market to be near historically elevated readings from a valuation perspective, and does not feel we may witness periods of exceptional returns in years to follow.
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Panel Discussion: David Keller, Barry Sine, David Krell and Ralph Acampora
David Keller began the discussion addressing the current state of affairs at the MTA, and how the renewed interest and recognition in/of the CMT designation has been one of the biggest achievements during his tenure. The panel then discussed the historic progression of the MTA and the two distinctively diverse schools of thought: Technical and Fundamental Analysis. There was no fundamental data (Balance sheets, Company financial statements etc., that are the primary inputs for Fundamental analysis) as companies were not required to disclose operational information until the SEC implemented the Securities Act in 1933. This was followed by the launch of perhaps the book that laid the foundation and groundwork for anything related to Value investing / Fundamental Research today: Security Analysis by Graham & Dodd. Prior to 1933, all the available financial data of listed companies was either scarce of unreliable, and insider trading was at large. On the contrary, the first records of price analysis go way back to the rice traders in the 1700s. Price action analysis was the only form of analysis that reliably countered all forms of speculation, insider trading and non-availability of information in those ages. However, the recognition of Technical analysis as a credible source of research remained in a sorry state, as highlighted by this event: Robert Magee charged by SEC for violations in 1949 for Technical analysis based recommendations, and for conveying the message that analysis of price was a valid form of understanding market behavior. Interesting Quote (Ralph Acampora): Magee did not have an MTA to back him. However, Technical Analysis as a body of knowledge and research has made substantial progress, particularly post the establishment of MTA and IFTA: o o Federal Reserve paper citing the efficacy of TA in 2000 The most important date in Technical Analysis history: Dec 17, 2004. This was the day the SEC declared after a meeting with SEC, MTA and NYSE lawyers: There are 2 types of analysts: One is a fundamental analyst, who has a CFA and follows companies; and the second is a Technical analyst, who has a CMT and follows stocks. Interesting Story (Ralph): After the meeting was over, one of the lawyers put a chart in front of Ralph and asked: What is Fact? Ralphs answer: Only price is fact. Earnings are estimates and may get restated. You never restate a chart. The attorney responded by saying that it was the best answer that hes ever heard. SEC accepts CMT exam for Technical analysis in lieu of Series 86 Barry Sine making the occasional joke about Technical analysis: Sure it works in practice, but will never work in theory. Academic institutions are slowly realizing the importance of this school of thought: Many universities now offering courses in Technical Analysis The CFA body of Knowledge has now introduced a 75-page chapter for Technical analysis. This ensures over 100,000 new pair of eyes each year trying the understand price action behavior. Global reach: 40% of MTA members are Non-US residents / CFA Designation reaching a maturity stage: There is a huge opportunity for the MTA to expand worldwide.

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The best quote from this panel (Ralph Acampora): If you want a job, get your CFA. If you want to keep the job, get your CMT. Another gem from David Keller when he was asked about his message to young and aspiring technicians: Always be a student of the market.

Keynote Presentation: Jeff DeGraff & Ned Davis, moderated by David Lundgren
This was the event I was really looking fo rward to. Herere some notes from the individual presentations and the panelist discussion that followed:

Ned Davis Presentation:

Ned began the presentation with the basic definition of price: It is an equilibrium point between supply and demand (basic ec onomics). Based on the variety of indicators that they follow at NDR, he kept reiterating the weight of the evidence approach, wherein no one single indicator takes precedence/importance over the others. It is the combined message of these indicators that shapes their analysis and conclusions. Steps followed in Market Research: Trend, Monetary analysis and Sentiment Valuation Markets are driven by different indicators. Some of our most favorite ones include: o the BigMO (a combination of price trends of about 100 industries) o Breadth: % of stocks above the 50-day / 10-week MA; % of stocks above the 40-week MA o Sentiment Composite: 20 different sentiment indicators combined for a score; we always remain wary when the crowd is extreme o Consumer Confidence o Given the fact that the financial system is the backbone of any economy, he likes to use the relative strength of the Financial sector in particular as an indicator for the US stock markets. o Median P/E Ratio: Also like to look at Dividend Yields and the Rate of Inflation o 70-week Linear Regression of the 10-Yr bond yields o Ratio of the LT Treasury Yields to the ST Treasury Yields o Reuters CCI (Annual change) o Breadth Thrust: An instance where 90% of the stocks are above their 50 -day MA. Gains more importance if occurs near possible turning points than within an existing trend. o Zweig Bond Model Comparison of trading techniques: Mean reversion is much more dangerous; trend following is the easier and better of the two. Technicals on Macro Data: No trendlines to be used; we use stochastics / trend following techniques and found them to be more reliable. Relationship between 10-Yr Bond yields and equity markets is Non-existent. This is contrary to popular public opinion. Midterm Election Years: Has witnessed poor returns historically, but declines have provided excellent buying opportunities (On average, the market has advanced 60% in the next 2 years from the low). Ned continues to look for signs of a breakdown, but is not seeing them yet. There was certainly a lot to take away from a learning perspective. Ned called Warren Buffet a sentiment technician. Based on Buffets famous saying, Be Fearful when others are Greedy and Greedy when others are Fearful, one can easily relate this to identifying sentiment extremes to make investment decisions, one of the key areas under constant scrutiny in Technical analysis. He also placed a lot of emphasis on the compulsory use of stop loss in your trading / investments. He says, The great importance of technical analysis is the stop loss.

