CMT Level III 2017: The Integration of Technical Analysis

Everything you need to pass Level III of the CMT Program

CMT Level III 2017: The Integration of Technical Analysis fully prepares you to demonstrate competency integrating basic concepts in Level I with practical applications in Level II, by using critical analysis to arrive at well–supported, ethical investing and trading recommendations. Covered topics include: asset relationships, portfolio management, behavioral finance, volatility, and analysis. The Level III exam emphasizes risk management concepts as well as classical methods of technical analysis.

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

What Is the CMT® Program? xi

How This Book Was Created xiii

Preface xv

Chapter 1 System Design and Testing 1
Charles D. Kirkpatrick II and Julie R. Dahlquist

Chapter 2 Money and Portfolio Risk Management 29
Charles D. Kirkpatrick II and Julie R. Dahlquist

Chapter 3 Behavioral Techniques 51
Perry J. Kaufman

Chapter 4 Pattern Recognition 81
Perry J. Kaufman

Chapter 5 Multiple Time Frames 107
Perry J. Kaufman

Chapter 6 Advanced Techniques 119
Perry J. Kaufman

Chapter 7 System Testing 167
Perry J. Kaufman

Chapter 8 Practical Considerations 241
Perry J. Kaufman

Chapter 9 Risk Control 285
Perry J. Kaufman

Chapter 10 Regression 355
Markos Katsanos

Chapter 11 International Indices and Commodities 363
Markos Katsanos

Chapter 12 The S&P 500 389
Markos Katsanos

Chapter 13 European Indices 405
Markos Katsanos

Chapter 14 Gold 413
Markos Katsanos

Chapter 15 Intraday Correlations 429
Markos Katsanos

Chapter 16 Intermarket Indicators 439
Markos Katsanos

Chapter 17 Everything Is Relative; Strength Is Everything 461
Julius de Kempenaer and Paul Ciana

Chapter 18 Analyzing the Macro–Finance Environment 491
Robert A. Weigand

Chapter 19 Portfolio Risk and Performance Attribution 525
Robert A. Weigand

Chapter 20 Statistical Analysis 571
David Aronson

Chapter 21 Hypothesis Tests and Confidence Intervals 617
David Aronson

Chapter 22 Causality and Statistics 649
Edwin T. Burton and Sunit N. Shah

Chapter 23 Illusions 661
Edwin T. Burton and Sunit N. Shah

Chapter 24 The Story Is the Thing (or the Allure of Growth) 669
James Montier

Chapter 25 Are Two Heads Better Than One? 677
James Montier

Chapter 26 The Anatomy of a Bubble 685
James Montier

Chapter 27 De–Bubbling: Alpha Generation 697
James Montier

Chapter 28 The VIX as a Stock Market Indicator 719
Russell Rhoads

Chapter 29 Hedging with VIX Derivatives 735
Russell Rhoads

Chapter 30 Introduction to Candlestick Charts 749
Thomas N. Bulkowski

Chapter 31 Findings 757
Thomas N. Bulkowski

Chapter 32 Statistics Summary 769
Thomas N. Bulkowski

Chapter 33 Above the Stomach 775
Thomas N. Bulkowski

Chapter 34 Deliberation 785
Thomas N. Bulkowski

Chapter 35 Doji Star, Bearish 795
Thomas N. Bulkowski

Chapter 36 Engulfing, Bearish 805
Thomas N. Bulkowski

Chapter 37 Engulfing, Bullish 813
Thomas N. Bulkowski

Chapter 38 Last Engulfing Bottom 823
Thomas N. Bulkowski

Chapter 39 Last Engulfing Top 831
Thomas N. Bulkowski

Chapter 40 Three Outside Down 839
Thomas N. Bulkowski

Chapter 41 Three Outside Up 847
Thomas N. Bulkowski

Chapter 42 Two Black Gapping Candles 855
Thomas N. Bulkowski

Chapter 43 Window, Falling 863
Thomas N. Bulkowski

Chapter 44 Window, Rising 867
Thomas N. Bulkowski

Chapter 45 Dead–Cat Bounce 871
Thomas N. Bulkowski

Chapter 46 Dead–Cat Bounce, Inverted 885
Thomas N. Bulkowski

Chapter 47 Earnings Surprise, Bad 895
Thomas N. Bulkowski

Chapter 48 Earnings Surprise, Good 907
Thomas N. Bulkowski

Chapter 49 FDA Drug Approvals 919
Thomas N. Bulkowski

Chapter 50 Flag, Earnings 931
Thomas N. Bulkowski

Chapter 51 Same–Store Sales, Bad 945
Thomas N. Bulkowski

Chapter 52 Same–Store Sales, Good 957
Thomas N. Bulkowski

Chapter 53 Stock Downgrades 969
Thomas N. Bulkowski

Chapter 54 Stock Upgrades 983
Thomas N. Bulkowski

Chapter 55 Statistics Summary 997
Thomas N. Bulkowski

Chapter 56 Fact, Fiction, and Momentum Investing 1015
Clifford S. Asness, Andrea Frazzini, Ronen Israel, and Tobias J. Moskowitz

Chapter 57 Conclusions 1041
Richard J. Bauer Jr. and Julie R. Dahlquist

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.