Speaker 1: This is Masters in Business with very Ridholts on Bloomberg Radio.
Speaker 1: This week on the podcast, my special guest is Katie Stockton.
Speaker 1: She is the chief technical strategist at bat I G,
Speaker 1: a New York based brokerage firm, the institutional brokerage firm.
Speaker 1: If you are at all interested in really some of
Speaker 1: the details of a practitioner in the field of technicals
Speaker 1: who are using it as part of their process to
Speaker 1: advise UH substantial hedge funds, pension funds, mutual funds, really
Speaker 1: large pools of institutional money, UH, then this is the
Speaker 1: sort of conversation that you're gonna enjoy. We very much
Speaker 1: go into the weeds and we talked a lot about
Speaker 1: very very specific technicals and processes and how she approaches
Speaker 1: the market. She she's an award winning UH technician who
Speaker 1: is highly respected on the street. And really it's it's
Speaker 1: a um, quite a change in the world to look
Speaker 1: at technicals today as is accepted and part of the
Speaker 1: firmament of finance, compared to ten or twenty years ago
Speaker 1: when they were kind of looked looked at askance. And
Speaker 1: I think the between the rise of quantitative analysis and
Speaker 1: the computing power that really lets us see, Hey, are
Speaker 1: these technicals genuinely providing value or not that that's helped
Speaker 1: them gain broad acceptance. So if you're at all interested
Speaker 1: in trading, charting, anything technical, you're gonna really enjoy this
Speaker 1: conversation with no further ado, my interview with Katie Stockton.
Speaker 1: My guest today is Katie Stockton. She is the chief
Speaker 1: Technical Strategist for bt I G in New York City. Previously,
Speaker 1: she was chief market technician at m CAM Partners. She
Speaker 1: has also been a trader for Ulysses Management fairly substantial
Speaker 1: New York hedge fund. She also was a publishing analyst
Speaker 1: for the Technical Strategy Group at Morgan Stanley. She is
Speaker 1: a CMT and she received her designation in two thousand one.
Speaker 1: This year, she was named Best Institutional Brokerage for Equity
Speaker 1: Research at the Technical Analysts Award for the technical research
Speaker 1: she provides. Katie Stockton, Welcome to Bloomberg. Thank you Berry.
Speaker 1: It's good to be here. It's good to have you.
Speaker 1: Let's let's start with a little bit about your background.
Speaker 1: How did you find your way to Wall Street? What
Speaker 1: attracted you to stocks, bonds and charts. Well, I think
Speaker 1: it was really meant to be early on, I had
Speaker 1: an interest in mathematics and and that took me into
Speaker 1: a finance major in college. And fortunately, you know, that
Speaker 1: finance major obviously bosed me to you know, all things
Speaker 1: Wall Street, of course, but also exposed me to technical analysis,
Speaker 1: which is of course what I do today in college.
Speaker 1: In college, believe it or not, really so, so, what
Speaker 1: sort of classes were you taking where they talked about
Speaker 1: charge Because it seems that at the academic level, other
Speaker 1: than people like Professor Andrew lo O and m. I.
Speaker 1: T who writes about technicals and the heretics of finance,
Speaker 1: academics look askance at technicals. Well, you know, I think
Speaker 1: there's a good trend there quite frankly, but still early stages,
Speaker 1: right right, I'm broken out yet. Um. But when I
Speaker 1: went to University of Richmond in Virginia, a smaller school,
Speaker 1: and it just happened to have coursework in technical analysis.
Speaker 1: Believe it or not, it was one of at the time,
Speaker 1: it was one of twelve universities that offered this, and
Speaker 1: now there's far more. But even still, I just got
Speaker 1: lucky in a way that they offered that coursework. At
Speaker 1: the I believe it was a four hundred level of
Speaker 1: Finance class and at the time it was offered to
Speaker 1: graduate students, so I audited it and that gave me
Speaker 1: the exposure to some of the tools that I now use.
Speaker 1: So you had the bug pretty early in your career,
Speaker 1: did Yeah? And I had an internship while I was
Speaker 1: at college for a firm called Dorsey right An Associates.
Speaker 1: If you've heard of them, Not only have I heard
Speaker 1: of them, but Tom Dorsey was a previous guest on
Speaker 1: the show Is That Right? And Tom is great? And
Speaker 1: I'm guessing you'll eventually ask me who my mentors are,
Speaker 1: and Tom Dorrissey will come up again in our conversation.
Speaker 1: He's obviously a great person and a great technician and
Speaker 1: really helped inspire me to do it for a living
Speaker 1: point and so we'll get into point and figure on
Speaker 1: versus other types of charting later. Um. So, I've spoken
Speaker 1: to various technicians who began their career either as fundamental
Speaker 1: analysts or strategists and said, you know, I'm really more
Speaker 1: interested in the supply and demands of stock transactions than
Speaker 1: the broad I don't want to call it guesswork, but
Speaker 1: the broader, less tech the cool things you apparently never
Speaker 1: had that sort of bug. You went straight into the
Speaker 1: straight into it, and like I said, it just seemed
Speaker 1: like it his fate for me to to do what
Speaker 1: I do now because it's it's such a great mesh
Speaker 1: of the mathematical side of things, and it really resonates
Speaker 1: with me in terms of analyzing a stock as a stock,
Speaker 1: not just as representative of a company, because as we
Speaker 1: all know, you'll see a market move effect various stocks
Speaker 1: in a way that makes no sense from a fundamental perspective.
Speaker 1: So to be able to understand how that's happening, why
Speaker 1: it's happening, and really what's happening, and I think that's
Speaker 1: very valuable. So when I took the course, the Technical
Speaker 1: Analysis course with Ralph Alkimpora, one of the things that
Speaker 1: have stayed with me was a quote of his and
Speaker 1: Ralph said, fundamentals tell you what to buy, Technicals tell
Speaker 1: you when what do you think? Well, there's undeniably a
Speaker 1: great market timing element that you can derive from the charts.
Speaker 1: And I would also argue though, that you can use
Speaker 1: them for idea generation and it becomes a matter of preference.
Speaker 1: So I think of technical analysis as really a complementary discipline,
Speaker 1: So it's not a stand alone in the same way
Speaker 1: that I don't think macro you know, economics or fundamentals
Speaker 1: should also be a stand alone. I think together you
Speaker 1: can get a great sort of rounded view of a
Speaker 1: market or a security. And you know, if the fundamentals
Speaker 1: help you decide what to buy, and then you use
Speaker 1: technicals or charts to understand your best entries and exits,
Speaker 1: that's definitely one use. So there's a lot of risk
Speaker 1: management involved in using completely. Yeah, that they can be
Speaker 1: very valuable, especially for a cell discipline, which I think
Speaker 1: a lot of people are lacking for sure. So so
Speaker 1: what is technical analysis actually measure? When you're looking at
Speaker 1: a chart of a stock, what are you really looking at?
Speaker 1: You know, it's it's prices, right, So the market really
Speaker 1: lends us one data point and it's price, and I
Speaker 1: would argue that volume is another one. But yet has
Speaker 1: really lost some of its value in terms of having
Speaker 1: in any predictive information. Why is that? Why is volume that?
Speaker 1: As a trader and it was always volume proceeds price,
Speaker 1: you heard that constantly. Is that no longer it used
Speaker 1: to be? Yeah, you need to see volume expanding into
Speaker 1: sustainable up trends, and that that was the stuff of
Speaker 1: the textbooks way back when. Now, of course we've seen
Speaker 1: volume on on the decline since about two thousand and seven,
Speaker 1: so about ten years now. Is that of the financial
Speaker 1: crisis or the rise of indexing or I think many
Speaker 1: different A little it's many different things. I mean, there's
Speaker 1: obviously derivatives. We have so many different influences on volume
Speaker 1: these days, and I would argue some of them are
Speaker 1: not um real volume. I mean, there's always a buyer
Speaker 1: and seller, right, but are these committed buyers? Are they
Speaker 1: you know, real sellers so or are they passive you
Speaker 1: know indexers, or or are they high frequency traders? So
Speaker 1: you just you can't really understand if the volume is
Speaker 1: real these days. And then it's also been on the decline,
Speaker 1: so you have these influences that make it just that
Speaker 1: much less helpful in my opinion. So to me, I'm
Speaker 1: I'm very much just looking at prices, and prices can
Speaker 1: be incredibly informational and and of course those prices are
Speaker 1: measuring supply and demand, and it's just that simple. Let's
Speaker 1: talk a little bit about what the chief technical strategist does.
Speaker 1: What does your process look like, where do you begin. Well,
Speaker 1: I am a cell side research analyst, so I work
Speaker 1: for a broker dealer b T i G here in Manhattan.