My favorite Quote (Ned Davis): Were in the business of making mistakes. Winners make small mistakes, losers make big mistakes. Market thoughts: o Ned Davis: Bullish; sentiment/value models consistent with high risk bull market environment. There is a potential for a decent sized correction, but not enough evidence. o Jeff DeGraff: Remains quite constructive; expects at most a 3-5% correction. His trend and credit work remains bullish, leverage indicators are in an excell ent position from a long-term perspective and point to a multi -year bull market ahead.

Jeff DeGraff Presentation:

Jeff began the presentation on a very interesting premise: Dual -scale / Analog charts, one of the most commonly used techniques by mainstream / print media to garner attention. One can randomly combine multiple scales and data to visually back your thesis. He suggests that you should always remain conscious about ocular regression / correlation, and using a scatter plot to check relationships s hould be the pre-cursor before making any decisions. Notes from his presentation: They follow a quantitative trend model. Some of the important metrics / indicators that they monitor include: o % of issues making 20-day highs o Breakdown into different regimes: Jeff always reads the output of indicators within the context of different regimes: Bull markets or bear markets. He believes that no two environments are the same; hence, it is important to establish ground rules that help define the boundaries of indicator behavior in different environments. o Relative performance of Industrials vs. the Financials o Relative strength of the IPO index vs. SPX o RenMac Leverage Indicator o Sentiment indicators: He is only interested in identifying the outliers in sentiment data. o Volume is not much useful for understanding trend behavior in individual stocks; rising volume is generally a proxy for sentiment. o Some additional metrics they anal yze to predict environments for possible turning points in the broader market: Price Momentum (1-Month) Volatility Historical Growth / Valuation Capital Efficiency Trend Following vs. Mean Reversion: Jeff says that trend following works, is easier to implement and follow. Mean reversion is extremely difficult to practice successfully and is also a major hurdle in career longevity. Use of indicators: Jeff says that every indicator need not provide a buy/sell signal. Indicator values can help shape your portfolio exposures / risk levels / hedging size. I believe this is a unique approach and I havent heard anyone talk about this before. Volume analysis: When he carried out extensive back testing on price breakouts with or without volume, he was surprised to realize that breakouts without volume had better returns than those with volume.

This is completely contradictory to the popular belief that succes sful price breakouts are more likely to be supported by higher volume. Sentiment Indicators: With respect to popular sentiment indicators including polls, he says median values offer no statistical edge. For eg. If you consider the AAII poll, the bullish participants increasing from 40% to 60% means nothing. However, if we were to look at extreme values / outliers, we can identify a skew. Fundamentals / Valuation: Jeff says the pursuit of getting the earnings right is a complete waste of time; it is the market multiple that matters.

