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Letter from the CMT Support StaffDear CMT Candidates, Registration and scheduling for the Level III exam closes today Thursday, April 5th at 5 PM EDT. Please make sure that you register as soon as possible to ensure your seat for the Level III exam this May. After this closing date, the MTA will be unable to register anyone for the Level III exam. Please note, the MTA offices will be closed April 6th, 2012. Registration and scheduling for the Level I and II exams will close on Friday, April 20th at 5 PM EDT. However, the CMT Support Staff strongly suggest that you sign up as soon as possible for these exams to ensure your preferred time, date, and location. The MTA has made significant investments in the CMT Program over the past year. These efforts to improve the Gold Standard in technical analysis, the CMT designation, are part of the ongoing advocacy work which the MTA performs on behalf of current charterholders as well as candidates in the CMT Program. We have included an article from the recent issue of Technically Speaking outlining some of the efforts by Robert Johnson, Ph.D., CFA, CAIA and the CMT Support Staff. As a reminder, registration for the 2012 Annual Symposium closes on Monday April 9th, 2012. Please click here to complete your registration today. In this issue we focus on indicators and oscillators and provide you with three related practice questions. We will also highlight the process for contacting sponsors to obtain Member status with the MTA; an important step towards attaining your CMT designation. In the next issue we will focus on selection and decision. We wish you success in your final weeks of preparation for the CMT exam.

CMT Prep MaterialsSample Question Booklets Level I: Book A | Book B Level II: Book A Level III: Book A | Book B

Sample Quiz Questions Level I: Set A | Set B | Set C Level II: Set A

Archived CMT Institute Sessions Level I: Access archives Level II: Access archives Level III: Access archives

Recommended Reading Lists CMT Exam Level I CMT Exam Level II CMT Exam Level III

Most Sincerely, The CMT Support Staff

Ongoing Improvements to the CMT Programby Michael Carr, CMT*Recently the MTA hired Robert Johnson, Ph.D., CFA, CAIA, in a consulting capacity as Director, CMT Studies. This position was specifically created to enhance the professionalism of the CMT Program and Dr. Johnson seems tailor made to fill the new position. He brings the skills and experience to the position that will be needed to bring the CMT Program to the next level. His education-related experience includes working with psychometric experts to identify and apply the best practices in testing and distance learning. His finance-related experience includes a Ph.D. in investments and professional certifications in the field. In a recent conversation, Bob explained that he has just started reading the required books and reviewing the test materials but his first impression is favorable. He noted that what is missing from the Program is appropriate pedagogy (a term defined below). Bob has years of experience in professional certification programs and understands that it is normal for organizations like the MTA to develop a program without an emphasis on proper pedagogy. Generally, technical experts define the professional Body of Knowledge (BOK) as a first step in a certification program and that is what has happened with the CMT. That leads to a sound base for a testing and certification program. The next step in the process is to develop the pedagogy, which is defined as the study of being a teacher or the process of teaching. Wikipedia helpfully adds that, the term generally refers to strategies of instruction, or a style of instruction. Since its founding in 1973, the MTA has expanded beyond New York City and now includes more than 4,500 members in over 85 countries. That expansion has made it important to reconsider how candidates study for the CMT exams. Bob explained that the test preparation is now a series of books which serve as textbooks even though most were not written as textbooks. There are limited study aids available and this makes it difficult for some students to prepare for the exams in a distance learning environment. In addition, there are readings with duplicative and sometimes contradictory coverage. When he says his emphasis will be on the pedagogy of the CMT Program, Bob said, he means that his goal is to provide students with learning materials that are best suited for a global audience in a distance learning environment. In his new role, Bob will direct the development and integration of CMT study materials, including the development of learning objectives and eventually may lead to a customized curriculum for CMT Program candidates. In previous positions, Bob has worked on extensive distance learning projects and believes those skills will help him lead an effort to improve the CMT Program. He will not be focusing on what is tested. The subject matter experts within the MTA will define what knowledge and skills need to be tested. The MTA has been working with Thompson Prometric for several years to conduct job surveys and define what should be included in the BOK and ultimately tested. The CMT Board of Governors will continue to select the reading material. While all of these processes will continue, Bob will be working to make the process more effective from the candidates perspective.

Now, candidates are assigned readings and have no insight into what is most important in the readings. With learning objectives, the candidate will know precisely what they are to glean from any assigned reading. Test developers will be able to write detailed questions that thoroughly address the candidates knowledge of the assigned reading. In the end, the candidate will be better prepared to apply the BOK in the real world. This is certainly not a short or quick process. It will take years to develop the foundation of a pedagogically sound distance learning program. In the interim, CMT candidates will continue with an outstanding program that develops their knowledge and ensures mastery of that knowledge. In the future, the Program will become more educationally sound to deal with the complexities of the global distance learning environment. The MTA has been growing and improving for nearly 40 years and will continue growing and improving. It is an organization dedicated to continuous improvement and Dr. Johnson is now putting the CMT distance learning program on a path of pedagogical improvement.

*Reprinted from the April 2012 issue of Technically Speaking.