Speaker 1: Your clients are mostly large institutions, all institutional clients, and
Speaker 1: it runs a gamut in terms of hedge funds, mutual funds,
Speaker 1: really anyone who can benefit from this kind of analysis,
Speaker 1: which I would describe as top down in nature. But
Speaker 1: I also do a lot of bottom up work to
Speaker 1: support that, or my version of bottom up work is
Speaker 1: probably quite different than what we all know. So that's
Speaker 1: what I was gonna ask. When you say top down,
Speaker 1: you're really looking at markets, different types of asset classes,
Speaker 1: different sectors, and bottoms up our specific companies. Is that's
Speaker 1: exact right? I do tend to be equity centric, and
Speaker 1: at BT I G we are global financial services firms,
Speaker 1: so I've branched out and looked at more than just
Speaker 1: US and to really global equity markets. And I do
Speaker 1: start with the major indussease, the equity indsease. I look
Speaker 1: at sector benchmarks, things like that, and then of course
Speaker 1: anything that really influences equities, whether it's commodities, f X,
Speaker 1: things like that. So that's where I start and I
Speaker 1: think it's an important place to start in a UM
Speaker 1: an environment that is so sort of top down driven,
Speaker 1: right where where the macro influences are so important and
Speaker 1: really are the drivers of some of the trends. And
Speaker 1: to understand that's very important. I mean, if you're if
Speaker 1: you're you know, right on the market, generally, you're probably
Speaker 1: going to have a much better you know time at
Speaker 1: being right on any individual company. And then I do
Speaker 1: also look at the market, um, you know, just based
Speaker 1: on the stocks that comprise the major indicry. So every week,
Speaker 1: every other week, in fact, I'll do either international or
Speaker 1: US and and take a list of five hundred stocks
Speaker 1: and look at those one by one. And it's a
Speaker 1: bit tedious, but that process to me helps me in
Speaker 1: my my market views, but also can help us understand
Speaker 1: where there is opportunity UM whether it's breakouts or breakdowns
Speaker 1: or a theme based opportunity. So we're just looking for
Speaker 1: developments on the charts and themes. So when you're looking
Speaker 1: at charts, are you looking specifically for either extensions of
Speaker 1: trends or breaks of trends? Are you looking at specific patterns?
Speaker 1: What is it that catches your main focus? Well, I
Speaker 1: really do believe as you could imagine in trend following,
Speaker 1: and I think that you generally want to have your
Speaker 1: core long exposure in you know, securities that are in
Speaker 1: long term up trend set. And there's a lot of
Speaker 1: academic support for for that. Certainly. Yeah, you know, a
Speaker 1: trend in motion tends to stay in motion. And yet
Speaker 1: where I can also add value to our clients as
Speaker 1: an understanding where there might be an inflection point or
Speaker 1: you know, deteriorating momentum that type of things. So we
Speaker 1: do spend a lot of time looking for signs of
Speaker 1: trend exhaustion it how would you how would you look
Speaker 1: for trend exhaustion and how would you define that? There?
Speaker 1: There's I'd say there's three classes of indicators that I use.
Speaker 1: The first would be momentum or trend following, the second
Speaker 1: would be overbought oversold, and the third would be relative strength.
Speaker 1: So to arrive at that trend exhaustion signal, I'm typically
Speaker 1: looking at the overbought oversold measures. So for me, that
Speaker 1: would be a stochastic oscillator or Tom Demark's suite of
Speaker 1: indicators tend to help with that as well. And what
Speaker 1: what don't you look at what are the sort of
Speaker 1: things that you just don't find of a lot of
Speaker 1: value at least to your process, right, and it's very
Speaker 1: specific to the individual. Of course, what you have success
Speaker 1: with and what I always recommend to people is to
Speaker 1: to have a process and whatever that process, maybe to
Speaker 1: be consistent and somewhat systematic in the way you approach it,
Speaker 1: because what you learn is that these indicators, while they
Speaker 1: fail you, often you learn where they tend to fail you.
Speaker 1: And it's all in really how you combine the indicat
Speaker 1: heaters that you arrive at a market view, and so
Speaker 1: it's fairly probabilistic. You're no one indicator is a sure thing,
Speaker 1: but a collection of indicators give you a better chance.
Speaker 1: That's exactly right, And it helps to take out some
Speaker 1: of the gray area of the market. So I really
Speaker 1: welcome those kinds of tools that are a bit more
Speaker 1: mathematically derived and less visual, but to really just enhance
Speaker 1: what you're seeing more visually, because you can't take that
Speaker 1: element away, of course. But what I don't use would
Speaker 1: be UM. I don't use many UM you know, wave analysis,
Speaker 1: no wave for me, I don't use anyone. Still a
Speaker 1: lot of people do in fact, and my experiences is
Speaker 1: that they tend to be more bearish than not. Has
Speaker 1: that worked out the well, and so I think, you know,
Speaker 1: maybe that could be more successful when overlaid with some
Speaker 1: of the momentum tools and what else don't you use.
Speaker 1: What do you think of fibinaci as a trading tool, Well,
Speaker 1: it's not really a trading tool, but it's a way
Speaker 1: to identify support and resist stance, right, so that can
Speaker 1: be very valuable. In fact, I think, if if any
Speaker 1: takeaway that you have from the charts, support and resistance
Speaker 1: should be where you start, because that's your gauge of
Speaker 1: risk and reward. So fibonacis can be very very helpful
Speaker 1: in that regard. They're a little difficult to explain to clients,
Speaker 1: as you could imagine, because why do they work? Yeah? Why? Yeah?
Speaker 1: Why do they work? It's a ratio throughout nature. I
Speaker 1: don't want to man explain fibonaci because you're the I
Speaker 1: wish I wish you would. In fact, it is the
Speaker 1: golden ratio, which is found in all sorts of um
Speaker 1: in and in um, the nautilus shells, and in all
Speaker 1: sorts of other things like that. And as you said,
Speaker 1: we're not really sure why it works or it works,
Speaker 1: but it certainly seems to be there. It does matter,
Speaker 1: and it can be really helpful when you don't have
Speaker 1: more traditional means of deriving support and resistance. And by
Speaker 1: that I would mean something like a movie average, a
Speaker 1: movie average, or a peak or a trough on the chart.
Speaker 1: So my friend Todd Harrison, who used to be a
Speaker 1: chief trader at a hedge fund, used to say, is
Speaker 1: with things like Fibonacci when we would be debating how
Speaker 1: well they work or didn't work, is the support there
Speaker 1: because of the fibonacci or is the fibonacci there because
Speaker 1: of the support? Or? In other words, if everybody believes
Speaker 1: something is the case, does it just become a self
Speaker 1: fulfilling prophecy or something else going on? You know? I mean,
Speaker 1: we we could talk about that. I don't think there's
Speaker 1: any real answer to that question, unfortunately, except to say
Speaker 1: that where things are self fulfilling, great because we we
Speaker 1: welcome that. And uh, you know, I'd say the fibonacis
Speaker 1: would be less obvious as something that would be self
Speaker 1: fulfilling in that it's a subjective approach to draw in
Speaker 1: those ratios on the charts, whereas something like the two
Speaker 1: day movie average would be more likely to have that
Speaker 1: self fulfilling nature. I support resistance because there's so many
Speaker 1: eyes on it. Let's talk a little bit about technical
Speaker 1: analysis for the late person. Explain to us what technical
Speaker 1: analysis actually is. Well, you know people know it as charting, right,
Speaker 1: So you take a price. Any security has a price,
Speaker 1: and what we're using is that price as a gauge
Speaker 1: was supply and demand for that security, and trying to
Speaker 1: understand the trends behind that, and not only the trends
Speaker 1: but also when they might end. So that that's the
Speaker 1: design of technical analysis. We're trying to understand where there
Speaker 1: might be a shift in that supplied demand relationship just
Speaker 1: using price based analysis. So early in your career you
Speaker 1: worked for Tom Dorsey at Dorsey Right, and they are
Speaker 1: famous for point and figure charting. How does that chart
Speaker 1: differ from just a regular price chart. Um, it's incredibly different. Yeah,
Speaker 1: you know, when you look at it, it it looks almost
Speaker 1: like a tic tac toe sheet with x's nose And
Speaker 1: the most important distinction is that it doesn't really reflect
Speaker 1: time on the X axis in the same way that
Speaker 1: a typical bar chart which would have open high low
Speaker 1: closed data would UM. I tend to use the bar
Speaker 1: charts more now, in part because it was difficult on
Speaker 1: a in a cell side position to explain exactly why
Speaker 1: we should care about these xs and os. But they're
Speaker 1: really such such a useful a way of looking at
Speaker 1: the market is to understand this supply demand that goes
Speaker 1: into the xs and os that you're plotting on these
Speaker 1: these grids UM great for trend following, great for understanding
Speaker 1: breakouts and breakdowns. Um, but you know they omit a
Speaker 1: volume component and no volume, no time, just buying and selling. Yeah,
Speaker 1: just buying and selling, Like you know, has price moved
Speaker 1: enough to designate another plot? Basically, what are what are
Speaker 1: some of the big misconceptions about technical analysis? We've heard
Speaker 1: people say over the years that stuff is just voodoo.