A Visual Toolkit for Investing: The Rise of Charting in Social Media with Charlie Bilello, J. C. Parets, Greg Harmon and Ralph Acampora, moderated by Phil Pearman
Phil Pearman kicked off the second day of the symposium with a panel discussion on Social Media and charting that has taken off hugely over the last 5 years in particular. It is an excellent visual / real -time medium for generating numerous ideas with anything thats attracting meaningful attention. The most common e xamples include sites like Twitter, Stocktwits, WordPress and Tumblr. Thousands of traders / participants flock these websites for ideas and initiate trades based on them across asset classes and time frames. Phil to Ralph: What are you doing on Twitter? Ralph: Been on twitter for over a year. The thing I like about it is 140 characters, which ensures brevity and clarity. Some things unpleasant about it include the not-so nice comments people voice out over opinions. Well, I dont read anything that is s ent to me. Its a kind of a one-way street: Only outgoing ideas, no incoming. Phil: With Twitter and social media, this is a one-to-many mode of communication. How do you deal with the feedback, both pleasant and negative? Greg: Its tough to deal with negativity; however, it is very important to cut out the noise. The social media websites provide an incredible platform for one-to-many communication, which is just a huge advantage even over something like an email. The sheer size of audience you can rea ch out to is a significant benefit to share ideas. Charlie: Need to learn how to look past the noise. Only pay attention to / interact with professionals. The level of hatred and intensity is funny at times, but is also helpful from a sentiment perspective. For eg. the sheer pessimism for gold and bonds coming into 2014 is a classic example of how extreme sentiment can get for anything that does not work in bull markets. JC: Completely agree with Charlie. Negative feedback helps you get a good feel from a sentiment perspective. If you curate your streams, it can generate excellent ideas / bring your attention to important issues that you are otherwise not aware of. Additionally, the larger your audience and the more followers you have on Twitter / Stocktwits and the traffic you get on your blog, you can really use it to your advantage, especially from a sentiment perspective. If you have ideas, throw it out and get feedback. Phil: Recently, Twitter and a select few websites have started quantifying sentiment data, providing a bit of an objective basis to an otherwise random flow. How useful is that? Greg: Aside from gathering sentiment, you get a feel from the people you follow and their feedback, where peoples biases are. It is also important to keep people in your streams that have a set negative view or a set positive view. For eg. If ZeroHedge (a permabear) goes positive on the markets, something is definitely wrong in the world. Phil: Social marketing: Using blogs, feeds and Social media platforms for a business purpose. Charlie: It is a conscious strategy to build a presence on the internet using social media. This is a new thing for asset management companies. We are looking for a way to provide communication to the clients and show what we are thinking on a real-time basis vs. just something like a quarterly letter. I like using a blog as it can be on a more personal level and can add a lot of analytics to it.

Greg: Blogs can be anything: from expanding your twitter entries to full length posts. I use a blog to create a presence. I like to let the world know what I am thinking about the macro view as well as the micro view. I also use it to curate my own thoughts. Its almost like keeping a journal of my views over time. The blog has helped generate a lot of business for me. Ralph: I havent graduated to a blog yet. What I am afraid about, is people may think I day trade. I am a long -term trader / investor. I get quite upset when people say that Technicals are for traders only. I need to get that message out to my followers. I dont think Twitter helps me do that: observations on significantly higher time frames. Phil: These are just publishing tools, and they need to be considered just that. They appear shiny and new and flashy, but these are just a medium for exchange of ideas and biases. It is a technological advance that provides a means to put out ideas to the public at large. Getting back to Ralphs methods, you may post your methods about the time-frames you primarily observe and your outlook. Only people that are interested in a similar time-period analysis may consider connecting to your blog. JC: Ive been writing a blog for over 3 years. There are numerous benefits to it: It becomes a trading journal wherein you can refer your ideas fro m a historical perspective as its always there once you upload it. You can go back and see what you were thinking, when you were thinking, what sort of feedback you received and so on. For eg. I can recall a bearish post on Apple the other day and so many connected hate emails I received by posting bearish comments on Apple that upset so many market participants. I feel the twitter platform is great, given the fact that you can constantly be pushing out a consistent message to the participants. Phil: There is a super counter-intuitive aspect to the process. We are building a trust and displaying our confidence over time using the social media platforms. Full disclosure vs. Free Updates: Are clients uncomfortable with free real-time updates that are distributed on the social media platforms? Greg: Think about what you share in marketing meetings. You are giving away stuff for free, but giving it one at a time. Twitter / blogs on the other hand can reach out to a huge audience. I try to keep distinctive services between fee-paying and non-fee-paying clients. Charlie: It is a very valid concern and one that we have thought about deeply. When we wrote the paper for the Dow award, while we were writing it, we were thinking about the fact that do we really want to reveal a part of the model that wasnt revealed before. In the end, we decided that the benefits outweigh the costs and hence we decided to put it out there. So far, the reception has been great but it remains a concern.

Strategist Panel with Tony Dywer and Jurrien Timmer

Tony Dywer Presentation:
Markets are closely correlated with the direction of earnings. Direction of earnings is driven by economic activity; Positive economic activity is driven by steepness of the yield curve and the availability of money. Core inflation: Has moved back to historic lows giving Fed the incentive to remain historically accommodative. Interest rates trend: Yield curve still steep; spread between 6 Months & 10 Year note to be considered for evaluation. Every recession has been preceded by an inversion of the yield curve by a mean 15 months. At this juncture, it remains historically cheap. Corporate earnings are improving; Treasury yields have risen more than speculative grade yield due to solid demand; Real GDP has been positive on the back of low inflation. Earnings outlook remains positive starting 09. Current valuation expansion following the trajectory of past non-recessionary periods. Strong correlation observed between VIX and HY Debt to Treasury spreads; volatility is driven by improvement in corporate credit spreads.

