CMT Level II 2017: Theory and Analysis

Everything you need to pass Level II of the CMT Program

CMT Level II 2017: Theory and Analysis fully prepares you to demonstrate competency applying the principles covered in Level I, as well as the ability to apply more complex analytical techniques. Covered topics address theory and history, market indicators, construction, confirmation, cycles, selection and decision, system testing, and statistical analysis. The Level II exam emphasizes trend, chart, and pattern analysis, as well as risk management concepts.

This cornerstone guidebook of the Chartered Market Technician® Program will provide every advantage to passing Level II.

What Is the CMT® Program? xi

How This Book Was Created xiii

Preface xv

Chapter 1 Charting 1
Perry J. Kaufman

Chapter 2 Moving Averages 69
Charles D. Kirkpatrick II and Julie R. Dahlquist

Chapter 3 Time–Based Trend Calculations 97
Perry J. Kaufman

CHAPTER 4 T rend Systems (Part 1) 113
Perry J. Kaufman

CHAPTER 5 T rend Systems (Part 2) 137
Perry J. Kaufman

CHAPTER 6 Momentum and Oscillators 155
Perry J. Kaufman

Chapter 7 Volume, Open Interest, and Breadth 197
Perry J. Kaufman

Chapter 8 Bar Chart Patterns 235
Charles D. Kirkpatrick II and Julie R. Dahlquist

Chapter 9 Short–Term Patterns 269
Charles D. Kirkpatrick II and Julie R. Dahlquist

Chapter 10 Option Pricing Basics 311
Edwin J. Elton, Martin J. Gruber, Stephen J. Brown, and William N. Goetzmann

Chapter 11 Understanding Implied Volatility 325
Russell Rhoads

Chapter 12 About the VIX Index 337
Russell Rhoads

Chapter 13 Regression 351
Markos Katsanos

Chapter 14 Regression Analysis 357
Perry J. Kaufman

Chapter 15 Correlation 369
Markos Katsanos

Chapter 16 Intermarket Analysis 383
Markos Katsanos

Chapter 17 Cycle Analysis 395
Perry J. Kaufman

Chapter 18 The Scientific Method and Technical Analysis 417
David Aronson

Chapter 19 Theories of Nonrandom Price Motion 471
David Aronson

Chapter 20 Case Study of Rule Data Mining for the S&P 500 523
David Aronson

Chapter 21 Selection of Markets and Issues: Trading and Investing 571
Charles D. Kirkpatrick II and Julie R. Dahlquist

Chapter 22 System Design and Testing 597
Charles D. Kirkpatrick II and Julie R. Dahlquist

Chapter 23 Relative Strength Strategies for Investing 625
Mebane T. Faber

Chapter 24 Perspectives on Active and Passive Money Management 639
Robert A. Weigand

Chapter 25 A Stock Market Model 671
Ned Davis and Loren Flath

Chapter 26 A Simple Model for Bonds 707
Ned Davis and Loren Flath

Chapter 27 Prospect Theory 715
Edwin T. Burton and Sunit N. Shah

Chapter 28 Perception Biases 723
Edwin T. Burton and Sunit N. Shah

Chapter 29 Inertial Effects 731
Edwin T. Burton and Sunit N. Sha

For over 40 years the Market Technicians Association has worked to advance the discipline of technical analysis. What started as a small group of sell–side analysts on Wall Street is now a global association of over 4,500 members in 85 countries. The mission of the Market Technicians Association is to establish and maintain the highest professional standards among technical analysts by educating the investment community about the theory, practice, and application of technical analysis.