Speaker 1: Oh and they're still saying it, some of them. But well,
Speaker 1: I've been doing this for about twenty years, and I'd
Speaker 1: say it's come a long way, a really long way,
Speaker 1: so in terms of the level of professionalism that you
Speaker 1: see in our our small industry, and for good reason,
Speaker 1: because people are realizing that that it's helpful, and I
Speaker 1: think the push towards using it more systematically has really
Speaker 1: taken it to that next level. So the misconceptions would
Speaker 1: be that we're trying to you know, take historical prices
Speaker 1: and always you know, predict something that it's overly predictive,
Speaker 1: and then you assign these silly names to various price patterns,
Speaker 1: and I think that adds to some aura of it
Speaker 1: being not as serious in terms of the analysis, But
Speaker 1: in reality it's it's more surface level because it really
Speaker 1: is only price based. And I see that as a
Speaker 1: positive because it allows you to look at anything and
Speaker 1: have an opinion on it in less than a minute,
Speaker 1: for for example, and it's objective. You're not you know,
Speaker 1: you're looking at the actual data, not someone's opinion about
Speaker 1: management or new product or new that's right, And I
Speaker 1: think in a way that's a good thing because you
Speaker 1: you become less committed to a position. And if you
Speaker 1: identify a stock that you're interested in because it has
Speaker 1: a great uptrend or some renewed momentum behind it, or
Speaker 1: it's exhibiting relative strength, um, but you've only put in,
Speaker 1: you know, twenty minutes of research on it, um, I
Speaker 1: think you're less likely to get married to that position. Um,
Speaker 1: But you know the best types of positions, in my opinion,
Speaker 1: would have that you know, that trend falling, you know,
Speaker 1: those gauges lined up positively, but also have the fundamental backdrop,
Speaker 1: So that to me would be an ideal setup. And
Speaker 1: I think more and more people are recognizing the value
Speaker 1: and using it as that complementary discipline as opposed to
Speaker 1: something that's designed to say, okay, well, whereas you know
Speaker 1: this SMP five going to be in five years, because
Speaker 1: that's not really to me where the value is. I
Speaker 1: love the idea that it allows a degree of objectivity
Speaker 1: so that you don't marry a position. A phrase I
Speaker 1: heard many years ago was strong opinions weekly held and
Speaker 1: I've always really enjoyed that. We love this and then
Speaker 1: it breaks the trend and that's it. We're done, right.
Speaker 1: So to be somewhat noncommittal, Um, it does tend to
Speaker 1: help you manage risk. It does. So let's talk a
Speaker 1: little bit about technology. How has the ubiquity of of
Speaker 1: not just computers, but really high powered software on everybody's desktop.
Speaker 1: How has that changed the work you do as a
Speaker 1: as a technician in a very favorable way? Um, you know,
Speaker 1: with my first job out of college was actually hand
Speaker 1: charting these point figure charts that you describe. So, um,
Speaker 1: you know now that we have all these resources to use,
Speaker 1: the upside is it's really unlimited. It's it's exciting, um,
Speaker 1: in that we can do so much more in terms
Speaker 1: of our capacity to not only draw the charts and
Speaker 1: access the charts, but also to filter for different setups
Speaker 1: and look for different price patterns using some advanced software
Speaker 1: that can identify these patterns almost for you. It's really
Speaker 1: amazing what you know people have come up with in
Speaker 1: that regard, and it can be very helpful in terms
Speaker 1: of idea generation. But also you know that the push
Speaker 1: towards AI and more quantitative approaches to the market, they
Speaker 1: tend to have a technical element to them because a
Speaker 1: lot of them are price based. You have that that input,
Speaker 1: and so I think there's a lot of upside there.
Speaker 1: I think it's still somewhat early stages in terms of
Speaker 1: what can be done with it, but certainly, you know,
Speaker 1: anything that you can program, of which a lot of
Speaker 1: indicators are very programmable, I think there's a lot of
Speaker 1: upside there. In the introduction, I mentioned the award you won,
Speaker 1: which is quite an honorific to receive the essentially the
Speaker 1: Technologomist of the Year award. For lack of a better phrase,
Speaker 1: tell us a little about the award and how have
Speaker 1: your institutional clients responded to that. So they the Technical
Speaker 1: Analyst which is a UK based organization. They do an
Speaker 1: annual awards event and ceremony and with more than one category,
Speaker 1: so by no means that my Technical Analysts of the Year.
Speaker 1: But but we do, you know, appreciate the honor of
Speaker 1: being labeled best institutional brokerage for equity research, which of
Speaker 1: course is technical nature. So we um you know, have
Speaker 1: publicized that in different ways, you know, a press release,
Speaker 1: and it's been well received by clients of course, and
Speaker 1: and what their their vote of confidence is in the
Speaker 1: written product that we produce. It's funny that I gave
Speaker 1: your award of promotion. I'm trying to do appreciate it.
Speaker 1: I was I was interviewing somebody and I could not
Speaker 1: keep their title straight in my head. It was one
Speaker 1: of these typically long sort of Wall Street and by
Speaker 1: the time the interview was done, I just had given
Speaker 1: up trying to get their title right. And it was
Speaker 1: just And today we have the CEO of JP Morgan
Speaker 1: and you know, they could see the compliance person in
Speaker 1: booths pulling their hair out of their head. It was
Speaker 1: it was pretty hilarious, but it was a big deal.
Speaker 1: Was the big award that I'm not exaggerating one shorthanded.
Speaker 1: Do you believe we we beat out fifteen other firms
Speaker 1: and UM that's exciting to me. It really is a
Speaker 1: vote of confidence in what we're producing. And they were
Speaker 1: complementary of the research as being you know, timely and actionable.
Speaker 1: Do you got to like that? Right? So so let's
Speaker 1: talk about UM clients today. I tease the segment as
Speaker 1: what modern institutional clients want? What is it that clients
Speaker 1: are looking for from a technical UM research analysts like yourself.
Speaker 1: There's no one answer to that. In fact, every meeting
Speaker 1: that I have tends to be quite different. UM and
Speaker 1: we can add value in a lot of ways. The
Speaker 1: most obvious way, perhaps is by being more of a strategist.
Speaker 1: We're helping people understand the top down market views where
Speaker 1: you know, is the S and P five hundred in
Speaker 1: terms of momentum and over about over sould measures and
Speaker 1: what are levels of importance? Things like that. So some
Speaker 1: clients really want to know that because obviously that top
Speaker 1: down view trickles down into their positions and and there,
Speaker 1: and it's quite important. And you find that, you know,
Speaker 1: even if people disagree, they're often disagreeing for a different reason.
Speaker 1: It's not because they're coming from a technical you know
Speaker 1: position there. It's more macro fundamental that's leading them to disagree.
Speaker 1: So it's not as much of a debate as it
Speaker 1: would be if I was a macro strategist perhaps going
Speaker 1: into an office. So so you put out a written
Speaker 1: research product that gets emailed out weekly, daily, whenever how often,
Speaker 1: and I'm assuming there are some special um topics and
Speaker 1: alerts and different things you cover. When that goes to
Speaker 1: a client, what are the responses? Is it an email
Speaker 1: response back? Here's what I like? Is when I don't like?
Speaker 1: Is it? This is really significant? We need to talk
Speaker 1: about this right away because you hate X, y Z
Speaker 1: and it's our biggest position. How do you get feedback
Speaker 1: from clients? And what are those subsequent conversations? So the
Speaker 1: written product, by no means is that and all of
Speaker 1: what we do, but it's certainly foundational to what we do.
