Stock Market Charts ( they are easier than you think)

1. Stock Market Charts(they are easier than you think) Michael Kahn, CMT February 2014

2. Who am I? Chartered Market Technician (CMT) • trained and certified in market analysis Columnist – Barron's Online Newsletter Editor – Quick Takes Pro Former charting software designer …and beaten up enough by the markets

3. What do I do? Help investors assess risk and reward. no crystal ball no tea leaves no chicken entrails

4. Agenda • Just the basics • When the market is moving - trend • When the market is resting - pattern • Other important stuff – volume, sentiment, time

5. Possible Goals • Get the feel for the market (sentiment, momentum) • What does the market say? • Bullish? • Manic? • Does the chart agree with the fundamentals? • Or at least not disagree? • Intangibles • The Fed • Gurus • “Risk on”

6. Possible Goals • What part of the market is best? (relatives) • Size • big or small • Sectors • Defensive or aggressive? • Traditional leaders or not? • Bonds? Gold? • Maybe it is time to diversify asset classes

7. Technical analysis is a windsock, not a crystal ball. - Carl Swenlin

8. People • People tend to do similar things when faced with similar situations. • People’s behavior is the basis for chart patterns. • The chart is the chart is the chart. (no analyst guesses and gov’t revisions)

9. What is Fundamental Analysis? A method of evaluating a security that entails attempting to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors. -- from the CFA Institute website (and Investopedia)

10. What is Technical Analysis? A method of evaluating securities by analyzing statistics generated by market activity. -- from the Market Technicians Association website

11. What do they have in common? Neither one can handle conditions that cause the market to be restricted, manipulated and otherwise not free. • Fraud • Mergers • Quantitative Easing

12. Dated humor Save us Obi Ben Bernanke (sorry Janet)

13. How I cope I will make you a chart you cannot refuse The Godfather of Technical Analysis

14. Price Rules! • Price - The stuff you put in the bank In price, there is knowledge. Alan Shaw, CMT, Chief Technical Analyst. Smith Barney, retired Ralph Acampora, CMT, Chief Technical Analyst, Prudential Securities, retired

15. Volume is next • Volume – How much money is moving In volume, there is truth. Dennis Jarrett, Jarrett Research

16. Momentum • Momentum – How fast it got there Which speed is profitable and most sustainable?

17. Structure (Patterns) • Structure – Trends and Patterns

18. Sentiment (Fear and Greed) • Sentiment I feel good! Whatever She’s gonna eat us! Tesla Oct 2013 Electronic Arts Jul 2012

19. We got game! • Price • Volume • Momentum • Structure • Sentiment

20. Looks like a cheaper place to buy How many times have you thought, “My stock is on sale, let’s buy!”

21. Looks like a cheaper place to buy Same price, different trend……could the same be on tap for 2014?

22. The trend said it all It works in both directions.

23. What does the market have to say?

24. The trend said it all It works in long-term time frames at major turning points, too.

25. Does something look right here? The Big Picture a few years ago.

26. And today… Log scales

27. Leadership Changing? Barron’s Online November

28. Leadership Changing again?

29. Leadership

30. Leadership

31. Sentiment It’s the end of the world as we know it. – R.E.M.

32. Sentiment • Are you the last to be invited to the party? • social media stocks last year? biotech now? • Is your hair stylist giving you tips? • Are they ridiculing the bearish commentators? • Gold is going to $800!!!!!! • Or for early 2009, were doom and gloom forever?

33. Quiz Time • Question - What does it mean when the neighborhood tavern has CNBC on the television and not ESPN?

34. Quiz Time • Question - What does it mean when the neighborhood tavern has CNBC on the television and not ESPN? • Answer - the market is not at a bottom

35. Quiz Time • Question - What does it mean when the banks are offering new interest only mortgages?

36. Quiz Time • Question - What does it mean when the banks are offering new interest only mortgages? • Answer – the real estate market is not at a bottom……(sound familiar?)

37. Quiz Time • Question - What does it mean when there are whole aisles in the supermarket dedicated to the Atkins diet?

38. Quiz Time • Question - What does it mean when there are whole aisles in the supermarket dedicated to the Atkins diet? • Answer – time to buy bread and cereal stocks

39. Quiz Time • Question - What does it mean when everyone is talking about the Great Depression and Financial Armageddon?

40. Quiz Time • Question - What does it mean when everyone is talking about the Great Depression and Financial Armageddon? • Answer – It’s March 2009! • The AAII survey showed 70.27% bears on March 5. Unprecedented. And it was not the only one.

41. Quiz Time • Question – What does it mean when, after a five-year bull market, mutual fund company advertisements show regular people saying “we’ve got to get back into the market?”

42. Quiz Time • Question – What does it mean when, after a five-year bull market, mutual fund company advertisements show regular people saying “we’ve got to get back into the market? • Somebody is about to get burned again.

43. Up is good, down is bad. Nice long-term base

44. What do you see?

45. How about this?

46. or this?

47. There was no need to lose it all.

48. There was no need to lose it all. real trading!

49. If you don’t see anything, it’s not there.

50. If you don’t see anything, it’s not there. Get it?