Indicators & OscillatorsIndicators might not vacillate between two defined levels while oscillators always will. Volume indicators: On-Balance-Volume (OBV) is a volume indicator that was developed by Joseph E. Granville. This indicator measures the positive vs. the negative volume in the trading period under investigation. You may wonder how positive volume is separated from total volume for the day. The answer is that The daily data that is cumulated into the index is the volume for the day adjusted for the direction for the price change from the day before. Thus, it is the total daily volume added to the previous day index if the price close was higher and subtracted from the previous day index if the price close was lower than that of the previous day. Kirkpatrick and Dahlquist, Technical Analysis 2nd Edition, Chapter 18, page 416 (1st edition, page 417). You have an index of what the volume is doing relative to the price action of the issue. This indicator is very useful in markets that are in consolidation. Remember to draw support and resistance lines on the OBV just as you would on any other chart that you are reviewing. Oscillators: Oscillators vacillate between two levels which, in many cases, represent overbought or oversold levels. Indices that incorporate price and volume and are not bounded by levels as oscillators are. The level of the index is irrelevant but What is relevant is the trend of the index relative to the price of the trend. Kirkpatrick and Dahlquist, Technical Analysis, Chapter 18, page 417. As the name implies, an oscillator is an indicator that goes back and forth within a range. Overbought and oversold conditions (the market extremes) are indicated by the extreme values of the oscillator. Often, the oscillator will be scaled to range from 100 to -100 or 1 to -1, but it can also be open-ended. Kirkpatrick and Dahlquist, Technical Analysis 2nd Edition, Chapter 8, page 135.

Examples of oscillators include: McClellan Oscillator Haurlan Index McClellan Ratio-adjust oscillator McClellan Summation Plurality Hughes breath oscillator Arms Index On Balance Volume Stochastic Williams %R MACD with a trigger line (actually a histogram) Williams Variable Accumulation Distribution (WVAD) Twiggs Money Flow Elder Force Index Relative strength indicator (RSI)

Indicators & OscillatorsThese, and many other indicators are used by technical analysts. Some are volume indicators, some are momentum indicators, and some are directions indicators like the ADX. The rate of change indicator (ROC) tells you how fast the prices are moving it but does not specify in what direction. It is important to understand these indicators because they have different strengths and limitations. To use them correctly, you must understand the unique capabilities of each tool. For the exam, it is important that you have knowledge of these oscillators and indicators including their purpose and how to use them. While it is highly unlikely that you will be asked to produce or identify the formula, you should have a familiarity with and understanding of this topic. Please note the list above is not comprehensive or exhaustive. Any and all oscillators and indicators seen in the required readings may appear on your exam. A very important take-away on this topic is that there are many more indicators and oscillators than you will likely use in a professional setting. Professional analysts discover which indicators and oscillators work best in the markets that they review and they develop preferences for a select few. They will then use their preferred indicators or oscillators consistently on their charts becoming very familiar with the strengths and limitations of the analysis. It is, thus, redundant and nonproductive to use many oscillators that essentially tell the same story. This is why most analysts prefer to use just one, or perhaps two, oscillators and learn their complexities and intricacies well rather than depend on mechanical signals from many. Kirkpatrick and Dahlquist, Technical Analysis 2nd edition, Chapter 18, page 441. (1st edition, page 445)

There are several places in the required readings where you will find explanations of oscillators, indicators and related concepts. We have listed them below: A. divergences/confirmations: a. Kirkpatrick & Dahlquist, Technical Analysis, Chapters 8 & 18 b. Pring, Technical Analysis Explained, 4th Edition, Chapter 10, 12, 16, 24, 28 c. Kaufman, New Trading Systems and Methods, 4th Edition, Chapter 9 d. Edwards , Magee, & Bassetti, Technical Analysis of Stock Trends, 9th Edition, Appendix C B. open interest: a. Kirkpatrick & Dahlquist, Technical Analysis, Chapter 18 b. Kaufman, New Trading Systems and Methods, 4th Edition, Chapter 12 C. oscillators: a. Kirkpatrick & Dahlquist, Technical Analysis, Chapter 18 b. Pring, Technical Analysis Explained, 4th Edition, Chapters 23 & 24 c. Kaufman, New Trading Systems and Methods, 4th Edition, Chapter 9 d. Edwards , Magee, & Bassetti, Technical Analysis of Stock Trends, 9th Edition, Appendix C D. overbought/oversold: a. Kirkpatrick & Dahlquist, Technical Analysis, Chapter 18 b. Pring, Technical Analysis Explained, 4th Edition, Chapter 10 c. Kaufman, New Trading Systems and Methods, 4th Edition ,Chapter 9 d. Edwards , Magee, & Bassetti, Technical Analysis of Stock Trends, 9th Edition, Appendix C E. volume: a. Kirkpatrick & Dahlquist, Technical Analysis, Chapter 18 b. Pring, Technical Analysis Explained, 4th Edition ,Chapter 22 c. Kaufman, New Trading Systems and Methods, 4th Edition, Chapter 12

Practice QuestionsLevel IWhich of the following indicators uses volume in calculating momentum? a. MACD b. Williams %R c. Elders Force Index d. Stochastic oscillator Answer c: Kirkpatrick and Dahlquist, Technical Analysis 2nd Edition, chapter 18, page 423 (1st edition, page 426) The EFI is an easy oscillator to calculate in that is uses only closing prices and daily volume. specified period of the daily price change multiplied by the volume. The index is simply an exponential moving average over some

Level IIWhen the ADX is rising it indicates a. b. c. d. where to buy the market. that the market is trending . a buy when the levels are less than 15. a sell when the levels are more than 15.