Speaker 1: We published two weekly notes. One is our top down
Speaker 1: view you know, stocks, bonds, commodities, things like that. And
Speaker 1: the other is the bottom up work where we look
Speaker 1: at the individual stocks and you know, help with the
Speaker 1: idea generation, look for breakouts and breakdowns and themes. And
Speaker 1: then we have a daily note to publish some signals
Speaker 1: and some market internal measures we call them, and to
Speaker 1: really manage our call on an intra week basis. So
Speaker 1: we're fairly prolific in terms of what we publish and
Speaker 1: and generally speaking, you know, we'll we'll get questions from
Speaker 1: those reports, whether they're about various securities, you know that
Speaker 1: the individual equities. That would be one thing where people
Speaker 1: would ask about things like crude oil you know today
Speaker 1: of course it would be relevant, you know, for crude oil,
Speaker 1: just because it's been in the news. And so I'll
Speaker 1: get questions on whatever's topical. And and how often do
Speaker 1: you find your views are changing on not just the
Speaker 1: whole market, but sp of accectors or specific regions. How
Speaker 1: frequently do you find yourself saying, gee, we like this
Speaker 1: six months ago, but not so much anymore. I'm very
Speaker 1: fluid in my market views, and I find that when
Speaker 1: something is strongly trending, like the smp F one, you
Speaker 1: don't change your views that much except to manage those
Speaker 1: views from a shorter term perspective to say, well, there's
Speaker 1: some greater risk right now of a pullback, and that
Speaker 1: type of thing can be very added value to people
Speaker 1: that are trying to determine whether to wait or at
Speaker 1: exposure immediately. So we try to manage the views on
Speaker 1: a short term basis, but the longer term views tend
Speaker 1: to be pretty sticky. Where they're a little bit less
Speaker 1: stick you would be when you have a range bound
Speaker 1: type of situation, So a break out right like a
Speaker 1: non trending market, So the euro would be a great
Speaker 1: example of one that had been non trending really for
Speaker 1: a couple of years until recently we had a break
Speaker 1: out in the euro and that then becomes more of
Speaker 1: a trending situation and probably for that reason, will will
Speaker 1: stay more sticky in our views. So let's talk a
Speaker 1: little bit about currency, since since you brought that up,
Speaker 1: we've seen a very strong dollar and and for those
Speaker 1: people listening to this far off in the future, here
Speaker 1: we are. It's the summer of um. As we're recording this,
Speaker 1: the down in the SMP are making fresh all time
Speaker 1: highs that was up about one twenty and it is
Speaker 1: not all that far away from two um. And we
Speaker 1: had a fairly substantial rally in the dollar pretty much
Speaker 1: up till the end of is the euros gained the
Speaker 1: dollars loss. How do you look at currency is relative
Speaker 1: to each other and what does that mean for the
Speaker 1: local economies there and here? Yeah, And I mean I'm
Speaker 1: not wanting to comment on on the macro influences of
Speaker 1: the f X moves. The way I look at it
Speaker 1: is as the Dollar index, which is really massively euro centered.
Speaker 1: You know, the dollar index had seen such a nice
Speaker 1: round up, as you mentioned, but really in the last
Speaker 1: months has just been in this persistent down trend and
Speaker 1: it's been Yeah, it's really pretty big drop and and
Speaker 1: almost um, you know, barely interrupted by relief rallies. So
Speaker 1: it's really been a persistent drop and sort of differentiates
Speaker 1: itself because of that. And I think when you have
Speaker 1: a trend like that, you just want to be respectful
Speaker 1: of it. When you look at the euro, it's not
Speaker 1: an exact inverse, but it's certainly close to it. Um.
Speaker 1: You know, if you look at EU r USC, you
Speaker 1: see this breakout that I mentioned from the wide trading range,
Speaker 1: and that breakout just simply based on the width of
Speaker 1: the range would target about without any indication of the
Speaker 1: time frame over which that would happen. But you know,
Speaker 1: longer term meaning more euro strength, more dollar, more dollar weakness,
Speaker 1: and we've gotten some underperformance from European equities and and
Speaker 1: out performance from US equities. But I think that shift
Speaker 1: is is maybe less currency related and more related to
Speaker 1: other macro influences and certainly whether or not those markets
Speaker 1: are oversold on a relative basis. So I want to say,
Speaker 1: for the past decade, the US is up something like
Speaker 1: two D seventy and Europe is up eleven, and e
Speaker 1: M is essentially flat. Maybe getting those numbers. Yeah, you know,
Speaker 1: it's been amazing the long term relative strength ratios, you
Speaker 1: know e M versus developed or e M versus US.
Speaker 1: But finally, in the past i'd say years, so you've
Speaker 1: really seen stabilization um in terms of relative performance globally.
Speaker 1: And maybe that's because it is so much more of
Speaker 1: a global marketplace, or maybe it's just because finally these
Speaker 1: markets are are participating and you know, their economies are
Speaker 1: looking better. Whatever the driving forests, it certainly has manifested
Speaker 1: itself in some turnarounds in the ratios. So we're talking
Speaker 1: about currencies, Let's talk a little bit about something that
Speaker 1: I think a lot of people find um challenging or perplexing.
Speaker 1: How do you track on a chart the various blockchain
Speaker 1: currencies like bitcoin. These things all look like they've just
Speaker 1: become completely unhinged. How do you buy into something like
Speaker 1: that that's had such a explosive move to the upside,
Speaker 1: you know, I call it a parabolic up trend. When
Speaker 1: you see those, and they are very difficult to find
Speaker 1: entries that you can feel confident in adding exposure. I
Speaker 1: do think the charts are very viable ways to analyze
Speaker 1: these currencies because you know, otherwise information is somewhat limited,
Speaker 1: So so you can really identify trends, and they're certainly
Speaker 1: trend dean. And then in order to take advantage of them,
Speaker 1: I think you need to have confidence in buying breakouts.
Speaker 1: So if you actually see a fresh catalyst on the
Speaker 1: charts where you're exceeding a resistance level, then you have
Speaker 1: to have confidence in in buying higher and it's it's
Speaker 1: often the right thing to do, quite frankly, when these
Speaker 1: trends are in motion. So with with the parabolic trends,
Speaker 1: I tend to watch some of the more sensitive or
Speaker 1: shorter term moving averages, and when they flatten, I tend
Speaker 1: to recommend taking down partial exposure. For example, the twenty
Speaker 1: day moving average would be quite short term, but when
Speaker 1: you're in this parabolic up move that's quite steep and
Speaker 1: you see the twenty d flatten, which often happens before
Speaker 1: you get a really meaningful pullback, I think that can
Speaker 1: be a good mechanism I guess to take down exposure.
Speaker 1: We have been speaking with Katie Stockton, chief technical strategist
Speaker 1: at b t i G. Check out my daily column
Speaker 1: on Bloomberg View dot com. You can follow me on
Speaker 1: Twitter at rid Halts. We love your comments, feedback and
Speaker 1: suggestions right to us at m IB podcast at Bloomberg
Speaker 1: dot net. I'm Barry Ridhults. You've been listening to Masters
Speaker 1: in Business on Bloomberg Radio. Welcome to the podcast. Thank
Speaker 1: you Katie so much for doing this. And I don't
Speaker 1: know if you remember where we first met, but I
Speaker 1: want to say, who's at camp Ko talk. It may
Speaker 1: have been I feel like we may go back further
Speaker 1: than that, but that was a great place. We do
Speaker 1: go back for it because I know who introduced us.
Speaker 1: It was Kevin Lane, that's right, who is a technician
Speaker 1: who runs uh b D in a research shop. And
Speaker 1: Kevin was at I want to call it technamentals secnamentals. Yeah,
Speaker 1: it's got to be euands sounds about right, That's yeah,
Speaker 1: that's the technicians. We run a these small circles all
Speaker 1: know each other, I feel like, so I can't tell
Speaker 1: you how many people I know who took the class
Speaker 1: with Ralph Atripora or other people at the I don't
Speaker 1: know what they're calling it now. They just did a
Speaker 1: big name change because it's now the the CMT Association
Speaker 1: Association used to be the that's right, So they've changed
Speaker 1: the name, which is a bit more aligned with the
Speaker 1: cf A societies. CMT, which is Chartered Market Technician, has
Speaker 1: really grown as a designation, and for me it's been
Speaker 1: invaluable in my career because you know, it's a credentializes
Speaker 1: you right to publish this research, but also in preparing
Speaker 1: for that, you know, you you do learn a lot
Speaker 1: of tools and other disciplines that might be interesting, and
Speaker 1: so it helps expand your horizons A little bit, and
Speaker 1: you've you've become a regular on the on the media
Speaker 1: circuit talking about various market sectors. I notice you're much
Speaker 1: more circumspect in the way you discuss markets then some
Speaker 1: technicians are. Some technicians want to get right into the
Speaker 1: As you can see from this chart, it's a head
Speaker 1: and shoulders. It's this. It's that you really talk more
Speaker 1: in a way that a lay person can appreciate what
Speaker 1: you're saying, as opposed to getting into the weeds with
Speaker 1: some of the more esoteric right. And I mean that
Speaker 1: is going on behind the scenes, by the way. So
Speaker 1: I am taking the fibid ACHIESE and the Demark indicators
Speaker 1: and applying them to the ratios, and that all goes
Speaker 1: into the analysis. But I don't do anybody any favors
Speaker 1: by getting too in the weeds with those indicators. But rather,
Speaker 1: you know, explain my discipline and and then you know,
Speaker 1: explain the takeaways in a way that people can understand them.