Jurrien Timmer Presentation:

Everything should be thoroughly tested for efficiency; Their approach at Fidelity comprises a combination of Technicals, Quantitative and Fundamentals. Charting is an art, and it is supposed to tell a story. There are many ways to graph the data: Indicator Heatmaps, MAs, Adv/Dec lines etc. Relevant questions to ask at this juncture: o Have US equities entered a secular bull? A definite YES. o Is the Great Rotation underway? Cumulative Flows / Fund ETFs suggest the same. o Escape Velocity: HY Credit spreads. o Is the Market ahead of itself? Earnings & Valuation (Trailing P/Es) Additional note: Consensus EPS data compiled by Bloomberg: Every quarter, the expectations are too high and they gradually come down. Is the earnings cycle peaking? (The normalized earnings cycle) o Can the market withstand the end of QE? Additional observations: o Highly leveraged debt on USD/JPY o Treasury yields could stay low as long as monetary yields Possible relationships to explore: o Gold vs. Central Bank Assets o Gold vs. 10-Yr treasury yields (adjusted for inflation) at constant maturity

Keynote Presentation: What have we Learnt from the 2007 Credit Crisis: with Larry McDonald
The financial crisis exposed meaningful shortfalls in the risk management approach Credit leads equities; there has been a massive explosion in corporate / sovereign debt issuance, while political uncertainty is at the highest level. VIX has been slayed by ECB/FED blows Historically, the greatest financial crisis of the last 110 years that include the ones in 1907, 1929, 1974 and 2008 were experienced after many years of market normalization. The VIX has spent more days above 30 in the last 5 years than the last 17 years. M&A in the US domestic market is back at the 07 levels. Number o o o o o of stocks in the Russell 1000 above 10X sales and book value, more than 20X earnings: 14: 14 stocks 12: 7 stocks 10: 0 stocks 08: 7 stocks 06: 7 stocks

There is a huge expansion in the size of the markets, with particular reference to the debt markets. CDS spreads of the big global banks provide an excellent precursor to evolving financial troubles in specific regions. Emerging Markets & Asia Impact: o A 10% drop in overall EM demand shaves off 0.5% of the US GDP o HSBC 5-Yr CDS vs. JPM 5-Yr CDS: From the moment HSBC Credit started to underperform the JPM CDS, EM markets/currencies dramatically weakened o Also likes to look at the Morgan Stanley 5-yr CDS vs. Standard Chartered 5-Yr CDS. o May 13: We witnessed credit underperform significantly, and well before the Equity sell -off o We closely track the China SHIBOR (Shanghai Interbank Offer Rate). China is more leveraged than the US. o Also like to look at Private Sector Debt as a % of GDP. Additional observations: o Is the Fed taper leading to a collapse of the Chinese Housing markets? o China has a high economic risk vs. systemic risk o 16% of S&P 500 earnings are exposed to EM risk; in 1995, this number was 5%.

Keynote Presentation: Profiting from Global Intermarket Relationships with John Murphy
Intermarket analysis has come a long way over the last decade after John Murphy brought it to everyones attention with his ground breaking book Intermarket Technical Analysis. While it was viewed with a lot of skepticism when introduced, Intermarket analysis remains one of the most valuable methods of analysis in the toolbox of a market technician. What is it exactly? Intermarket analysis combines all global markets into a unified and coherent model, and adds a new dimension to traditional technical analysis. It bridges the gap between Fundamental, economic and Technical analysis. Drawing from his vast experience as a trader, educator and writer, Mr. Murphy guided everyone through an excellent presentation addi ng some humor in the midst and at the same time giving a lot of food for thought to a spellbound audience. Herere some notes from the same: Commodity Intermarket Trends o Stocks and commodities bottomed out together in 2008 given deflationary pressures; a t present, both are diverging. o There is also a divergence between Agricultural commodities and Base metals o Recent advance in the commodities market (CRB index) has been mostly on the back of strength in the agricultural commodities, while base metals conti nue to languish. o Copper: The plunge in copper prices is tied to the weakness in Chinese stocks, as China accounts for over 40% of global demand. o Gold: The end of the secular bear in stocks is bad for gold; it almost perfectly coincided with the beginning of a new secular bear in gold. o A US Dollar index turnaround would end the recently observed strength in gold; this may unfold soon as USD is sitting on a strong multi -month support level. Global linkages o EUR/USD currency pair influences stock market performance. It is now testing a major longterm resistance level; monitoring closely. A bullish breakout may lead to another leg higher for the European stock markets. o Emerging market assets are bouncing off chart support: EM Local currency bonds are bouncing back; EEM is close to breaking out from a multi -year symmetrical triangle. o Plunge in the Yen continues to boost stocks markets / inflation as Japan is truly an exportoriented economy. Yen has also acted as a safe haven currency at the time of crisis. Bond-Stock relationships favors stocks o Stock/bond ratio reverses a 13-Yr downtrend o Yield curve supports higher stock prices over the next several quarters o Rising yields to benefit cyclical stocks vs staples o Previous bond peaks have been very good for stocks o Recent strength in Utilities and Energy suggest that stocks are due for a meaningful pullback. o Comparing the 10-Yr bond yields vs. 2-Yr yields suggest that stocks can rally in a rising rate environment. The 2-Yr yield curve suggests higher stock prices.