Answer is: b Kirkpatrick and Dahlquist, Technical Analysis 2nd Edition, chapter 18, page 443 (1st edition, page 447)

Level IIIAs Chief Technical Strategist for a long/short hedge fund, you have been asked by the firms CIO to perform an analysis on several Dow Jones Indexes. Using the following chart, summarize the important technical observations and determine whether the index should be bought, sold or if no action is recommended at this time. Please include pattern recognition, Bollinger bands, moving averages, stochastic, and MACD in your response. Dow Transports (8 points) Chart 10:

Slow sto = slow stochastic MACD = moving average convergence divergence

Guideline Answer: Price Action: (1 Point) Double top formation in place. (1 Point) Price made a new low (lower low) on the current bar. (1 Point) Price is riding the lower Bollinger Band indicating increased momentum. Bollinger Bands: (1 Point) Bands are expanding (widening) indicated increased volatility. (1 point) The moving average has turned down indicating a bear trend. Stochastic: (1 Point) Failed bullish crossover leaves the indicator spending extended time in oversold territory, indicating prolonged weakness. MACD: (1 Point) Indicator in a downtrend with the histogram making a new low. Analysis: (1 Point) All indicators and price action point to continued weakness. Index should be sold.

Submit Your Questions For those of you that have any questions or concerns regarding technical analysis or the content of the exam please email CMT Program Director, Jeanette Young, CMT ([email protected]), and she will respond to you promptly.

Tools for the CandidateThe MTA provides members and affiliates access to the Educational Web-Series several times each month. These presentations include various speakers from around the world with diverse professional backgrounds. There are several of these webcasts that stand out as special or exceptional. This week we encourage you to watch John Murphys webcast on intermarket analysis. These are fabulous informational videos, however there is one caveat you must remember. If the information in the presentation is different from that which has been assigned in the readings, you must defer to the recommended readings. You will be tested on what is assigned in the readings and no other. The material covered in webcasts and meetings will help you better understand the broader subject at hand.

A Review of the New Normal in Intermarket Work: A webcast presentation by John Murphy, CMT on October 19th, 2011 as part of the MTA Educational Web Series. View this presentation Download the slides

John Murphy, CMT, former technical analyst for CNBC, is author of several bestselling books including "Technical Analysis of the Financial Markets." His book on "Intermarket Analysis" created a new branch of market analysis emphasizing market linkages. A revised edition of his third book "The Visual Investor" was published in February 2009. John was given the first award for outstanding contribution to global technical analysis by the International Federation of Technical Analysts, and has received the Market Technicians Association Annual Award. Mr. Murphy emphasizes the use of Exchange Traded Funds (ETFs) to implement asset allocation and sector rotation strategies as well as global trading. His current market views are published on Stockcharts.com.

Your Required Reading Counts for MTA Continuing Education Credits By participating in the CMT Program, candidates are required to read various technical analysis books for each level of the exam. Each completed book qualifies candidates for 1 MTA Continuing Education credit. You can report your credits using the Self-Reported CE Credit Form by clicking here.

Obtaining "Member Status" with the MTA"Affiliate Status" vs. "Member Status" The difference between affiliate status and member status is that you cannot be issued the Chartered Market Technician (CMT) designation, run for a board position, or execute voting rights as an affiliate. There is no additional cost to obtaining member status; however, there are certain requirements that must be met. These requirements, as outlined in the MTA By-laws and Constitution, can be seen by clicking here. For candidates enrolled in the CMT Program, we encourage applying for member status early so that there is no wait time between passing the Level III exam and being granted your CMT designation.

Applying for Member Status STEP 1: Find three (3) current MTA members who have already acquired member status to be your sponsors. If you do not know anyone, you can view a listing of all members who are willing to sponsor new candidates. All those included on this list have opted-in and welcome your introductory e-mail or phone call. Take advantage of the "randomize" feature on the list to select a variety of sponsors Try to select at least one sponsor in your area so you can develop a future relationship with STEP 2: Fill out the Application for Member Status entirely. Contact the MTA if you have any questions about the application. STEP 3: Direct your sponsors to the Sponsor Questionnaire and ask them to fill it out as soon as possible. You may direct them to http://go.mta.org/sponsorme

The CMT support staff recently revised the entire Frequently Asked Questions (FAQ) page to better support candidates in the CMT Program. Feel free to share this with your colleagues who may be interested in enrolling in the CMT Program.