Speaker 1: So demark is really fascinating. Um set of technicals. I
Speaker 1: don't know how they work. They're they're really quite woman
Speaker 1: explaining that what our demark indicators and how do they work?
Speaker 1: You know, there there's so many of them, and I
Speaker 1: honestly only scratch the surface with the Demark indicators that
Speaker 1: are available to us. I know, it's a it's an
Speaker 1: option on the Bloomer. You can add it. They have
Speaker 1: a right, they have a service on the Bloomberg terminal,
Speaker 1: which I do use and use it quite a lot actually,
Speaker 1: And to me, you know, I find value in the
Speaker 1: indicators that they provide um in identifying inflection points. And
Speaker 1: it's the closest thing that I have to something that's
Speaker 1: a coincident indicator of inflections. And as you could imagine,
Speaker 1: most technical indicators tend to have a lag them because
Speaker 1: they're moving average base, so it's just inherent that they
Speaker 1: have that lag. But there's something about the demark indicators,
Speaker 1: and at least the ones that I use in their construction,
Speaker 1: that can get us a bit closer to the actual
Speaker 1: inflection point. Now, Unfortunately, like any indicator, because there is
Speaker 1: no you know, at one all or you know, holy Grail,
Speaker 1: we have to cross reference the demark indicators with other tools,
Speaker 1: whether it's the stochastics which will also give you sort
Speaker 1: of an overbought over sold reading, or or momentum based tools.
Speaker 1: Those taken together can give you the best takeaway. And
Speaker 1: so we don't take every signal for face value, but
Speaker 1: rather say, okay, what are the probabilities here based on
Speaker 1: what everything else is saying? So what are what are
Speaker 1: some of your go to indicator? What if you had
Speaker 1: to say, this is where I begin, this is my
Speaker 1: most important I'm going to guess it's going to be
Speaker 1: trend because you've emphasized that so many times. Yeah, it
Speaker 1: is trend, especially in a trending tape. So I would
Speaker 1: say in a non trending tape, which of course there's
Speaker 1: an art and identifying what kind of environment you're in, um,
Speaker 1: I'll use more of the overbought over souled measures sometimes,
Speaker 1: you know, it depends on the timeframe as well, So
Speaker 1: theoretically every indicator should apply over every time frame, almost
Speaker 1: fractal in that way. And yet I found in my
Speaker 1: experience that that I get more use from the OSCI
Speaker 1: leaders in you know, short term, you know environment. So
Speaker 1: looking at say the intra day charts, looking at a
Speaker 1: thirty minute bar chart, oft the SMP futures, I'm actually
Speaker 1: more inclined to use an overboard over sould measure than
Speaker 1: a trend following device. It's just a matter of preference,
Speaker 1: sort of like a trading tool. But I would say
Speaker 1: if I had to take my one indicator to the
Speaker 1: deserted island, would probably be the mac D indicator, which
Speaker 1: stands for moving average convergence divergence, and that has been
Speaker 1: a really helpful trend fall engage. It's very price range.
Speaker 1: It's not an envelope as much as it is it's
Speaker 1: a spread between two moving averages. And and what's nice
Speaker 1: about it, it has a signal line, so it has
Speaker 1: a smooth version of the data itself that gives you
Speaker 1: distinct buy and sell signals and there and you know,
Speaker 1: it takes out some of that gray area, right, So
Speaker 1: it's either on a buy or a cell signal, And
Speaker 1: of course there's nuances to it, but to me to
Speaker 1: to try to capture those let's call it two to
Speaker 1: three month moves, which I think really is where we
Speaker 1: are in the market right now, especially in equities that
Speaker 1: you can't afford to miss o's anymore. You know, used
Speaker 1: to be you said it and forget it and ride
Speaker 1: the long term trend. But quite frankly, now you know
Speaker 1: there's such a guess pressure on people to perform on
Speaker 1: a quarterly or even monthly basis these days that they
Speaker 1: really need to capture these moves and the weekly MACDI indicators.
Speaker 1: So looking at it macdie and a weekly bar chart
Speaker 1: can be really a great tool for that. So you
Speaker 1: mentioned when you're in a non trending market, when you're
Speaker 1: in a range bound market until this last leg began,
Speaker 1: and I want to say, sometime towards the end of
Speaker 1: the summer last year, what was it eighteen months or
Speaker 1: twenty four months of not a whole lot of progress.
Speaker 1: What were you looking at during that period when we
Speaker 1: were range bound and what told you, hey, we're breaking
Speaker 1: out of this range? What was what was the big
Speaker 1: signal there? You know that in terms of what I
Speaker 1: was looking at it, you know that that period that,
Speaker 1: by the way, is that I want to say mostly yeah,
Speaker 1: I guess really at the end of two fifteen, it
Speaker 1: was still you know, it was it was morphine into
Speaker 1: that sort of range bound tape. But what was range
Speaker 1: bound here in the US was actually much more of
Speaker 1: a correction in international market. So if you looked at Japan,
Speaker 1: or if you looked at European benchmarks, you'll see that
Speaker 1: they really saw a pronounced corrective phase. And what captured
Speaker 1: that was not the MACD indicators so much on the
Speaker 1: weeklies because that was a bit noisy. But if you
Speaker 1: looked on the monthlies, you actually saw a macde cell
Speaker 1: signal in the monthly bar chart at the SMP five
Speaker 1: D I believe it was oh gosh, I want to
Speaker 1: say February two fifteen, So it got ahead of that
Speaker 1: environment which created was, you know, a more challenging environment
Speaker 1: for trend following. So with that macdi cell signal that
Speaker 1: we had um, we were able to give a bit
Speaker 1: more weight to the over Bodom SOULD measures knowing that
Speaker 1: we were in some kind of corrective period. Um. In
Speaker 1: addition to that, what we found in two thousand and
Speaker 1: sixteen especially it was the year of the climactic lows,
Speaker 1: right we saw at the February low of that year,
Speaker 1: the Brexit low, and then the election low. All of
Speaker 1: these were really climactic, and by that I mean the
Speaker 1: emotions were really running high. You've got these massive declines
Speaker 1: that almost by traditional methods would have looked like breakdowns
Speaker 1: on the charts. But we have some tools called market
Speaker 1: internal measures, which would be volume breath leadership and sentiment
Speaker 1: that can help us identify these climaxes as they're underway.
Speaker 1: So volume, you know, to circle back in the converse
Speaker 1: station to volume. I do look at it on an
Speaker 1: aggregate basis, and when it tends to spike is when
Speaker 1: it actually holds information, because that's more emotionally charged trading
Speaker 1: to change. Not necessarily the base rate that matters, that's right,
Speaker 1: So it's not even the level. I'm just looking for
Speaker 1: spikes and the market internal measures that I mentioned, those
Speaker 1: really are to me the most informational win they're at extremes. Otherwise,
Speaker 1: what are you looking at? Internal advancers and decliners would
Speaker 1: certainly be a breath measure that I look at. I
Speaker 1: look at them on a cumulative basis and also an
Speaker 1: oscillating basis, and you know, things like the percentage of
Speaker 1: stocks above their fifty day moving averages and and sentiment.
Speaker 1: I tend to look at the VIX, but I'd say
Speaker 1: even more so, I look at something called the CNN
Speaker 1: Fear and Greed Index, which incorporates the VIX, but also
Speaker 1: put call ratios and junk bond demand, things that are
Speaker 1: transactionally base gages of sentiments. So I tend to find
Speaker 1: a lot of value in that and right now we're
Speaker 1: actually seeing an extreme in that in that sentiment measure.
Speaker 1: Now in terms of that environment, um you know, we
Speaker 1: did see some major oversold extremes in these market internals
Speaker 1: at those lows that made them appear more treatable. Now
Speaker 1: with the breakout, it's really when we saw the SMP
Speaker 1: exceed resistance based on previous highs, that we could get
Speaker 1: confident that that I was ready to run again. So
Speaker 1: when was that? I remember the breakout and we've talked
Speaker 1: about this in the past, was a big, fresh old
Speaker 1: time high's first time in thirteen years, but um or
Speaker 1: or above levels previously set in oh seven and two thousand.