Interactive Session: Investing with the Trend with Greg Morris

Best Quote by Greg: All the financial theories and all the fundamental analysis in the world will never be any better than what the trend of the market will allow. Started off the presentation with a discussion on bear markets. The size and average duration in time along with the corrections and drawdowns. Comparing LT Buy & Hold Returns (85-Yr period): o Small stocks: 11.9% o Large stocks: 9.8% o Government Bonds: 5.7% o Treasury Bills: 3.8% o Inflation: 3% A comparison of methods: Fundamental and Technical Analysis Technical Analysis: o Price o Trend Determination o Breadth Analysis o Relative Strength Analysis o Most importantly, it bridges the gap between analysis and action. TA removes the destructive emotions of fear, hope and greed; it keeps our perceptions clear and gives us discipline. The importance of breadth cannot be under-emphasized. It helps us identify distribution. o Excellent quote on Market Breadth: It arrives at the party on time, but leaves early. Japanese candlestick patterns: Important points to keep in mind: o Context is the most important thing for the effectiveness of a pattern; o The Japanese developed the candlestick patterns using daily prices; do not use it with any other time frame. Gregs Rules: o If something doesnt trade, dont do any TA on it (referring to economic indicators plotted on charts). o Dont turn correlation into a visual exercise. o Turn off the TV/Internet; cut out the noise. o Develop a simple process that is easy to follow and explain o Create a security selection process based on momentum o Devise a simple set of prudent and reasonable rules o Do not confuse luck with skill o Listen and learn from the market: It is always right.

Interactive Session: Stock Timing Using Pairs Logic with Perry Kaufman
Discussed one of the arbitrage (pair-trading) strategies that are available on Kaufmansignals.com Arbitrage/Pair trading: Identifies two similar markets that are moving apart, buys the cheaper / sells the more expensive one, reversing the trades when they come back together. Can be done across asset classes using futures / ETFs. You can use correlation / co-integration for the purpose, but why complicate. Perry suggested using the stress indicator introduced in his book Alpha Trading. The Stress indicator is comprised of 3 simple stochastic calculations over a 60 -day period: o Stochastic 1 (Stock 1): (C(today) L(60))/(H(60) L(60)) o Stochastic 2 (Stock 2): (C(today) L(60))/(H(60) L(60)) o Stochastic difference (D): Stochastic 1 Stochastic 2 o Stress: (D(today) L(60)) / (H(60) L(60)) Oversold: Values below 10; Overbought: Values above 90; Neutral: 50 (for exits). The stress indicator gives good signals, but buying one asset and selling the other one has issues particularly with those related to short-selling. A detailed analysis of the performance suggests that long trades are the ones that make the most profit. Hence, if we just buy the stock and not go short against it, the profits are likely to be much higher. Protecting the downside: o Importance of hedging selectively o Protect long positions by going short on the SPY when the trend of the index turns down o Use 50-DMA to hedge 50% of position when the trend turns lower. Stop loss orders absolutely essential for this strategy Use only an emergency stop loss (say like 15%) from the entry point Quote time: In the long run, no stop is the best, but in the short run, an Enron can end your trading career. A summarization of rules: o Decide on a pair to trade: AAPL vs QQQ o Calculate the Stress indicator for the pair; buy the stock when SI <10 o Exit the long when SI=50 o Calculate the necessity of a hedge (look at the trend in the QQQ) and decide the size o Exit the hedge when stock reaches target / market trend turns higher. o Do not trade stocks < $3 o All trades initiated on next days open. Building a portfolio with this strategy: o Scan for volatile (more profitable) stocks; calculate return ratio. o Sort by highest long-term ratio o Discard negative results / markets with no trades