Speaker 1: But what was the breakout in was about I'd say
Speaker 1: July of two thousand sixteen is when we broke out.
Speaker 1: You know, that was on back of the Brexit low.
Speaker 1: And that breakout yielded a measured move price projection, which
Speaker 1: is a very common way of driving an upside target
Speaker 1: when you don't really have resistance to use, and that
Speaker 1: gave us a target of that at that time of
Speaker 1: about dred which we reached of course, or the SMP
Speaker 1: five reached in I think it was Q two and
Speaker 1: we met some resistance there, which is also a very
Speaker 1: natural occurrence. Now that we've seen a subsequent breakout above
Speaker 1: that level, we were able to reassign another measured move
Speaker 1: price projection in this case of about Oh really, and
Speaker 1: right now we're still about thirty points away points away
Speaker 1: from twenty were approaching, and I think, you know, it
Speaker 1: won't be a straight path higher up to but I
Speaker 1: think it's a viable target based on the trajectory of
Speaker 1: the trend, and so that's a context within which we
Speaker 1: view everything else. So you mentioned the VIX, We should
Speaker 1: really talk about it because it's pretty much at record lows. UM.
Speaker 1: The argument seems to go something like, the VIX is
Speaker 1: showing terrible complacency and this all ends badly versus Hey,
Speaker 1: the early nineties, the VIX was in the routines and
Speaker 1: stayed there for years, and you still have another seven
Speaker 1: years of well market to go. How do you look
Speaker 1: at the VIX. What do you think it means? Well,
Speaker 1: what I don't look at it um probably in the
Speaker 1: same way as a derivatives trader might, for example, but
Speaker 1: rather as a gauge of sentiment and something that tends
Speaker 1: to have an inverse relationship to the SMP five hundred,
Speaker 1: so in that since it can hold some information, however,
Speaker 1: I care most about when it spikes, and it's it's
Speaker 1: difficult to identify when that might occur. We do have
Speaker 1: some tools that can assist in that, you know, overbought over,
Speaker 1: SOULD measures, things like that. But the way I see
Speaker 1: the VIX is just as one gauge of sentiment, and
Speaker 1: what we've had to do with the the fact that
Speaker 1: it keeps making new loads, is to reset our extreme
Speaker 1: levels or thresholds for that overly complacent reading, which I
Speaker 1: would argue now it is there so spikes to twelve,
Speaker 1: which is like a big percentage move from where it is.
Speaker 1: But twelve or even fifteen is so low for the VIX.
Speaker 1: What what might thought tell us? Well, you know, for me,
Speaker 1: if if we see it, you know, spike to twelve,
Speaker 1: my guess is that we're getting a pull back to
Speaker 1: at least the fifty day moving average and the SMP
Speaker 1: five It wouldn't take much to get the VIX to
Speaker 1: that level. The spikes tend to last maybe two weeks
Speaker 1: in duration at most, so you have to be very
Speaker 1: quick to act on it when you start to see
Speaker 1: it maybe inch above its twenty day or fifty day
Speaker 1: moving average of its own. It is not really a
Speaker 1: trending index, so we have to be careful using tools
Speaker 1: like moving averages and and you know, identifying levels because
Speaker 1: maybe they're less important. What what are your thoughts about
Speaker 1: the argument that some have made that well, so many
Speaker 1: people have moved from stock picking and active management too.
Speaker 1: You have five trillion a black Rock and four trillion
Speaker 1: at Vanguard. I think Vanguard is now four point four trillion,
Speaker 1: of which two thirds at Vanguard is passive, and um
Speaker 1: I think once it gets half at black Rock is passive,
Speaker 1: that's trillions of dollars that used to be actively in
Speaker 1: the market. What does it mean that so much money
Speaker 1: is now passively allocated? What what might that mean to
Speaker 1: the VIX, if anything at all? You know, I'm not
Speaker 1: sure how it would affect the VEX, except to say that,
Speaker 1: you know, it should contribute to the trending nature of
Speaker 1: the tape and there and also would see the VIX
Speaker 1: sort of, you know, flounder at low levels as as
Speaker 1: the major indices forged higher, and whether it's passively or
Speaker 1: actively driven at the end of the day, and we
Speaker 1: want to just be on the right side of the
Speaker 1: moving averages and of the momentum behind the market, regardless
Speaker 1: of what those momentum forces maybe, And so you know,
Speaker 1: our goal is to understand when the loss of momentum
Speaker 1: is great enough to lead to a shift in in
Speaker 1: that trend that we need to take action around. So
Speaker 1: it just depends on your time frame at that stage.
Speaker 1: You know, do you do you want to miss the
Speaker 1: a three percent pullback or are you okay with that?
Speaker 1: Are uka sitting through that? So that becomes a matter
Speaker 1: of preference, and you reference sentiment. I've always found sentiment
Speaker 1: such a challenge to trade off of accepted extremes. So
Speaker 1: what do you you reference the three percent pullback? Can
Speaker 1: you use sentiment to anticipate something like that? What is
Speaker 1: what is sentiment? Really it's relevant to the conversation right
Speaker 1: now because we do have that extreme reading in the
Speaker 1: CNN Fear and Greed Index, for one, which is enhancing
Speaker 1: that low reading in the VIX. We're at an extreme rate.
Speaker 1: So you mentioned an extreme I think so I think
Speaker 1: we've finally reached that for the first time since March
Speaker 1: based on this one measure, and what I've identified is
Speaker 1: It typically has a lead time of a few weeks
Speaker 1: before you see it, and it's a short term peak,
Speaker 1: not not anything you know, really worrisome orbarish, but a
Speaker 1: short term peak tends to unfold in the SMP five
Speaker 1: a couple few weeks after you get the extremes in
Speaker 1: measures of sentiments, So I think it can be helpful
Speaker 1: in that regard. However, I do give more weight to
Speaker 1: the momentum gauges or the trendfall engages, whether it's a
Speaker 1: MACD indicator or you know, some kind of oscilator. Those
Speaker 1: to me take precedence because they're a little bit closer
Speaker 1: to the price data that the market is giving us.
Speaker 1: And the CNN Fear and Greed Index, what else goes
Speaker 1: into that besides the VIX? Because I know a number
Speaker 1: of different um firms have put out their own Fear
Speaker 1: and Greed Index and they very quickly seemed to top
Speaker 1: or bottom rapidly. It was sort of surprising that the
Speaker 1: news flow changed and suddenly they all plummeted um. So
Speaker 1: what else is in that that index? So it's the VIX,
Speaker 1: the put call ratios, junk bond demand, safe haven demand,
Speaker 1: there's a momentum reading there's a breath reading based on
Speaker 1: advancers and decliners, and I think I'm forgetting one, but
Speaker 1: taken together, I think you're actually getting a nice system
Speaker 1: of checks and balances. And what I found is, as
Speaker 1: an oscillating measure, it's much better than the average sentiment
Speaker 1: engage that we all grew up with in a way. Yeah,
Speaker 1: the poles and the surveys at identifying market tops, not
Speaker 1: just market bottoms. Most every sentiment gage is quite good
Speaker 1: at helping us identify market bottoms when the when the
Speaker 1: fear levels spike and everybody's capitulating, it just shows up everywhere. Yeah,
Speaker 1: it does show up, and it's a bit you know,
Speaker 1: easier if you will. And maybe that's because it's been
Speaker 1: more often a bull market than not, so maybe that's why.
Speaker 1: But this, the CNN Fair Agreed Index, tends to be
Speaker 1: a bit better at market tops. So there are a
Speaker 1: number of indicators that in the modern era have seemed
Speaker 1: to have sort of fallen by the wayside. And I
Speaker 1: kind of have the put coal ratio on the edge
Speaker 1: of that. So do you remember the odd lots um indicator,
Speaker 1: And then there was the end of week money flow indicators.
Speaker 1: Those things all seem to have just withered away because
Speaker 1: who cares about odd lots and money flow? Is is
Speaker 1: it's so instantaneous these days that it doesn't seem to
Speaker 1: have the same impact. Where do you put the ratio?
Speaker 1: The ratio for MEUM burned me a little bit in
Speaker 1: in two thousand and eight, and it's when you know,
Speaker 1: the extremes became more extreme. So you know, I have
Speaker 1: a little bad taste in my math from that UM
Speaker 1: that period, and what it's actually done in a way
Speaker 1: is led me to give them not no weight, but
Speaker 1: certainly less weight. And that's why I like that they're
Speaker 1: one out of maybe seven components of that sentiment indicator,
Speaker 1: because you know there in's that that checks and balance
Speaker 1: the system that helps you understand when an extreme is
Speaker 1: really extreme. These days, UM, any other sentiment matter worth Uh?
Speaker 1: I don't think so. I think again, it's really more
Speaker 1: about trend following, support and resistance overbought over sold measures
Speaker 1: that those relate are more important, and that the market
Speaker 1: internal measures. While they can be very helpful, their informational
Speaker 1: at extremes, and I think people like to talk about
Speaker 1: them because they tell more of a story and we
Speaker 1: all like a good story and want to understand why
Speaker 1: something's happening. But in reality, the charts are designed to
Speaker 1: help us understand what's happening, They're not really designed to
Speaker 1: give you that story. So I almost think that sentiment
Speaker 1: and breath and leadership get a little too much press
Speaker 1: before before I go to my favorite questions, you touched
Speaker 1: on a subject that's one of my favorite subjects. So
Speaker 1: why is it that we all like a good story?
Speaker 1: And how potentially dangerous are those stories? How can they
Speaker 1: lead us astray? Well? And that's what I love about
Speaker 1: the charts is that they they sort of isolate exactly
Speaker 1: what is happening from a supply demand perspective without getting
Speaker 1: tainted by the stories. And it's not to say you
Speaker 1: shouldn't have a reason to invest in something. There should
Speaker 1: always be a reason. And however that reason has derived,
Speaker 1: um you know, that's important because those are the drivers
Speaker 1: of the trend. So there might be some fundamental story
Speaker 1: that's very important to the future of a stock. I
Speaker 1: would not never disagree with that, But when it comes
Speaker 1: to just headlines and hearsay and anecdotal evidence of something,
Speaker 1: I think it can be very dangerous. And that's why
Speaker 1: the charts can help us sort of stay honest. So um,
Speaker 1: I described that as monkeys love a good narrative and
Speaker 1: and you explain the dangers of that perfectly. Let's let's
Speaker 1: jump to my favorite questions. These are the questions I
Speaker 1: ask all of my guests, um, some of which I've written,
Speaker 1: some of which have come from readers and listeners, including
Speaker 1: the first one. So what's the most important thing people
Speaker 1: don't know about your background? Oh? The most important thing
Speaker 1: people don't know. That's the most It could be the
Speaker 1: most interesting. Doesn't have to be important, Yeah, I mean,
Speaker 1: I think it's just the way you think about the
Speaker 1: world and my background. I was not not a talented artist,
Speaker 1: but I've always had an interest in art and things
Speaker 1: that are sort of more visual in nature. So I
Speaker 1: think that's you know, it's not something a lot of
Speaker 1: people would know about me, but I enjoyed a painting
Speaker 1: and creating things and a technician who's looking at at
Speaker 1: visual data that's exactly right, and you know, it's something
Speaker 1: that you can get lost in. And I think the
Speaker 1: charts are in a way the same. And I spend
Speaker 1: probably too much time making my charts look really pretty.
Speaker 1: Tell us about some of your early mentors, you know,
Speaker 1: really the people that I've worked for, I've been so
Speaker 1: blessed in having exposure to them and also um to
Speaker 1: be able to embrace their disciplines at a young age
Speaker 1: where I was still somewhat impressionable and hadn't gotten set
Speaker 1: in my ways yet. So it would have started with
Speaker 1: Tom Dorisey at Dorsey Wright and Richmond who inspired me
Speaker 1: and helped me understand how technical analysis fit with them
Speaker 1: you know, everything else really in sort of the bigger
Speaker 1: world of finance and in Wall Street, and and Dorsey
Speaker 1: Right is still going strong. I think they sold the
Speaker 1: company a couple of years in NASA NASTAC and they're
Speaker 1: still they now. Tom Dorsey is putting out a number
Speaker 1: of e t f s right, they ETFs. I'm not
Speaker 1: sure how many, but they've had ETFs for a long
Speaker 1: time and have ten billion or fifteen billion in a
Speaker 1: m and then if if memory serves, Yeah, so they've
Speaker 1: been very successful and certainly have a great following on
Speaker 1: Wall Street. And you know from there, I worked for
Speaker 1: someone named Mike Curly, and that was when I had
Speaker 1: a stint in San Francisco working for a firm called
Speaker 1: the offering, which was at the time you know, this
Speaker 1: is late nineties, mind you, the investment bank of you Trade,
Speaker 1: and we were bought by wit sound View, and so
Speaker 1: I worked with Mike Curly and that was really my
Speaker 1: first name is Yeah, he's been around and he was
Speaker 1: sort of in the Navy and had just this really
Speaker 1: interesting approach. You'll actually find a lot of technicians have
Speaker 1: a military background owned or background in some kind of
Speaker 1: engineering field. It just lends itself, you know, to that
Speaker 1: kind of analysis. And so he taught me some structured, disciplined,
Speaker 1: organized that's right, and that's where a lot of the
Speaker 1: indicators that I used came from. It's from my Curli's discipline, um,
Speaker 1: you know. And then beyond that, I worked for Rick
Speaker 1: Benson your when I was at Morgan Stanley, and he
Speaker 1: gave me exposure to some of the indicators that excuse me,
Speaker 1: really differentiate my work, I'd say, from you know, the
Speaker 1: counterparts at other firms, whether it be the cloud model,
Speaker 1: which is also called Echi moku um and yeah, well
Speaker 1: that actually it goes back to Japanese is that it
Speaker 1: is I think equally as old as candlesticks, and in
Speaker 1: the same way that they're designed to give you that
Speaker 1: sort of one look of the chart, where you're getting
Speaker 1: as much information as you can into that one view.
Speaker 1: Um So, he exposed me to those which have been
Speaker 1: invaluable in my work, and also the demark indicators he
Speaker 1: taught me. So I've been very lucky to have people
Speaker 1: like Rick and Mike and Tom as mentors, you know,
Speaker 1: over my career. And also, you know, I've been highly
Speaker 1: involved in the now named CMT Association. I was vice
Speaker 1: president of that organization for some time and was able
Speaker 1: to get to know, you know, people like Ralpheck Emporra, who,
Speaker 1: by the way, you know, came to guest lecture that
Speaker 1: class that I took in college, and he stood up
Speaker 1: in front of the class and took the Wall Street
Speaker 1: Journal and tour it in half and said, you don't
Speaker 1: need this anymore and uh and boy he got our attention.
Speaker 1: You know, all of our finance majors in the room.
Speaker 1: It was pretty pretty neat. So a lot of people
Speaker 1: to inspire me. Um So, you mentioned several mentors. What
Speaker 1: about investors? What investors have influenced the way you look
Speaker 1: at either markets or or individual stocks. Honestly, I haven't
Speaker 1: found my inspiration in any of the investors, which, to
Speaker 1: be honest, tend to be a bit more fundamentally or
Speaker 1: macro oriented the ones that that we all know. Um.
Speaker 1: So I've found it more in the tools that i've
Speaker 1: you know, derived from my ment tours. So I don't
Speaker 1: really have an inspiration in terms of my investing style, um,
Speaker 1: except to say that that it really is you know, technical,
Speaker 1: you know, technically oriented, and it came from you know,
Speaker 1: studying for the CMT program and being inspired by some
Speaker 1: of the methods that I read about in that program.
Speaker 1: Let's talk about books. This is everybody's favorite question. Tell
Speaker 1: us about some books you've read recently. They can be fiction,
Speaker 1: non fiction, market related, not and and some of your
Speaker 1: all time favorite books. Oh goodness, Well, that's a hard
Speaker 1: question for a mom of three young children, where reading,
Speaker 1: you know, time to read books is sort of you know,
Speaker 1: it's hard to find that other than the hungry caterpillar?
Speaker 1: What else? What else have you been looking at? You know,
Speaker 1: I like to read. I like a good beach read,
Speaker 1: to be honest, But that aside, you know, the demark indicators. Um,
Speaker 1: you know, I've I've read Jason Pearl's book probably most
Speaker 1: recently on those and and that's very accessible, and I think, um,
Speaker 1: you know, there's not enough literature out there on those,
Speaker 1: so I've appreciated that. And then it goes back to
Speaker 1: a lot of the textbooks on technical analysis, which you know,
Speaker 1: at the end of the day, it is somewhat of
Speaker 1: a mathematical discipline, so they're they're not gonna, you know,
Speaker 1: keep you up at night, but at least I'll give
Speaker 1: you the tools that you need, you know to So
Speaker 1: Edwards and McGee, right, the Martin Pring's book, you know,
Speaker 1: Technical Analysis Explained, which I'm sure has been updated a
Speaker 1: million times since I first read it. Um so more
Speaker 1: so those types of books as opposed to you know,
Speaker 1: Reminiscences of a stock Operator that type of thing, which
Speaker 1: is fascinating but really isn't much of a how to. Yeah,
Speaker 1: in a way, it's the right learn from others mistakes, right,
Speaker 1: Um So it's it's you know, the textbooks that for
Speaker 1: me have really helped me, you know, move my discipline forward.
Speaker 1: So so what's your guilty pleasure? Beach read? Oh, the
Speaker 1: beach reads Gosh right now I'm reading Hillbilly Elegy, which
Speaker 1: is a lot of people that yeah, yeah, I do,
Speaker 1: like I try to alternate, you know, fiction and nonfiction,
Speaker 1: just to mix things up. And UM, you know I
Speaker 1: just and then I had my US Weekly, so you
Speaker 1: know that is that is a good pleasure US Weekly. UM.
Speaker 1: So let's talk a little bit about how the industry
Speaker 1: has changed since you joined. Let's call it twenty years ago.
Speaker 1: Is that a fair number. So what's the biggest change
Speaker 1: that's taken place for you as a technician over that
Speaker 1: time period. It's really the acceptance of the discipline and
Speaker 1: it's it's not like it happened overnight, but certainly the
Speaker 1: acceptance of what we do every day. And by the way,
Speaker 1: most people don't do this as their primary career. They
Speaker 1: do it as Some are just hobbyists, you know, they
Speaker 1: do it for personal reasons to help their investing, and
Speaker 1: others are in a different seat, like they're a trader
Speaker 1: for a hedge fund or their portfolio manager out a
Speaker 1: mutual fund, trying to understand these things so they can
Speaker 1: use it in a in a way that um, you know,
Speaker 1: facilitates what they already do. And so, um, you know
Speaker 1: that the adoption has really gotten to the point where
Speaker 1: I'm not going to client meetings and having to pitch
Speaker 1: them on the value of technical analysis, but rather to
Speaker 1: focus on what we can really add value in, which
Speaker 1: is idea generation risk management, identifying important levels, and looking
Speaker 1: for opportunities. So so, given those changes over the past
Speaker 1: let's call it ten or twenty years, what do you
Speaker 1: see as the next set of changes within the industry.
Speaker 1: I think it must be. You know, we do a
Speaker 1: lot of project work for clients that's a bit more
Speaker 1: quantitative in its nature. I don't think you can make
Speaker 1: charts quantitative solely, but certainly with the tools that we have,
Speaker 1: you know, from the technologies that are now offered to us.
Speaker 1: I think there's a lot of upside in a planet
Speaker 1: more systematically and quantitatively and also in appliant more from
Speaker 1: a risk management perspective, which we all know is quite important.
Speaker 1: So I think that's going to be the next push
Speaker 1: and where there's a lot of upside, and I think
Speaker 1: it's an exciting field. I'll be attending a conference in
Speaker 1: October for the if TO organization, which is an international
Speaker 1: federation of technical analysts, and that conference is centering around
Speaker 1: AI and technical analysis, and I don't know enough about
Speaker 1: it yet, but I think there's some interesting things going
Speaker 1: on there that AI and technical analysis that sounds fascinating.
Speaker 1: That's really that's really interesting. Um there's a quote from
Speaker 1: Jeff Bezos that I love, and it says something along
Speaker 1: the lines of, uh, if we're not failing a lot,
Speaker 1: we're doing something wrong, meaning we have to constantly try
Speaker 1: things and and by definition some of those things won't
Speaker 1: work out. So with that as the preface, tell us
Speaker 1: about a time that you attempted something and failed and
Speaker 1: what you learned from that. Well, yeah, and I mean
Speaker 1: we could go back to the conversation about the pot
Speaker 1: call ratio, you know, in terms of two thousand and eight,
Speaker 1: where you know, I just stayed with it too long
Speaker 1: because I was giving too much weight to the market
Speaker 1: internals when I should have given more weight the momentum
Speaker 1: and trendfall engages, which I always advocated as more important.
Speaker 1: Um So when it actually came to the moment, I
Speaker 1: just I stayed in too long, is what happened. So
Speaker 1: so it was it was actually deviating from my discipline
Speaker 1: because I got married to my view. So so there
Speaker 1: is you know a lot of risk in that, especially
Speaker 1: from that top down perspective. And and we had to
Speaker 1: again keep ourselves honest by really adhering to the indicators,
Speaker 1: the trend falling indicators, especially to help you know, us
Speaker 1: determine our biases and and so, you know, as not
Speaker 1: to get too married to your views. So outside of
Speaker 1: the office, what do you do for relaxation and enjoyment? Oh, well,
Speaker 1: you know, I actually don't have a lot of time
Speaker 1: outside of the office, but just I spend time with
Speaker 1: my kids and and you know, enjoyed traveling. And am
Speaker 1: I remembering you were a runner for a long time.
Speaker 1: I'm a runner. I had sort of an avid runner,
Speaker 1: not very far and not very fast, but I still
Speaker 1: enjoy it. Um. I remember it was you and Jim
Speaker 1: Bianco and who else up in camp Co talk and
Speaker 1: I'm thinking, yeah, I'm just gonna sleep it. You guys
Speaker 1: were up and out running early. It puts me in
Speaker 1: a happy place and it clears my head. And I
Speaker 1: think that I found that and not that I get
Speaker 1: to paint often, but painting does that for me too.
Speaker 1: And I think it's healthy for everybody to be able
Speaker 1: to remove themselves from the market something different from what
Speaker 1: what the regular course of events. That's right? And um
Speaker 1: my last two and very favorite questions. So if a
Speaker 1: millennial or recent college grad came up to you and
Speaker 1: said they were looking for advice about a career in
Speaker 1: technical analysis, what would you tell them? This actually does
Speaker 1: happen often, so I would always say, you know, listen you,
Speaker 1: I don't know that there's a lot of job opportunity
Speaker 1: in technical analysis. As a purist UM sort of in
Speaker 1: my seat where I'm a sales side publishing technical strategists,
Speaker 1: there's not that many of us UM. And yet I
Speaker 1: think as a discipline something that that you should learn
Speaker 1: UM as one part of a bigger picture that by
Speaker 1: all means everybody should pursue the CMT should actually really
Speaker 1: take it upon themselves to learn it as a discipline
Speaker 1: not only for their career but also for their personal investing.
Speaker 1: I think it's invaluable and UM, you know, just to
Speaker 1: have I guess a bigger scope to what you're doing,
Speaker 1: whether it means also pursuing the cf A or something
Speaker 1: like this. UM. But as you know, a new UM,
Speaker 1: I guess, a new graduate going into a firm, I
Speaker 1: think a mistake that I made that UM. Now with
Speaker 1: some hindsight, I can say I would have benefited from
Speaker 1: really knowing what was going on around me in the firm,
Speaker 1: because I think, you know, we get so narrow focused
Speaker 1: and what our day to day job is, especially at
Speaker 1: a younger age, UM, but we lose sight of of
Speaker 1: how we fit in to the big picture. And I
Speaker 1: think just to know what's going on around you it's
Speaker 1: really obviously valuable. And our final question, what is it
Speaker 1: that you know about investing charting strategy today that you
Speaker 1: wish you knew twenty years ago? Oh gosh. I would
Speaker 1: say probably that demark indicators would be the first thing
Speaker 1: that come to mind as being a tool. UM so
Speaker 1: that that came in probably about halfway through my career,
Speaker 1: and it would have been great to have you know,
Speaker 1: known more about them in the earlier stages. I think
Speaker 1: that would have certainly helped um, you know, around two
Speaker 1: thousand for example, and you know when they would have
Speaker 1: been you know, added value in terms of the inflection
Speaker 1: points that we saw because that came without very much warning,
Speaker 1: as you could imagine, not a lot of divergences ahead
Speaker 1: of that peak. Well, thank you so much, Katie for
Speaker 1: being so generous with your time, and I will see
Speaker 1: you up at uh Well, I see you at Camp Montall.
Speaker 1: That sounds like we have been speaking with Katie Stockton.
Speaker 1: She is the chief Technicals Srategists at bt i G.
Speaker 1: If you enjoy this conversation, be sure and look up
Speaker 1: an inch or down an inch at any of the
Speaker 1: other hundred and fifty or so such conversations that we've
Speaker 1: had previously. We love your comments, feedback and suggestions right
Speaker 1: to us at m IB podcast at Bloomberg dot net.
Speaker 1: I would be remiss if I did not thank the
Speaker 1: crack team who helps put these podcasts together. Medina Parwana
Speaker 1: is my audio engineer. Taylor Riggs is my booking producer.
Speaker 1: Michael Batnick is head of research. I'm Barry rid Holts.
Speaker 1: You've been listening to Masters in Business on Bloomberg Radio.